Coyote Blog

Yuk.  $14 million giveaway to developer

Last week, Phoenix City Council members approved a deal for the $82 million high-rise, mixed-use Phoenix Central Station. The development at Central Avenue and Van Buren Street will include about 475 apartments and 30,000 square feet of commercial space.

As part of the deal, Phoenix would give the developer, Smith Partners, a controversial tax-abatement incentive called a Government Property Lease Excise Tax for the tower portion of the project. The agreement allows developers to avoid paying certain taxes through deals that title their land or buildings to a government entity with an exclusive right to lease the property back.

In this case, the city already owns the land, but the developer will eventually take title over the building. The arrangement allows them to not pay property taxes for 25 years, which a city official estimates would be $600,000 to $900,000 per year based on conversations with the developer. However, the developer will make smaller lease payments back to the city, and, after eight years, pay taxes on those lease payments.

The agreement requires the developer to pay the city a portion of its revenue, which will net the city an estimated $4.4 million over the first 25 years

The difference from the $4.4 million they will actually pay and 25 years at $750,000 in property taxes is about $10 million (fudging concerns about present value and such).  I used to be OK with anything that reduced taxes for anyone, but now I have come to realize that discounting taxes for one preferred crony just raises taxes for the rest of us.  [Props to Republican Sal Deciccio for being one of two to vote against this]

Here is my guess as to what is going on here.  Phoenix paid a stupid amount of money to build a light rail line that costs orders of magnitude more money than running the same passengers in buses.  One of the justifications for this gross over-expenditure on the light rail boondoggle was that it would spur development along the line.  But it is not really doing so.  Ridership on light rail has been stagnant for years, as has been transit ridership (most of the light rail ridership gains simply cannibalized from bus service, shifting low-cost-to-serve bus riders to high-cost-to-serve train riders).

So they need to be able to show transit-related development to justify future light rail expansions.  Thus, this subsidized development along the rail line.

I will make a firm bet.  Within 5 years we will have Phoenix politicians touting this development as a result of the light rail investment with nary a mention of the $10 million additional taxpayer subsidy it received.

A reader sent me this, and I found it pretty funny:

Minnesota Public Radio and two neighboring churches in downtown St. Paul are escalating their opposition to the proposed line.

MPR said noise and vibrations from the train, connecting Minneapolis and St. Paul, could harm their ability to record and broadcast. The churches say those very same effects could rattle their aging buildings and disrupt their worship services.

In the latest salvo, MPR has asked the project planners to study alternative routes through downtown St. Paul.

MPR and the churches say they support light-rail, but not the proposed route along Cedar Street. The tracks would be laid about 14 feet from the front door of the broadcast center.

"As far as we know, this is the closest a light-rail line will run to federally designated noise- and vibration-sensitive facilities anywhere in the country," said Jeff Nelson, public-affairs director for MPR.

I am not sure a comment is even necessary.   MPR has published any number of light rail stories about budget and approval battles that were thinly disguised cheerleading for light rail.  Take this article for example, which discusses how light rail might be saved from trouble, but because it only quotes light rail supporters, a reader can't even figure out why the trouble exists.

Basically, MPR is saying "please put the rail line, which we support, near someone else who may hate it being nearby as much as we but don't have the access to the media and the political process to make a big stink about it."   Already, the line has apparently made an expensive accommodation for just one organization -- the University of Minnesota, a state agency.  The arrogance of this is staggering.  It reminds me of the NY Times and Columbia University, both of whom claim to be advocates for the underdog, except when the underdog gets in the way of their real estate deal and eminent domain grab.

By the way, am I the only one who has never heard of a federal designation for "noise- and vibration-sensitive facilities?"  If such a designation really exists (and I sure can't find it with any similar search terms on Google), what percentage of the list would you guess is politically connected organizations using the designation to get privileged treatment vs. those without power?

Update: The "federally designated" thing is a bit of an exaggeration.  The PR department of MPR was kind enough to send me a link.  They are referring to the category 1 designation in this report, which merely says that amphitheaters and recording studios should be in the quietest category when assessing impacts of transit nearby (neither MPR or any other facility is mentioned by name).  This same report essentially comes to the conclusion that it is perfectly possible for light rail to be near to recording studios and amphitheaters, just that some care needs to be taken in design.

By the way, the "As far as we know, this is the closes a light-rail line will run to" such a facility is just nuts.  I guess the "as far as we know" covers them from outright fraud, but I have to look no further than my own town of Phoenix to find light rail in proximity to such venues.   I know of a few radio stations and TV stations right on the rail line, but a quick Google maps search found at least 9 radio stations and TV stations and recording studios right on just the Central Avenue portion of the route.  In addition, I know of at least 5 ampitheaters on the route, not to mention our main public library.  (In fact, the library is right near the intersection of the rail line and Interstate-10, and I find it perfectly quiet there).  In fact, I would challenge MPR to identify one urban passenger rail line where there is NOT a radio station, TV station, recording studio, or ampitheater in close proximity.