Fry’s Food Store grocery store last week announced plans to build downtown Phoenix’s first full-service grocery store.
But the 55,000-square-foot mixed-use project may carry a price tag of $200 million. And an official with RED Development, which plans to develop the property, said via email that they are negotiating with the city “to assist with the higher costs” of building in the city’s core.
But how much will the city help with those costs?
Deputy City Manager Paul Blue wouldn’t reveal details about the negotiations. But City Councilman Jim Waring said Tuesday that he had been briefed on the negotiations, and they had indicated they’re leaning heavily toward a tax-abatement tool called Government Property Lease Excise Tax – or GPLET.
The developers want to build the project between Washington and Jefferson streets and First and Second streets, which serves as a surface parking lot now.
The city owns the land. Jeff Moloznik, vice president of development for RED Development, said via email that the city would continue to own the land and enter into a long-term lease agreement as part of the development.
In a GPLET, the city continues to own the land and essentially leases the property to the development, which means the project doesn’t have to pay as many taxes. The city has used the tool in the past – recently for a “micro-housing” development near downtown – to spur economic development.
Corporations have saved millions of dollars in property taxes over the years because of the incentive, which critics say unfairly puts the tax burden on residents and other businesses.
Dan Klocke, vice president of Downtown Phoenix Inc., said he didn’t know if the project will receive the tax abatement. However, he said he believes this type of project would create a lot of sales, which would generate a high return once this project is complete.
“If it’s needed, I think it makes sense for the city to be negotiating with the developer,” Klocke said.
However, Waring, who has a long history objecting to GPLET incentives, said he would oppose such a move. As former state senate chairman of the finance committee, he said many small businesses have come forward saying the GPLET is unfair.
He said they complain about paying taxes to fund their competition, instead of the state providing more financial means for existing businesses.
“It’s really just the tax burden,” he said. “Honestly, competitors are sort of (saying) ‘well, you’re helping them build their business to compete with me.’ ”
Waring said he would like to seek other financial options.
“I am willing to listen to other discussions and other ideas,” he said. “I don’t know what those would be. My guess is they would get the votes for the GPLET and that will be it.”
Blue said the mayor’s office and city council have made bringing a grocery store to the downtown area a priority. Downtown has grown in recent years, and Downtown Phoenix Inc. estimates 9,000 people now live in the area.
Blue said city officials view the grocery store as a necessity for those who live and work in the area.
Residents must now travel north across Interstate 10 to get to the closest supermarket at Seventh Street and McDowell Road.
Councilman Michael Nowakowski, whose district includes downtown, said residents can expect a groundbreaking ceremony by the end of the year.
He also said the Fry’s Food Store is predicted to open their doors at the downtown Phoenix location early 2018.