OV to end tax-sharing to boost businesses

Posted on August 23, 2007 | Type: In the News
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Oro Valley's Town Council has decided to put anto issuing sales tax-sharing retail development incentives, though existing incentive agreements won't be affected.

Economic development incentives for retail "don't make sense," said Councilman Barry Gillaspie at an Aug. 14 public meeting. "I don't believe governments should be tampering in the private sector like that."

The town's existing economic development incentives, none of which were approved by the current Town Council, involve sharing tax revenue with developers - and in one case a resort - for a certain amount of time. The sharing of tax revenue amounts to a refund on taxes paid in Oro Valley.

The Town Council's decision not to use those incentives won't affect Oro Valley's ability to attract retail development, said David Welsh, economic development administrator.

"In my experience, I haven't seen they are effective," he said.
Jerry Bustamante, president and CEO of the Northern Pima County Chamber of Commerce, disagreed. "Economic development incentives are a tool that I think all municipalities should have in their toolbox," he said.

"It is a tool that you need to evaluate when you can use it on a case-by-case basis," he said. "If a developer or a business owner is going to make a significant investment that can benefit many others" - such as infrastructure improvements - "then in that case I think it's certainly necessary."

An economic development agreement plays a key role in the decision to make a commitment to a growing area ahead of the market, said Mike Carlier, owner of a land development company, The Carlier Co.

Incentives can offset the cost of building roads and other infrastructure expenses, as well as the delay in profits while a business waits for population growth to catch up to development.

The Town Council originally considered no longer offering economic development incentives for retail along with incentives that are tax-based.

But Councilman Terry Parish said the town should be writing comprehensive plans for how to deal with retail development incentives, rather than eliminating what he also referred to as tools.

Parish, who voted not to consider any new tax incentive-based development agreements, said Oro Valley "needs to start thinking out of the box as far as incentives go."

He suggested offering incentives such as putting projects on a fast-track review process.

"That's a great idea," Carlier said, but "it's yet to be properly implemented. It's just so darn difficult to fast-track anything."

Oro Valley has a 10-year agreement with Oracle Crossings developer Bourne Partners to give back 45 percent of retail sales tax revenue collected at the retail center, located at North Oracle and West Magee roads. The agreement is capped at $6.5 million.

The town also has an agreement with Oro Valley Marketplace developer Vestar Development Co. for 45 percent of retail sales tax revenue collected at that center, which is under construction at the southwest corner of Tangerine and North Oracle roads.

Oro Valley will return that tax revenue for a maximum of 10 years or $23.2 million.

That agreement brought Oro Valley to court after a petition from a citizens group, Stop Oro Valley Outrageous Giveaways, maintained that taxpayers had a right to vote on it.

When the agreement went before voters in 2006, 58 percent approved it, though some voters now say they voted under the impression that the center would have stores more upscale than one of its anchors, a Wal-Mart Supercenter.

Oro Valley's agreement with Vestar is one example of an economic development agreement being necessary to offset what the developer had to invest in the community, Bustamante said.
"Vestar is basically taking a piece of land that's almost undevelopable." The company is making significant infrastructure investments and bringing more commercial businesses and sales tax to the community, he said.

Earlier this month, Arizona businesses represented by Clint Bolick of the Goldwater Institute filed a lawsuit opposing a nearly $100 million tax incentive the Phoenix City Council granted to CityNorth, an upscale development under construction in northeast Phoenix.

Bolick's clients are seeking to void the council's approval on grounds that giving taxpayer money to selected retailers and developers is unconstitutional, according to a recent Arizona Daily Star story.

The Oro Valley Town Council voted on Aug. 14 to direct the town's Economic Development Division to draft a policy on economic development incentives for companies that would bring professional- level employment to Oro Valley.

The council will also consider economic development agreements with resorts and hotels as a separate matter. Oro Valley has an agreement with the Hilton Tucson El Conquistador Golf and Tennis Resort, 10000 N. Oracle Road, for 2 percentage points of the town's 6 percent bed tax. The agreement applies only to bed tax revenue collected at the resort and ends in 2010.

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