Mesa leaders agreed to waive property taxes for a planned housing development along the city’s light rail corridor.
In exchange for waiving $2.3 million in property taxes over eight years, city leaders hope to see an apartment complex with 245 “market rate” apartments and “resort-style amenities” north of Dobson Road and Main Street on a piece of land that’s sat empty for decades.
The site once was the Tri-City Mall’s parking lot. The mall was a boon to the area when it opened in 1968, but it steadily lost business to nearby Fiesta Mall, which has since shuttered, and closed in 1998. It was demolished in 2006 to make way for light rail.
Metro Phoenix cities areworking to keep up with demand for housing as the area’s apartment vacancies are at a nearly 50-year low. The apartments planned near light rail in Mesa aren’t billed as affordable — they’re billed as “market rate.” Apartment-hunting firm Zumper ranked Mesa as 45th most-expensive city for renters in the U.S., with median one-bedroom rent running $1,220 per month, which is similar to Phoenix and Glendale, but less than nearby Scottsdale, Gilbert and Chandler.Mesa officials estimate that despite the property tax abatement it still will come out ahead as the project is expected to generate $3.9 million in revenue for the city, county and state over those eight years.
The incentive is a government property lease excise tax, commonly called a GPLET. It typically lets a property owner temporarily transfer ownership of the property to a city, which doesn’t pay property taxes under state law. Cities in exchange typically charge rent.
The Mesa City Council on Tuesday signed off on plans to give developer Dobson Properties Sub-Fund a GPLET that will waive property taxes for the eight years. In return, the developer must pay the city $10,000 each year in rent and must buy back the property for $5,000. City documents say that will make up the cost of administering the incentive.
Critics have long said GPLET incentives unfairly take money away from public school districts, which rely on property taxes. The Mesa agreement requires the developer to pay nearly $211,000 to Mesa Public Schools, Maricopa County Community College District and East Valley Institute of Technology.
“We’ve really pushed the developer on GPLETs to make school districts whole so they don’t lose money,” said City Councilmember Francisco Heredia, whose district includes the proposed development. “We’re really cautious on working on these kinds of development agreements, but it’s one of the only tools we have as a city to spur up growth.”
The proposed apartment complex is near the proposed Sycamore Station development, which has been years in the making. The area years ago was deemed “blighted” and marked as the city’s “Central Business District” — a designation required by state law if a city is going to give out this type of subsidy.
Plans call for redeveloping the more than six acres of land that once was the Tri-City Mall parking lot.
Jeff McVay, Mesa’s downtown transformation manager, said the old parking lot has become “kind of a dumping site.” This project could bring much-needed housing to the area and be a boon for the nearby bustling Asian district.
The developer should have completed construction drawings and seek construction permits by the end of the month, city documents say.
To receive the tax incentive, the developer must meet or exceed several requirements from Mesa, such as beginning construction on or before March 31 and finishing construction on or before June 30, 2024. It also must:
- Build at least 277,000 square feet of apartments in a four-story building.
- Build at least 245 “market rate” units.
- Include amenities such as a fitness center, a co-working space for residents, a coffee bar, a dog run and washing station, package delivery and receiving, a bike storage area, a pool and spa, covered parking for at least half of resident parking, electric vehicle charging stations.
- Have “high-quality design,” including a neon sign. McVay said it’s a nod to Mesa’s rich history of neon signs lining Main Street.
- Comply with energy efficient building certifications, such as LEED certification.
The developer also is on the hook for public infrastructure improvements in the aging area, such as:
- Improvements to make dropping off and picking up students at nearby Webster Elementary School easier.
- Connecting Dobson Road to the light rail parking lot southeast of the proposed complex.
- Designing, installing and maintaining two public art projects.
- A “Hero’s Refrigerator” with freedrinks for first responders including police officers, firefighters and paramedics. McVay believes this to be the first of its kind in Mesa.
- City use of the community room two times per year, free of charge.
Other cities use this incentive, sometimes waiving millions
Other metro Phoenix cities have used the GPLET incentive in recent years, often waiving millions of dollars in property tax.
Peoria in April approved an agreement that spelled out as much as $13 million in incentives for a developer to build a $510 million development, complete with a full-service hotel, near the city’s spring training ballpark. Peoria asked for just $10 per year in rent. Critics at the time questioned the unconventional nature of the deal, its timing and its hefty price tag.Glendale also used a “partial GPLET” incentive to land the Crystal Lagoons water park. Some of the development tied to the water park, such as hotels, office space and parking structures, were not included in the incentive. The property is not in the city’s “central business district,” which is why the city couldn’t offer a complete GPLET like Peoria and Mesa. The city asked for $120 each year in rent, and agreed to sell the property back for its original price.McVay said Mesa leaders are intentional with these agreements. If the area is losing out on property taxes, its residents need to get something for it, he said.”That’s just been the city’s expectation. We are providing you with a significant financial advantage … there needs to be some kind of public benefit returned to the city,” he said.
Development near Sycamore Station has been years in the making
Another development that includes apartments and retail shopsnear Mesa’s original light rail station has been gaining steam, too.
That project, originally dubbed Sycamore Station, is closer to Main Street east of Dobson Road. If the two projects seem similar, that’s not an accident. City leaders years ago worked toward a master plan for the entire area, but a key property owner backed out, leaving them to piecemeal new developments on this block.
“That would have been our preference … (but) it’s time to get something out of the ground over there,” Mesa Mayor John Giles said. “Hopefully before long we’ll develop that whole area.”
Plans for the Sycamore Station development, which call for scrapping hundreds of the original parking spots and replacing them with apartments and retail, date back to at least 2016. City leaders recently gave it another OK.
Leaders have said they want to see two things in the development:
- A five-story apartment building with about 250 units and upscale amenities on the northwest side of the site, next to Dobson Road.
- Housing with retail on the first floor on the southeast side of the site, just off Main Street.
That project has plans for retail, unlike the apartments closer to Dobson. McVay said it makes more sense to have retail further from the busy traffic on Dobson and closer to light rail and more pedestrian-friendly intersections on Main Street.
The City Council in August approved rezoning that would pave the way for the project. Details such as when the project will break ground have not yet been announced.
SOURCE: Arizona Republic