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ABOR tries to rein in university development

By: - December 31, 2018 2:45 pm

Marina Heights, along Tempe Town Lake, at nighttime. Photo by Robertbody | Wikimedia Commons/CC BY-SA 3.0

The Arizona Board of Regents recently adopted new rules that aim to reign in real estate deals done by universities, just as Arizona State University has begun to move forward on several big projects.

ASU has been criticized in the past for the properties it owns being exempt from property taxes with some critics, like Arizona Tax Research Association’s Sean McCarthy, claiming its a way to shield private businesses from property taxes.

The university has defended its actions, saying that many of the developments aid in its educational goals, and it must seek new ways to do that since the state legislature hasn’t seen fit to increase state funding for higher education.

The new rules state that universities must seek ABOR approval on long-term commercial leases, optimize the value of the property and document economic benefit. Further, leases cannot be adopted “if the primary purpose is to remove private land or real property improvement from property tax rules.”

At least one of ABOR’s properties may already be in violation of one of those new rules.

Marina Heights

The Marina Heights development is worth around $1.2 billion, according to how much it was sold for in 2017.

ABOR owns the land, but private firms manage the property, which includes some of the largest buildings in the East Valley.

The development has taken criticism for being off the property tax rolls but ASU President Michael Crow has defended it as a new way for the university to bring in revenue.

The development has also been eyed by state legislators as an example of something they’d like to prevent ASU from doing, and the Joint Legislative Budget Committee has even looked into how much the property would pay if it was on the tax rolls: $9 million annually.

ATRA has put its estimate higher, at $12 million.

But even if state legislators decide to come in and change the law, a section of the development agreement between ABOR, ASU and Tempe has prepared for that eventuality.

The development agreement states that, if the property becomes subject to property taxes due to “a result of a change in the law, or any final, non-appealable unsuccessful judicial challenge,”  the City of Tempe will have 180 days to give the property a Government Property Lease Excise Tax agreement.

Such agreements, commonly referred to as GPLETs, are a development tool used by cities to allow entities to skirt property taxes by making the city the owner of the property and the entity the “tenant.”

The Marina Heights agreement also states that the landlord and tenant will judicially challenge any attempt to make the property pay property taxes.

Meanwhile, ASU is continuing development of its Novus Project in Tempe that will include 4 million square feet of retail and office space, which will all be exempt from property taxes.

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Jerod MacDonald-Evoy
Jerod MacDonald-Evoy

Reporter Jerod MacDonald-Evoy joined the Arizona Mirror from the Arizona Republic, where he spent 4 years covering everything from dark money in politics to Catholic priest sexual abuse scandals. He brings strong watchdog sensibilities and creative storytelling skills to the Arizona Mirror.