Incentives yield results

City's new office IDs $12.8M over a year to stimulate growth
2013-06-16T00:00:00Z Incentives yield resultsDarren DaRonco Arizona Daily Star Arizona Daily Star
June 16, 2013 12:00 am  • 

What a difference a year makes.

Tucson's new Economic Development Office identified $12.8 million in business incentives for seven projects over the past 12 months.

Last June, the city created a streamlined process for developers and businesses to apply for economic development incentives as a way to stimulate growth downtown and elsewhere.

Before most of the incentives are approved, the city must commission an independent audit to determine if the benefits to municipalities exceed those received by the developers, to make sure the taxpayer assistance really does benefit the public and isn't just a government handout to developers.

In the seven cases processed in the past year, the city, county and other taxing districts are expected to pick up a combined $24 million in estimated revenue over eight years.

In addition, the projects represent around $100 million in capital investment within the city and about 540 permanent jobs.

At the core of the city's business incentive model is the creation of a central business district downtown, which Mayor Jonathan Rothschild considers one of the city's finer moves.

"The central business district ... is the best thing we've done in years," Rothschild said.

Part of the reason for Rothschild's enthusiasm is it allows the city to offer a Government Property Lease Excise Tax to qualifying businesses. Under a GPLET, the city can waive property taxes up to eight years while a project builds up some capital.

The way it works is the city essentially takes over a property for up to eight years and leases it back to the owners for a nominal fee. During this time, the businesses can establish a cash flow without the burden of property taxes, increasing the chances they become long-term revenue producers for the city.

Although the Legislature created the GPLET law in 1996, the city never fully took advantage of it until recently.

Rothschild said that when he took office he noticed how successful Phoenix was with GPLET projects and he wanted the same thing for Tucson.

The result has been more growth, especially on the east side of downtown.

"I'm not saying mission accomplished, but if you have a criticism about downtown, you haven't visited it recently," Rothschild said.

who's getting what exactly?

• One East Broadway - The new home of the Pima Association of Governments. The seven-story building will also house a bike shop, restaurant and 24 residential units. What developer gets: A property tax exemption valued at $2.8 million plus $152,000 for public infrastructure improvements. What governments get back: $4.4 million. Status: Agreement with city signed in April 2013.

• Herbert Residential, 211 S. Fifth Avenue - Former Armory Apartments. The eight-story building is being remodeled and will feature studio and one-bedroom apartments. What developer gets: Property tax break of $1.47 million. What governments get back: $1.92 million. Status: Should come to City Council for approval in July.

• Cadence Student Housing, 350 E Congress St. - 465-bed student housing complex at East Toole Avenue and Congress Street. What the developer gets: Property tax break of $4.7 million plus $84,500 for public infrastructure improvements. What governments get back: $6.6 million. Status: Independent audit to be presented to City Council on Tuesday.

• Plaza Centro Retail Development - Part of the Cadence student housing project. What the developer gets: A Tucson Community Development Loan Fund of $2.2 million. What government gets back: Repayment of the loan plus interest. Status: Received initial approval from mayor and City Council.

• Rialto Block Project, 200 block of Congress Street - Scott Stiteler-led redevelopment of the Rialto block, which includes restaurants and office space for burgeoning entrepreneurs. What the developer gets: Tax breaks of $1.3 million. What governments get back: $9.1 million. Status: Independent audit goes before City council on Tuesday.

• American Tire Distributors, 6720 S. Alvernon Way - A North Carolina-based company expanding to Tucson. What company gets: A primary jobs incentive valued at $61,411. What governments get back: $897,373. Status: Approved and awaiting final signatures on development agreement.

• B/E Aerospace, 1851 S. Pantano Road - Manufacturer of interior products for business and commercial jet aircraft. What company gets: A primary jobs incentive valued at $102,244. What governments get back: $994,733. Status: Approved and awaiting final signatures on development agreement.

What's available

The city offers 21 incentives in all and has offered most of them for years.

The problem was no one knew about them because the application process and what was available were somewhat obscure.

But now, the city consolidated its economic development incentives into one department, making it easier for developers to know what's out there, said Economic Initiatives Program Director Chris Kaselemis.

For the first time, "we have something where in a couple of quick sentences, people can see what we offer," Kaselemis said.

Developers agree.

"A year ago, nobody knew where to apply for anything," said Jim Campbell, who developed the Cadence and Plaza Centro. But now, "you have to feel good when there's a group of people there trying to make (businesses) happen."

Not all roses

While the city's on the right track, said Hank Amos, CEO and chairman of Tucson Realty & Trust, there's more to Tucson than just the downtown area.

"It's a good start," Amos said. "But I think it can be expanded upon."

If the city wants to attract large companies, Amos said, they'll need more room than what the downtown area offers. He wants the more appealing incentives extended to areas around the airport and other industrial centers.

Others say throwing money at wealthy developers to build transportation bureaucrats new offices and student housing won't jump-start Tucson's flagging economy.

"It's phony development," said Jody Gibbs, an architect who has been critical of other city projects.

Gibbs said giving tax breaks to people who are "phenomenally wealthy" won't, in and of itself, create jobs with livable wages or affordable housing.

"It's really not aiding a majority of people in the city and it's not good public policy," Gibbs said.

What's needed is a serious debate over what we should subsidize, he said.

Rothschild said the city isn't just handing over money. It's making an investment with a guaranteed return. And that benefits everybody, he said.

As for the future of the program, Kaselemis said he would like to reach out more to small and existing businesses.

"We're not here just to focus on the huge company with high-paying jobs," Kaselemis said. "We need to give support to the ones who have been here because they play a very important role in our economy as well."

"I'm not saying mission accomplished, but if you have a criticism about downtown, you haven't visited it recently,"

Mayor Jonathan Rothschild

Contact reporter Darren DaRonco at 573-4243 or ddaronco@azstarnet.com

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