Stewart Motors held hostage for developer’s tax incentives

By Bob Graham, Motley Design Group

The developer of Circle on Central, the planned redevelopment of the historic Stewart Motor Co. Studebaker building at Central & McKinley, has apparently decided to play hardball as they plow ahead in their quest to secure GPLET tax incentives from the city of Phoenix despite mounting public opposition.

On March 28, the Empire Group pulled a permit for the complete demolition of the un-designated historic building, constructed in 1947 as the Studebaker dealership located in the heart of Auto Row, as Central Avenue north of Van Buren was known.  While the developer denies that they have any plans to demolish the building within the 30-day life of the permit, they made clear in a public meeting this Tuesday that they would seriously consider complete demolition of the building if their request for property tax incentives from the City is denied.

The Story So Far

Phoenix preservation advocates approached the developer earlier this year to open discussions on the affect of their proposed development on the historic building.  They were shown a 19-story mixed-use addition that would obliterate nearly three-quarters of the building. Alarmed at the impact of the design, a letter was circulated requesting that the developer consider alternative approaches that would leave the building substantially intact. To date, the developer’s plans have remained unchanged.

Whatever one thinks about the merits of the development, there is little meaningful leverage available to the community on its impacts because the property does not have any historic preservation protections (due to the resistance of the prior and current owners) and because the development conforms to zoning requirements without apparent need for variances or use permits.  As public knowledge of the project has grown within the downtown community, attention focused on one of the few elements of the project that requires a special approval process: participation in the Government Property Lease Excise Tax program, or GPLET.

For the full background on this story, the reader is referred to the prior article, Storm Clouds Circle.

GPLET for Dummies

The basic idea of GPLET is that after the project is finished it is placed under City ownership for a certain period of time and leased back to the developer. This removes the property from the property tax rolls because the City is not subject to property tax. A substitute excise tax is paid in its place (at a much reduced amount).

GPLETs have been handed out by past City Councils for years as one of the few tools available to incentivize downtown revitalization. They have been evaluated on a purely monetary basis – that the economic impact of a particular project will justify the reduction in tax paid by the developer over the course of the GPLET. The program has become controversial in recent years because of the tax implications on properties not receiving GPLETs – the other downtown property owners have to pay higher taxes to make up the difference.  Reduced tax revenues to the public school system have also been made an issue, although recent agreements include provisions intended to make the school revenue whole.

Many in the downtown community have been asking that the city re-evaluate its GPLET program and stop handing the incentives out so readily.  At some point, downtown has to be deemed a redevelopment success that no longer requires public subsidy; at which time GPLETs could incentivize the other kinds of goals that are not yet being addressed. A precedent was set just this year: Council’s approval of the Derby project was predicated on the inclusion of attainable housing in the project, at the request of the community. In the case of the Circle on Central development, it is fair to ask: no matter the economic benefit, should we be providing public subsidies to private projects that destroy valued historic buildings?

So, the Threat

Most people were quite surprised to learn of the developer’s application for demolition permit. Up to this point, the development team has seemed quite open and has implied, if not explicitly stated, that the project was still in its formative stages and that they would be happy to engage in a discussion with downtown stakeholders with the aim of improving the preservation impact of the project.

The developer was invited to present their project to the Roosevelt Action Association, which represents the neighborhood within which the project is proposed. They accepted and the developer attended a meeting on the evening of April 5, accompanied by his architect and his attorney.

Empire’s bottom line could be paraphrased as follows: The project is not going to change. We are only going to preserve the southeast corner of the building. We will throw you a bone by committing to a façade easement on the part that we don’t plan to tear down, and by putting historical displays inside. And if we don’t get GPLET, we will probably tear down even that last bit of the building.

There Are Alternatives

Aesthetics aside, architectural design is largely an exercise in reconciling competing values and requirements. Some, such as the ability to stand up or be safely fled if there is a fire, can’t be compromised.  Other requirements are often found to be at odds and a decision must be made as to which gets priority. For instance, the client may want to make a window larger, but doing so will increase the heat load. Which do you want? A bigger air conditioner or a smaller window? This mundane example could be one of thousands of similar trade-offs that architects make in the course of designing a single project.

“Historic preservation” in the case of Circle on Central has become one of those values that have been compromised in favor of other aspects of the project that the developer finds more important.

We know that the developer’s program can be accommodated on this site with a drastically reduced impact on the Stewart Motors building, because prior to the public meeting, an alternative scheme was shared with the developer’s architects that could provide similar or greater development intensity while preserving enough of the building to retain National Register eligibility. This plan is arrived at if you value preservation as a higher priority than, say, reducing the building height or eliminating curb cuts along Central Avenue.

Assume as a given that the project has to accommodate about 310 apartments and about 330 cars. This density is capped by the zoning. One way to reduce the amount of building destruction that must take place is to reduce the footprint of the new addition and make it taller. You would not be losing any units or square footage. You would probably lose some efficiency and therefore increase the cost overall. However, the zoning also provides height and density bonuses for projects that preserve and rehabilitate historic buildings. In this case, by preserving the building, you could increase the yield of the property from 310 units to as many as 540 units under the code. As a practical matter, because of the limits of parking feasibility, you could probably achieve only about 100 additional units, but going from 310 to 410 units is a significant increase and should help offset the loss of efficiency.

Minor alterations to the shape of the building would also result in a significantly increased level of preservation. Just by stepping the façade back where the new addition meets the old building, you can preserve all of the historic streetscape along Central. If you reopen the historic driveway entrance to the service bays, you can use that as an entrance to your parking garage.

Finally, the project may qualify for historic preservation tax credits or other incentives if a successful compromise can be reached. The biggest hurdle would be convincing the National Park Service that placing a 350-foot building next to/atop the historic building would not result in an unacceptable change to its historic context. But it would be worth exploring. If the expense to rehabilitate Stewart Motors were $200 per square foot, the tax credit would be worth half a million dollars.

Where is the Stewardship?

Admittedly, the design concept presented above is pretty rough in comparison to the developer’s plan, but we don’t have the benefit of eight months in design development. What I hope this example demonstrates is that the developer’s plan can’t be considered the one and only plan that works.  The developer has made a conscious decision from the start to sacrifice 75% of the building because they thought they could. And by right, they can; but that does not mean that we should dedicate public money to it.

Donovan Rypkema, noted advocate for the economics of preservation, recently posted on FaceBook:

“This argument of ‘historic preservation versus property rights’ has become a stale cliché that continues to be the framing of the argument. I’m waiting for the enlightened journalist to instead write about ‘owner intransigence vs. property responsibilities.’ Historic preservation is a property responsibility movement — the responsibility of stewardship, not just the right of ownership; the responsibility to one’s neighbors, not just one’s self; the responsibility to generations of children not yet born, not just the right to muck up a historic property for the whim du jour.”

It couldn’t be better said, and speaks to Empire Group’s approach to this design. They need to understand that just because they own the property, that doesn’t mean they don’t have a responsibility of stewardship. And the community should not knuckle under to the “whim du jour” because one piece of the building is being held hostage, while the rest is already under a death warrant.