Phoenix may lose $7.5M as GCU goes non-profit

Grand Canyon University’s recent conversion back to a non-profit university after 14 years as a for-profit entity was touted by university leaders as a way to remain competitive and save money.

But money saved for the university means money lost for the state, city and school districts — to the tune of about $7.5 million.

Last year, GCU had the highest tax bill of any property in Phoenix. But nonprofit universities do not have to pay property taxes, which means the uni-

versity will not have to pay the $9.2 million it had to pay last year for its campus at 33rd Avenue and Camelback Road.

Instead, only its parent company, Grand Canyon Education, will pay property taxes — about $1.7 million.

Arizona’s property taxes are divided among local government entities. The $7.5 million loss will hit school districts hardest, since more than 50 percent of property taxes are distributed to schools.

Schools will lose more than $4 million, Phoenix will lose $849,000, community colleges will lose $843,000, Maricopa County will lose $837,000, other special taxing districts will lose $651,000 and the state will take a $291,000 hit.

GCU maintains that the impact of its property tax decrease is outweighed by its other financial contributions to the Valley.

The university and its parent company will still pay more than $125 million in other federal, state and local taxes, such as income, payroll and sales tax, university spokesman Bob Romantic said.

And the $1.7 million Grand Canyon Education will pay annually in property taxes is still one of the highest tax bills in Phoenix, he said. This appears accurate, according to a 2017 analysis by real estate blog Commercial Cafe.

GCU is in the Alhambra Elementary School District and the Phoenix Union High School District. Romantic said university officials do not believe the change will overburden school districts or homeowners close to GCU.

“While the state, county and city as a whole will receive less in property tax revenue, state law provides for state equalization assistance in which funds are redistributed to districts that lack highvalue residential and commercial properties,” he said. “This makes up for that shortfall and ensures uniform assistance for all public school systems.” Councilman Daniel Valenzuela, who represents west Phoenix, said “it was never a secret” that GCU wanted to return to a nonprofit university, and “it’s GCU’s right to do this.”

GCU was a non-profit school from 1949 to 2004 before it fell on financial hard times and was purchased by a group of investors. The company went public on the Nasdaq exchange in 2008.

Brian Mueller, GCU’s president, said the school wanted to be a non-profit again to benefit its students and ensure the institution’s long-term legacy. Being a non-profit will help it accept philanthropy, pursue grants and become a full voting member of the National Collegiate Athletic Association.

Valenzuela said that regardless of the tax loss, “there are still many benefits of having GCU right there in west Phoenix” and the university will continue to drive up property values and drive down crime in the area.

“I think when you look at the big picture ... regardless of whether GCU is a for-profit or non-profit university, they are major benefit to the city of Phoenix and the people of Phoenix and, of course, our state,” he said.