As Phoenix negotiates the sale of the city-owned Sheraton hotel in downtown, a new aspect of the deal is sparking controversy: a proposed $97 million tax break for the buyer.
The city already expects to take a hefty loss on the Sheraton. In July, Phoenix entered into exclusive talks to sell to TLG Phoenix LLC, an investment company based in Florida, for $255 million.
Phoenix still owes $306 million on the hotel — the largest in the state with 1,000 rooms — and the city has already sunk about $47 million of taxpayers' money into it.
PREVIOUSLY: Phoenix may sell downtown Sheraton; losses could exceed $100M
But the deal raised even more eyebrows last week when the city released a report showing the deal's potential economic impact and the value of the proposed property-tax break.
Critics said the tax break would add to the city's staggering losses from its foray into the hotel business and shows the hotel is worth far less than its sale price.
"The incentive deal they are offering the buyer adds insult to this injurious affair," Sean McCarthy, senior research analyst at the Arizona Tax Research Association, a government watchdog group, wrote about the sale.
"The hotel probably would not fetch $255 million if the owner had to pay full property taxes in downtown Phoenix, which sports some of the highest rates in the state."
Meanwhile, representatives for at least two other prospective buyers said the city should have negotiated more competitively before jumping on the offer from TLG Phoenix.
City officials praised the deal, saying that it will put the hotel in the hands of an experienced owner who plans to spend tens of millions to give the Sheraton a much-needed face-lift.