Blighted buildings plus tax incentives draw developers downtown

With the help of a city tax incentive program, the resurrection of downtown is continuing to pick up steam.

On Tuesday a trio of developers will ask the Tucson City Council to support tax breaks that will help them restore several downtown buildings that are outdated, blighted or both.

The Government Property Lease Excise Tax — or GPLET — incentive program, created by the city in 2012, waives property taxes for eight years if the developer increases the property’s value by at least 100 percent. Also, an economic analysis must show the benefit to the government is greater than the benefit received by the developer.

The program helps projects get established and attracts the kind of development downtown needs, said Chris Kaselemis, the city’s Economic Initiatives program director.

Developers Don Bourn and Marcel Dabdoub said the incentive program is critical to making their renovation projects work financially.

The program is “one of the most important things the city has done for promoting downtown development,” Bourn said. He is applying for a GPLET for his project at 20 E. Congress and wants to apply for another in the future for his project at the old Indian Trading Post building.

Dabdoub said his Arizona Hotel project is dependent on the incentive plan.

“We were interested in the building because we were interested in what was going on downtown,” he said. “We went into it thinking the renovation would not be that expensive.”

But once his team got into to building, they found a mess. The building’s structure was deteriorating and squatters had trashed its interior.

“The conditions were really awful,” Dabdoub said.

Besides structural reinforcement work, his project will add kitchens and bathrooms to all of the apartments and restore historic atriums.

“We’re opening those back up to the sky to let fresh air and sunlight back in to the units,” he said.

“This is one project that really needs help in order to make it work,” Dabdoub said. “The only reason we’re able to bring it back to life is because of the incentives that are being offered.”

The latest round of GPLET incentive projects includes offices and market-rate housing, which round out the kinds of spaces downtown needs to keep growing, Kaselemis said.

Here are three GPLET incentive projects the City Council will consider on Tuesday.

BOURN HQ

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Tucson’s mayor and council will consider this GPLET application for the first time next week. City staff recommended moving the project forward to the economic analysis phase, which is the second of three steps, interim City Manager Martha Durkin said in a memo.

• The developer: Don Bourn

• The project: $3 million total renovation of the Chase bank building annex, 20 E. Congress St., near Stone Avenue. It’s a 19,377-square-foot building with three floors and a basement. The “modern and cool” space will include 11,000 square feet for the Bourne Cos. headquarters and a ground-floor restaurant with a patio, Kaselemis said.
• Status: Under construction. The interior requires “extraordinary demolition, remediation and reworking,” according to Bourn’s application. Crews gutted the building then installed a new centerpiece staircase, punched in windows and skylights, and installed a new facade. Bourn’s office moved to the building last week.

ARIZONA HOTEL

The developer is asking for both a GPLET incentive package and a $1.2 million loan from the Tucson Community Development Loan Fund, which is a loan pool using federal funds for projects that eliminate urban blight. City staff recommended moving the project forward into the economic analysis phase.

“The project will revitalize a vacant, blighted structure across from the Ronstadt Transit Center,” Durkin said in a memo.

• The developer: Marcel Dabdoub

• The project: $4.8 million to turn an historic hotel at 31-47 N. Sixth Ave. into 16 small, market-rate apartments, a ground-floor restaurant and basement offices for business startups. The 25,000-square-foot building is listed on the National Register of Historic Places, and Dabdoub said his team is taking extra care to “respect the historic look and feel of the building.”
• Status: In the planning phase. Construction is expected to begin this summer and be done by January.

RIALTO BLOCK

The mayor and council are expected to give final approval to the Rialto block project for a GPLET agreement that has been in the works since October 2012.

“It’s just a great project in one of the core pieces of downtown,” Kaselemis said. “It’s definitely a deserving project.”

• The developer: Scott Stiteler

• The project: $11.4 million to turn the boarded-up buildings around the historic Rialto Theatre into restaurants, bars and offices.
• Status: Nearly complete, anchored by Proper restaurant. Construction is expected to begin this summer on the last storefront, the Meatery butcher shop and deli.

MORE PROJECTS

Previous GPLET agreements were signed with Johnny Gibson’s Downtown Market, the Herbert apartments, Mister Car Wash headquarters, Cadence student apartments and the One East Broadway apartments.