Mesa OKs tax deal for multifamily housing, retail development

The Mesa City Council has approved a tax incentive deal for a mixed-use development near North Dobson Road and West Main Street in the West Redevelopment Area.

The five-story, 285,890-square-foot Ovio project is under construction at 1830 W. Main St., near Dobson Road, and will include 191 apartments and an almost 5,700-square-foot ground floor with dedicated commercial space.

The council voted 5-0 to approve a government property lease excise tax, development, sidewalk easement, and vehicle entrance and exit easement agreements with Pride Ventures LLC II.

Mayor Mark Freeman and Councilmember Rich Adams were absent from the meeting.

“The development will create market-rate multifamily housing, create jobs, increase revenues to the city, provide valuable public-access easements, and reduce slum and blight conditions within the West Redevelopment Area and the city’s single Central Business District,” a staff report stated.

Under the government property lease excise tax agreement, the developer will transfer the property and improvements to the city. The city will then lease them back to the developer for eight years, during which time there will be a tax abatement. At the end of the GPLET term, ownership of the improvements is given back to the developer.

The developer will pay the city $80,000 rent over the eight-year lease, a minimum of $520,000 in construction sales tax, and make a $500,000 contribution to the city’s redevelopment priorities, the report continued.

All private and public improvements must be completed on or before Dec. 31, 2027.

The city estimates the project will generate a total economic impact of $60 million over the life of the lease, supporting an estimated 28 direct jobs and $5.8 million in labor, the report stated.

The development is also expected to generate $5.2 million in tax revenues to the city, county and state from sales and income taxes between 2027 through 2034, with $920,331 of that representing new tax revenue to Mesa.

One resident went before the council to share her concerns about the effect the tax could have on schools.

“I think that funding should not be taken from education to subsidize this venture,” Marjorie Gomez said. “I would like for there to be a lot more oversight into and justification for the funding source and that an alternative to taking money from the community college fund be explored.”

City Attorney Jim Smith explained that the school districts would not lose out during the abatement period.

“We require that the developer make the school districts and all the other governmental agencies whole by continuing to pay the tax that they would have paid to those entities, so the school districts are made whole,” Smith said. “After the eight years, the taxes will then obviously ramp up significantly because (the developer) invested in and made the improvements to the property. During the lease term, (the districts) are made whole and then afterwards the actual tax amount will jump up significantly.”

The developer will pay a one-time lump sum “in-lieu” payment to school districts being affected by the eight-year tax abatement. The sum is based on the taxes assessed against the property that the districts would have received if the land had remained vacant and there was no tax abatement.

The Mesa Public School District will receive $74,854, the Maricopa Community College District will get $12,762, and the East Valley Institute of Technology District will get $589.

“I know we’ve talked about this project quite a bit over the years as far as creating more opportunities for people to live in the area of the Asian District and along the light rail,”
Councilmember Francisco Heredia said. “This is a much-needed project with housing and some commercial that will be added once it’s fully done.”

Normally, the town hammers out arrangements such as the government property lease excise tax agreement before construction begins. However, Ovio experienced several circumstances that affected the normal process.

First, the COVID-19 pandemic prompted the developer to lock in contracts for materials, causing construction to start earlier then expected, the staff report stated.

Other complications included required improvements to the nearby Valley Metro Park-and-Ride, a redesign of the project mid-development and Ovio’s lender being acquired by another company resulting in additional reviews of agreements, the report stated.

Janet Perez can be reached at jperez@iniusa.org. Please send your comments about this article to AzOpinions@iniusa.org. We are committed to publishing a wide variety of reader opinions, as long as they meet our Civility Guidelines.