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Updated Feb 5, 2014 - 5:56 pm

Legislature mulls Grand Canyon University tax cut

PHOENIX -- The Arizona Legislature is considering giving a multi-million dollar property tax break to a private Christian university in suburban Phoenix that plans to expand to Mesa and possibly Tucson.

The Senate Finance Committee voted 6-1 Wednesday to cut the property taxes Grand Canyon University must pay every year by reclassifying it into a much lower rate.

If passed by the Legislature and signed by Gov. Jan Brewer, the university's tax bill for its Phoenix campus this year would drop from slightly more than $1 million to about $264,000.

The university has poured hundreds of millions of dollars into expanding its campus at 33rd Avenue and Camelback Road in recent years and plans to start construction on a $200 million Mesa facility this year. It also has been looking at property in Tucson for a third campus and considering expanding outside Arizona.

Grand Canyon lobbyist Kevin DeMenna told the committee university officials got sticker shock from the increased property tax bills and needed the rate cut to keep growing in Arizona. He said unlike state universities and nonprofit operations, the for-profit school pays taxes and is only looking for a more modest rate so it can continue to invest and support the community.

"They did not expect this level, this type of a hit," DeMenna said. "Grand Canyon, because they has chosen not to elect nonprofit status they are facing an enormous property tax bill as their expansion moves forward."

The proposal will lower the total assessed value in the Alhambra Elementary School District and the Phoenix Union High School District. The Maricopa County Assessor's office estimated that Alhambra alone will lose about $9.1 million in assessed value.

The overall decrease in revenue will be spread among other property owners in the county, with each paying a tiny amount, DeMenna said.

Grand Canyon President Brian Mueller said in an interview with The Associated Press that the university has paid $49 million in income, sales and property taxes in the past five years, all while providing a huge benefit to the local community and Arizona students, who are educated at a cost near what state universities charge with no state subsidies.

"What people are most excited about with all is that is we're making these huge investments in one of the toughest places in Phoenix," Mueller said. "It's going to serve the greater good for decades out, so the slight break on property tax pales in comparison to the greater good that comes out."

The university has also gone from 1,000 students a decade ago to 8,500 now, with plans to nearly double that number. It now employs 3,000 people, up from 1,000.

The tax break didn't go unnoticed by Kevin McCarthy of the Arizona Tax Research Association, who warned that the Legislature had stopped creating the special property tax breaks in recent years and that giving the university a cut could bring many other companies knocking.

"Decide who you're going to say no to. This entity is not the only one that is burdened with extraordinarily high business property taxes," McCarthy said. "They all are."

The sponsor of Senate Bill 1303, Republican Rep. Steve Yarbrough of Chandler, said helping even the playing field for the private university was a good public policy decision.

"It's in the best interest of the whole educational community," Yarbrough said. "They are going to pay property taxes, but I submit that they should pay at a lesser rate because of what they do and the benefit that accrues to our overall society because of what they do."

Democratic Sen. Steve Farley of Tucson agreed and voted to support the tax cut. He said Grand Canyon was considering expanding out of state and that offering a lower tax rate to help keep the school in Arizona makes sense.

"This seems to be to hold enough promise to have a net benefit to the state in terms of jobs and income," Farley said.

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