|
Source
Gilbert OKs subsidy to lure major project By Parker Leavitt The Republic | azcentral.com Fri Dec 21, 2012 11:19 PM Gilbert agreed this week to give $35 million in economic incentives to the developer of a massive commercial center that could double the town’s office space and help shake its reputation as a bedroom community. Town officials say the deal, the result of three years of negotiations with Ohio-based developer Nationwide Realty Investors, protects taxpayers while boosting employment by luring new companies to its largely undeveloped central business corridor. But critics are questioning the fairness to existing office centers of granting rich incentives. The two council members who opposed the agreement in Thursday’s 5-2 vote said they support the development but needed more time to vet the tax-rebate deal. Nationwide’s 300-acre mixed-use complex is the Valley’s latest megaproject to win a substantial public subsidy. Such incentives have faced intense scrutiny and controversy, with Phoenix’s $97 million deal for CityNorth the most notable recent example. That development, once envisioned as a crown jewel of northeast Phoenix, has been plagued by foreclosure. The Goldwater Institute, a Phoenix-based conservative think tank, challenged the incentive deal in court, prompting Phoenix to spend more than $750,000 defending the agreement. Gilbert officials say they’re confident Nationwide’s project, Rivulon, will play out differently. The Goldwater Institute, meanwhile, would not immediately say if it plans to oppose the Gilbert incentive deal and said an official statement could come later. No tenant yet Nationwide Realty Investors, a subsidiary of the insurance company, also developed Scottsdale’s Gainey Ranch Corporate Center and the Arena District in Columbus, Ohio. In Gilbert, the company plans to build 3.1 million square feet of office space, 500,000 square feet of retail and at least 250 hotel rooms. Located near Gilbert Road and the Santan Freeway, the development is scheduled to begin next year with construction of a 120,000-square-foot office building. Nationwide Realty Investors President Brian Ellis said the company has not secured a tenant for the building but he is optimistic about the center’s long-term prospects. “We want Rivulon to be well-known, not only in the Phoenix metropolitan area but regionally, as a best-of-class office development,” Ellis said. “We think the growth prospects for the Phoenix metro area in general and Gilbert specifically are outstanding.” Nationwide envisions the project will draw large tenants — perhaps a Fortune 100 company someday — and smaller businesses, Ellis said. The project would have “stalled indefinitely” if Gilbert had not approved the $35 million incentive, Ellis said. The agreement commits Gilbert to refunding half of the general sales tax and all of the construction sales tax generated by the development over the next 20 years, with a $35 million cap. The sales-tax rebates are intended to reimburse Nationwide for improving roads adjacent to and in the development. If road construction costs less than $35 million, Nationwide will receive only the lesser amount. Town officials structured the deal to include more rapid payouts if Nationwide builds denser, vertical buildings and penalizes the developer if it builds too much retail. The sales-tax rebates are tied to performance, since the Rivulon development has to begin producing tax revenue before any money can be refunded. Gilbert will award the funds only as Nationwide completes new blocs of at least 100,000 square feet of office space. Taxpayer protection pledged A study by economic-research firm Applied Economics projects Rivulon will generate $1.4 million in annual sales- and bed-tax revenue when construction is complete, and that figure could climb to $2.6 million once the maximum-development reimbursement is reached, officials said. “If they don’t perform, they don’t get reimbursed,” Councilman Ben Cooper said. “The taxpayer is not out anything here.” Ellis said Gilbert drove “a hard bargain” and was deliberate in securing the right deal for the community. Tax incentives are a familiar tool for economic development in Gilbert but have been a point of controversy. Jaws dropped in 2003 when Gilbert offered Disney heir and auto-mall developer Bill Lund $60 million in sales-tax rebates to build the Santan Motorplex in Gilbert instead of in Chandler. That deal, along with Scottsdale’s $37 million offer to developer Steve Ellman to redevelop the Los Arcos Mall site, prompted outcries from residents and legislators, who introduced new laws to tighten restrictions on taxpayer giveaways. About 10 years later, however, Gilbert’s auto mall is considered one of the town’s most prized economic assets. In 1999, Gilbert offered $5 million in sales-tax refunds to the developer of Gilbert Town Square, a commercial center near Town Hall that has struggled. While the complex has a movie theater, bowling alley and restaurants, several acres within the project remain vacant. Gilbert also used economic incentives to land the town’s first Costco in 1998, when the Town Council approved a sales-tax rebate agreement to offset the company’s road-improvement costs. Disagreement on incentives Many Valley cities have used economic incentives as artillery in border battles for coveted developments, and the Rivulon deal would likely land somewhere in the middle of the price spectrum. Glendale Mayor-elect Jerry Weiers, who beginning next month will lead the city mired in fiscal troubles, said economic incentives for the Phoenix Coyotes arena and for Cabela’s, among others, have backfired. “To make deals where you’re giving away taxpayer money doesn't make a lot of sense,” Weiers said. “You have to be fair to everybody.” Weiers said the best way for government to help business is to “get out of the way” by reducing permitting regulations. Opponents of Gilbert’s Rivulon deal argue that the town should not pick “winners and losers” and say the agreement is unfair to existing office centers like Rome Towers or SanTan Village mall, which has second-story office suites above retail shops. Representatives from mall-owner Westcor and Rome Towers did not respond to requests for comment Friday. Critics also point to the amount of vacant office space. According to a third-quarter 2012 report from CBRE, the office-vacancy rate for the southeast Valley was about 24 percent, while the Valley overall posted a 25 percent vacancy rate. “I support economic development, but I don’t want to jump into something and then find out we jumped the wrong way,” said Councilman John Sentz, who voted against the incentive agreement. Supporters of the deal contend that the development will give prospective businesses access to larger office spaces and point to the impending departure of software developer Infusionsoft to Chandler as evidence of a clear need. “Infusionsoft wanted to stay in Gilbert,” Mayor John Lewis said. “We finally reached a point where we did not have a solution for (them).” |