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What are GPLETs, and Why Do They Matter?

GPLET may sound like something you might serve on a Thanksgiving table, but it’s really an economic development tool used to encourage revitalization and infill in areas struggling to attract investment. The Government Property Lease Excise Tax, or GPLET, has been in place under Arizona law since 1996 and allows local governments to tax private entities that lease government property.

The GPLET has played a major role in financing some of Arizona’s most prominent commercial developments, including Phoenix’s Arizona Center, CityScape, and Renaissance Square and the Hayden Ferry Lakeside office complex in Tempe. These types of projects played a major role in anchoring burgeoning downtowns, contributing to the growing prosperity of neighboring property owners, and making Arizona a more appealing destination for investment and tourism.

The GPLET incentivizes development in designated redevelopment/blighted areas by enabling tenants to pay an excise tax to the local government for up to 25 years, instead of a higher property tax. And for eligible projects in central business districts (i.e. downtown areas) the excise tax can be abated for eight years.

Developers who receive GPLETs must improve the value of the property by 100% and excise tax funds go largely to schools and community colleges, as well as counties and cities. GPLETs are particularly useful for dense urban development where building and design costs are higher. These higher costs are due to: dealing with old infrastructure, archeological/environmental issues, and significant demolition; surrounding land vacancies making investments riskier; and difficult-to-obtain financing stemming from lower rates of return for lenders. The GPLET levels the playing field to bring in development where it might not have organically come to fruition on its own. It also creates a stronger tax base for governments and brings down property taxes for surrounding businesses once GPLET terms expire and tenants must pay full property tax.

Today, many of Arizona’s downtown areas are thriving with housing, retail, restaurants, and arts and entertainment venues on every corner – thanks in large part to GPLET developments. In the City of Phoenix alone, 22 GPLET projects have led to the creation of:

  • 3,700 new multi-family and student housing units
  • 5.2M square feet (SF): office space
  • 900,000 SF retail and restaurant space
  • 1,201 hotel rooms 
  • 679,000 SF of higher education space 
  • 8,200 structured parking spaces 
  • 17,800 new jobs 
  • $3.03B in construction capital investment 
  • $17M annual tax impact to the City

As neighborhoods, transportation corridors, and business districts change, so must use of GPLETs to ensure they are employed in communities with the greatest gaps in development.

Further Reading
Arizona Department of Revenue
City of Phoenix

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