Land owned by the Arizona State University, like many other institutions of higher learning, enjoys an exemption from property taxes. That makes landing a spot to develop on university-owned property a prime deal for investors.
The attorney general of Arizona would like to change that. In fact, he says that what the University is doing is actually illegal. Allowing it to continue is like allowing the University to "rent" its tax-exempt status to whatever businesses it favors.
Right now, the attorney general is focused on the still-undeveloped Omni Hotel, which he seeks to hold liable for property taxes despite its deal with the University. However, this isn't the first time that lawmakers have been troubled about the way that the University manages its real estate agreements. In essence, the University remains the official owner of property that it allows other enterprises to rent. Because the University retains ownership, the businesses who get the deals don't have to pay taxes -- a significant benefit to them.
The University claims that it makes the deals because it is a way to make up money that is badly needed due to state budget restrictions. The state, on the other hand, is claiming that the University is abusing its status by engaging in these strawman real estate deals. State officials also claim that the University's regents actually lack the authority under the law to allow private developers to basically borrow the tax-exempt status. Efforts in the past to outright outlaw the practice, however, have failed.
For developers and investors who are looking into real estate deals on University property, the renewed action by the state is troubling. If the attorney general is successful, it could seriously dampen enthusiasm for any budding projects -- and lighten the wallets of those already invested in existing ones.
It's always wise to have experienced legal assistance as you go through the process of vetting a real estate deal. Issues like these can often be overlooked.