| NEWS | Oops! from p 10 GPLET tax benefits.” In a 2020 letter to Phoenix residents, Mayor Kate Gallego said that ensuring access to affordable housing for all was a priority for the Phoenix City Council, with a goal to create 50,000 homes by 2030. The city suggested the Hubbard Project would further this goal. “We have a lot of apartments, a lot of condos, a lot of housing going up but it’s not workforce housing, it’s not affordable housing,” said Councilmember Michael Nowakowski, whose district is part of downtown. “I believe that if we start with this new trend where we get at least 10 percent plus a donation into a fund where we as the city of Phoenix can actually turn around and either have a nonprofit or ourselves build workforce housing or affordable housing, I think it’s a good trend to have,” he added. The Gift Clause That Keeps on Giving No one denies that the Hubbard Project is receiving a tax break amounting to nearly $8 million. What’s up for debate is whether the tax break is unconstitutional. “GPLETs are expressly designed to allow local government to attract develop- ment without violating Arizona’s strong gift clause provision,” said Lenets, the land use attorney in Scottsdale. “The very fact that there is an active lawsuit regarding GPLETs, meaning it has not been summarily dismissed on its face, means that GPLETs are not unconstitu- tional. This is not to say, however, that this could change based on the issues before the court in the current case, and the court’s ultimate ruling.” The Arizona Constitution’s gift clause keeps on giving the city of Phoenix prob- lems in court. The gift clause, a single provision buried inside the Arizona Constitution, ratified that no city can ever “give or loan its credit in the aid of, or make any dona- tion or grant, by subsidy or otherwise” to any person or company. For offering a tax break that’s nearly $8 million, the city will collect just $500,000 in rent combined over the next eight years. “That’s grossly disproportionate and that violates the gift clause,” Riches said. The city’s attorneys argued in the Amstar case that the market wouldn’t support the project, and that financing wouldn’t be available to the developer else- where. They further promised the return would outweigh the cost for taxpayers — a claim that has never been substantiated, according to Riches. And in Schires v. Carlat, a 2020 lawsuit 14 also known as the “gift clause” case, the Arizona Supreme Court held that the city of Peoria violated the gift clause by spending public funds to induce a private “WE HAVE A LOT OF APARTMENTS, A LOT OF CONDOS, A LOT OF HOUSING GOING UP BUT IT’S NOT WORKFORCE HOUSING, IT’S NOT AFFORDABLE HOUSING.” — MICHAEL NOWAKOWSKI, PHOENIX CITY COUNCIL university to open a branch campus in Peoria. This isn’t like what happened in Peoria, Phoenix officials claim. “The city did not violate the gift clause,” defense attorneys wrote in court docu- ments filed in April 2020. “This is because the city’s determination that the agree- ment served a public purpose was reason- able, and the value of what the city will receive under the agreement is not ‘grossly disproportionate’ to the value of what the city agreed to give.” In late 2020, months after the Amstar ruling, Assistant City Attorney Thomas Stack maintained that the Hubbard devel- opment agreement would contain “express requirements on the amount of tax revenue the developer would generate … and mandate additional payments by the developers if they do not generate that revenue.” Therefore, the revenues “qualify as a benefit” to the city, thereby rendering the development agreement constitu- tional, court records show. “I’m not buying that,” Riches said. “Whether or not it makes money in the long run, this is already a violation of the constitution.” He is also concerned about the dispa- rate control over the project offered to the developer even with the city government acting as the de facto owner. According to court documents, the developer may terminate the lease and acquire the property at any time and for any reason for a $100,000 payment. The city cannot transfer the title to the Hubbard Project to any third party without approval from the developer, nor can it place any liens or encumbrances on the project without approval from the developer. In the end, the plaintiffs and others in their position are liable for replenishing the public coffers for unlawful government expenditures, gifts, and loans, as was the case with the Amstar project. “The government shouldn’t force hard- working Arizonans to foot the bill so a private company can avoid paying prop- erty taxes,” said Paulin, one of the plaintiffs who owns properties downtown. “If a private developer wants to build a new high-rise, why should I be forced to pay higher taxes to subsidize it, at the same time that I am having to compete with their development?” MAY 19TH– MAY 25TH, 2022 PHOENIX NEW TIMES | MUSIC | CAFE | FILM | CULTURE | NIGHT+DAY | FEATURE | NEWS | OPINION | FEEDBACK | CONTENTS | phoenixnewtimes.com
