Phoenix, Arizona - The Attorney General’s Office signed an agreement Tuesday to resolve a lawsuit filed in the Arizona Supreme Court against the City of Tempe over its improper use of tax breaks to private developments.
The agreement settles the dispute related to Tempe’s use of Government Property Lease Excise Tax (“GPLET”) rates that were effectively eliminated by the Arizona Legislature in 2010. Starting immediately, Tempe can no longer use its prohibited tax loophole scheme on new leases. This will prevent Tempe from extending the abolished rate to several pending projects that were approved after 2010, including a Whole Foods and high-end apartment complex.
“Tax deals like this unfairly shift the tax burden to other hardworking taxpayers and deprive our schools from much needed revenue," said Attorney General Mark Brnovich. “This settlement gives the State the total relief sought in the suit, without the expense of ongoing litigation.”
The Attorney General’s Office filed the lawsuit in May after conducting an investigation to an “SB 1487” request from Representative Vince Leach. Under the law, the Attorney General’s Office is required to conduct an investigation and issue a report when a legislator alleges a city or town ordinance is in violation of state law or the state constitution. Representative Leach claimed property tax rates offered by Tempe to private developers were contrary to the state’s GPLET statutes. The Attorney General’s Office agreed, concluding that one of the GPLET deals identified by Rep. Leach might violate state law because it improperly applied the pre-2010 rate.
GPLETs are levied in lieu of property taxes when local governments lease publicly owned property to private businesses. In practice, a GPLET allows cities to exempt private developments from paying property taxes in favor of potentially lower excise taxes. In 2010, Arizona lawmakers amended the GPLET statute to stop perceived abuses, including raising the permissible GPLET rates.
The settlement agreement signed today resolves the State’s claims against the City of Tempe, ends the Supreme Court challenge, and ensures that Arizona taxpayers are treated fairly under the law.