Republicans Dance Around ‘Development’ During Debates

Posted on August 7, 2014

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Phoenix Cityscape, completed 2013-2014.

Phoenix Cityscape, completed  2013-2014. Land Owner: City of Phoenix.

Just over two weeks remaining before the primary, and Arizona’s potential Republican chief executives have circumvented public discussions about the real estate market, and the return of cranes to Arizona’s skies.

Yet the state’s historic reliance on construction was the first of several economy related topics at the Republican Forum for Arizona Governor at the Arizona Historical Society in Tempe, July 21.

KJZZ Radio journalists Mark Brodie and Steve Goldstein interviewed the panel of governor hopefuls in front of an audience of about 200.

There was noticeably less shouting than during KAET’s televised dialogue the night before.

Revenue, immigration, school funding, and lawsuits against the Obama Administration garnered most specifics both nights, as well as most passion.

But sprinkled between plans to eliminate state income tax and line the Arizona-Mexico border with sheriff’s deputies, a few of the GOP candidates generally supported cooperation between public and private sectors to encourage business.

There have been dozens of cooperative efforts between developers and public entities statewide  since the real estate market tanked in 2007, and each candidate saluted – in his or her own way – population and business growth as vital to Arizona economy.

However, only former Mesa Mayor Scott Smith pointed to an actual example of publicly supported development.

“Apple came to Mesa and was a five-year-overnight success story,” Smith said with a little dry wit.

Mesa’s annexation and installation of infrastructure in the far east-valley lured the tech-god away from California and Texas (and potentially other east valley cities) to invest $2 Billion in a Mesa factory.

“I looked at our city and said, ‘we can’t simply be a boat out here in the stream and go wherever the wind takes us,” Smith said.

He didn’t elaborate on the mechanisms his city used to secure the deal with Apple, which included state tax deferrals and support for a foreign free trade zone.

The project evolved into what is now DMB’s five-mile, master-planned destination community of Eastmark, located just off the 202 between Elliot and Pecos Roads.

Smith’s reference to the Apple/Eastmark development was the most specific during the debate.

“For a long time the State has relied upon population growth as a way to stimulate the economy,” Brodie asked former California Congressman Frank Riggs. “Is it time to rely upon something else?”

Riggs, a Veteran, was a California Congressman for about seven years.

He is a former police detective, real estate investor, and charter school developer.

He didn’t directly answer Brodie’s question.

“We want a diversified economy,” he said “Our recovery from the recession has been tepid.”

Riggs said he aims to improve Arizona schools and proposes to allow businesses to write off same year investments.

“The Feds have put more and more land – not the parks – out of the hands of improvement,” he said in an interview after the debate. “I want more state and local control.”

Riggs suggested the State Land Department could work to convince the Federal Government to release land in Arizona to generate more revenue for education.

Goldstein put a similar question about growth to current Arizona Secretary of State Ken Bennett, who also sidestepped:

“Every level of government seems to complain about un-funded mandates, and then for some reason turns around and does the same thing to the levels below them,” he said after recapping his political career as a Prescott City Councilman and State Senate President.

Bennett’s campaign website listed his support for freeing up federal land for state use, as well as a promise to immediately cease all State General Fund sweeps and restore funding to cities and towns for infrastructure.

“Growth is a gift,” answered Doug Ducey, founder and former C.E.O. of Cold Stone Creameries.“A Ducey administration will work with any business to encourage growth.”

Christine Jones, former C.E.O. of Scottsdale based GoDaddy.com, made several specific suggestions for incentivizing small businesses throughout the night, such as eliminating redundant tax filings and local business permitting.

However, her comments regarding development were limited to encouraging conservation of water and supporting Arizona’s water authorities.

“Simple public service announcement: this is a desert, conserve the water,” she said.

More Examples of Public Cooperation:

Marina Heights "State Farm" Project. Land Owner: Arizona State University.

Marina Heights “State Farm” Project. Land Owner: Arizona State University.

Meanwhile, less than two miles away from the debate, the self-touted largest commercial land development project in Arizona’s history grows closer to completion at downtown Tempe’s urban lakeside.

State Farm Insurance contracted with Ryan Companies and Sunbelt Holdings to build a 20-acre mixed-use campus which will house 8,000 insurance related jobs.

Competition for the regional administration hub volleyed between Texas, California, and several other states before landing permanently in Tempe, reportedly for its proximity to students training in business at Arizona State University.

Marina Heights, so dubbed for its premier frontage along Tempe Town Lake, is also expected to include residences, shops, and restaurants for employees and the public.

By leasing the land from ASU – a state agency – Ryan and Sunbelt were allowed to defer state tax payments until after the project’s completion, saving developers millions in financing as well.

Despite the extra scrutiny (and bureaucracy) implied by government ownership, it is widely acknowledged the project didn’t stand a chance without local and state cooperation.

Yet, neither the significance nor the implications of this joint venture between private developers and government were discussed at either Republican debate, nor the mechanism(s) that foster such developments.

City ownership isn’t rare in Arizona cities.

State law prohibits “gifting” tax abatements to private entities outright, and therefor requires municipalities or the state to lease the land, and freeze or exempt taxes to developers.

Though politically touchy, The Government Property Lease Excise Tax (GPLET) allows developers to bring something besides powerpoint animations to financiers.

Freeport McMoRan Inc. & Westin Hotel. Land Owner: City of Phoenix.

Freeport McMoRan Inc. & Westin Hotel. Land Owner: City of Phoenix.

During five years of frozen capital, downtown Phoenix contributed the land for at least two commercial towers, a boutique hotel, several state-of-the-art educational facilities, renovated several deteriorating buildings, and oversaw the creation of Arizona’s first privately owned public park – Cityscape Pioneer Square.

Tempe, Mesa, Gilbert, Chandler, and Tucson – to name only a few – have also used similar ownership/tax abatement strategies to resuscitate their downtowns into destinations for living and entertainment.

These financing strategies weren’t inspired by creativity alone. They’ve come ostensibly backed by promises of job creation and tax revenue. Their success varies.

Dancing Around Development:

Although subdivision permits aren’t flooding municipal coffers at anything close to pre-recession levels, Arizonans now flock to old banks, grocery stores, and gas stations for gourmet cuisine or their daily caffeine rush thanks to un-conventional developers, business owners, and city planners.

Neither criticism nor praise for any of the creative thinking that occurred during worst economy since the Great Depression have been raised in public debates by the GOP Gubernatorial candidates.

The candidates have simply been uninterested in discussing it, begging the question: does development– publicly incentivized or not – even register with Republican voters anymore?

Disbarred former Maricopa County Attorney and Gubernatorial candidate Andrew Thomas did not participate July 21.

He had no comments regarding growth or development the night before.

The Primary Election will be held August 26.

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Posted in: Arizona Politics