PHOENIX — The Goldwater Institute sued the City of Phoenix this week, challenging the use of taxpayer money to benefit the developer of a 26-story residential tower being built in downtown Phoenix.

Hubbard Street Group and Cresset Real Estate Partners, both based in Chicago, are making their Phoenix debut with the development of this $87 million project at the southeast corner of Sixth and Garfield streets scheduled to open in the summer of 2023. Cresset declined to comment and Hubbard Street executives could not be reached.

But the Goldwater Institute lawsuit accuses city officials of crafting a game of tax shells that allowed developer Hubbard Street Group to pay no property taxes on that project for eight years, in violation of the Arizona Constitution and of a 2020 court ruling finding a similar arrangement – involving a 19-story apartment complex in downtown Phoenix— unconstitutional.

Jon Richesdirector of national litigation at the Goldwater Institute, said the Arizona courts have made it clear that taxpayers’ money should not be used to benefit private and special interests.

Using the Government Land Lease Excise Tax, or GPLET, abatement provisions of Arizona law, the city is taking over the Hubbard Project so that the property technically becomes government property, excluding it tax rolls, then leases the property to Hubbard.

When the eight-year lease expires, the city returns the property to Hubbard, relieving what Goldwater calculates as $7.9 million in property taxes in exchange for paying the city a small amount of rent, said Rich.

Read the rest of this story from Phoenix Business Journal.

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