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04/24/1991 CITY COMMISSION SPECIAL MEETING Trip to Phoenix and Scottsdale, Arizona to View Downtown Redevelopment Projects April 24 and 25, 1991 The City Commission of the City of Clearwater assembled in Special Session at Tampa International Airport at approximately 7:00 a.m. on April 24, 1991 to board the flight to Phoenix, Arizona. Rita Garvey Mayor/Commissioner Sue Berfield Vice-Mayor/Commissioner Lee Regulski Commissioner Richard Fitzgerald Commissioner Absent: William Nunamaker Commissioner Also present were: Cynthia E. Goudeau City Clerk Mary Vaughn Ex-Officio Member - CRA Joined meeting when City Commission arrived in Phoenix: Michael J. Wright City Manager Jerry Sternstein Economic Development Director Donald Hunter Downtown Redevelopment Consultant At approximately 11:30 a.m. Mountain Time, the Commission began their tour of Phoenix. Donald Hunter reviewed the schedule with the Commission. The first project toured was the Biltmore Fashion Park, which is an older mall that has been expanded twice. This center is similar to what is proposed for Clearwater. Alison Melnychenko, Marketing Director for Biltmore Fashion Square, met with the Commission regarding the project. She stated it is the largest outdoor shopping center in Phoenix and it has a park-like atmosphere. In response to a question, Ms. Melnychenko indicated during the hot portion of the year traffic slows down. However, that happens throughout the area not just at the open air mall. She reviewed the project stating it is designed for high-end shopping and serves a radius of twenty-five miles. She further reported the center is privately owned. It is business-oriented during the day with a lot of business people coming to the center during lunch hours. The Commission went to the Phoenix Hyatt and checked into their rooms. After checking in, the Commission walked to Arizona Center where they had lunch. After lunch, they met with Andy Conlon representing the Rouse Corporation, Developer of the Arizona Center, to receive input regarding the project. Mr. Conlon reviewed the layout of the center. In response to questions he indicated they have eight city blocks which is approximately 20 acres of property. He also indicated they have 93 percent of the retail space committed and hope to have 100 percent committed by the end of the year. Questions were raised regarding rental rates for the retail space and it was stated it is a percentage of sales. He reviewed the history of the area stating the Arizona Center is now on the property that was the historic downtown of Phoenix consisting of parking lots and a run-down area. In response to questions regarding the City's involvement in the project, Mr. Conlon indicated the City owns the original six blocks, has the master lease and lot leases. Payments are made by the Rouse Corporation in lieu of taxes in order to pay for infrastructure needed for the site. The indebtedness for the project should be paid off over an eight-year period. The City contributed streets and rights-of-way and lent its condemnation ability to the development. In response to a question he indicated none of the condemnations had to go to trial. He reported the Rouse Corporation was chosen through a competitive request for proposals. They are doing well after five-and-a-half months, however, the project is still risky. He stated there is a three percent growth rate and in response to questions he indicated this is due to manufacturing in the area. He further elaborated it is a misconception that Phoenix is a retirement community. A question was raised regarding the percentage of retail. Mr Conlon indicated there is 50 percent entertainment, 50 percent retail. A question was raised regarding the effectiveness of the two-level retailing. Mr. Conlon indicated food and entertainment are on the upper level. In response to a question regarding occupancy of the office space, Mr. Conlon responded there is an architect, a media outlet, a state agency and a dental group. He further elaborated on the plans for the project stating they are looking at putting downtown guides on three-wheeled cycles. Mr. Conlon then took the Commission to meet with Denny Maus and Margaret McKeough, the City of Phoenix Economic Development Director and his assistant. They then went on a walking tour of the retail and convention center. In response to questions it was indicated the City of Phoenix provided up front assistance for the project in land assembly with the city condemning two acres of property. The Rouse Corporation paid the cost for that condemnation. The City also provided property tax abatement and issued tax exempt bonds. Rouse pays an annual land lease that more than covers the cost of these bonds. They also issued a letter of credit against the ground lease which supported the infrastructure. The City owns the entire site and buildings and at the end of the 60-year ground lease, Rouse can buy the property. The City receives 17 percent of the net profit from the center in the first 15 years of the lease which escalates to 27 percent after that time. In response to a question it was indicated tax abatement will be approximately $13 million over an eight-year period. A question was raised regarding whether or not there was any problem with the taxpayers accepting the tax abatement. It was indicated the City worked with the Chamber of Commerce and has assured that tax abatement will not be abused. In response to a question it was indicated the project is not costing the City of Phoenix any more than the tax abatement. Mr. Maus indicated there are high hopes for the Arizona Center to draw from the entire valley. Two more hotels are needed within the next three to five years to support the center as a convention area. The City Commission then toured the Mercado Center and met Mary Ann Miller, its marketing director. Ms. McKeough indicated this was also a city-assisted project which was purchased with Community Development Block Grant money. It has 40 thousand square feet of office space and 70 thousand square feet of retail space. They pay a percentage of sales to the City. It is considered a retail incubator with 80 percent of the retail owners being either minority or women. The City made parking available for the Center. Mr. Maus indicated part of what makes the project work is that festivals and others community activities are held there. It is hoped to tie all of downtown together with a Streetscape program. Efforts to expand the convention center have been hampered by the fact there are only two hotels in the area. It was indicated two more are needed in order for the center to work as designed. There is a symphony hall with 2,500 seats and a cultural arts center. Economic problems resulting from the savings and loan crisis and difficulties in adopting the Martin Luther King Jr. holiday have resulted in the city not raising all the dollars it had anticipated. A facility called the Solar Oasis for banquets and receptions is also being developed which will have an exhibit area regarding solar and hydroponic techniques. One project that has not produced as expected is the Square One project which was begun in 1983. The City bought the land so that it owned the entire block. A different company took over as developer and in 1988 the project was renegotiated. However, the office market has turned down due to the economy and leasing has stalled. Attempts are now being made to develop a modified project. An arena is also being developed in conjunction with the Arizona Suns. The City owns the facility and the land and the Suns are the long-term operators. The City has a $35 million cap on construction with the Suns being responsible for any other expenses. All revenues go into a fund to pay for the capital improvements and a letter of credit has been issued by the Suns for any cost overruns. In response to a question regarding the down side of the financing arrangements for the Arizona Center, it was indicated the Rouse Corporation was insistent on net cash flow being used and the City had to be very careful regarding its definition of net cash flow. It would be better if the project could be structured on gross revenues. Questions were raised regarding the rents charged in the Arizona Center. It was indicated they range from six to nine percent of gross and some agreements had to be made at below market in order to make it work. Questions were raised regarding the acceptance of public and civic associations. It was indicated these organizations actually started the projects and a downtown alliance was formed because the City was not concentrating on the downtown area. A new downtown plan has been developed and all groups are basically in agreement. It was indicated this document is not regulatory but advisory. It was further reported there is also a cruising problem for downtown Phoenix. The problem is generally due to the numbers of people cruising a seven-mile strip. It was indicated they are trying to bring people to the downtown area with entertainment which will then have benefits to the retail areas. The Commission then walked to City Hall to meet with Frank Fairbanks, City Manager of Phoenix. Mike Wright, Clearwater City Manager reviewed the situation in Clearwater and stated the Commission was in Phoenix to see how it handled downtown redevelopment. Mr. Fairbanks indicated the business community was supportive of downtown. Even those not in downtown believed it needed to be enlivened. He stated that while he did not know of any complaints from the business community, there were mixed feelings from the community at large. They are generally supportive of downtown but feel it is not moving fast enough. He stated as the City of Phoenix elects its officials on a district basis, there are some "my own neighborhood" philosophy problems. A question was raised regarding whether the market drove the plan or the plan was pushed to fit the market. It was indicated there was a little of both as the plan was directed as much as possible and then the market was allowed to take over. In response to a question it was indicated Phoenix does have water and sewer impact fees but no traffic or park impact fees. Discussion ensued regarding condemnation. It was indicated condemnation was used in 60 to 70 percent of the property in downtown. It would be preferable to avoid this avenue if possible. It was also stated alternative plans need to be developed in order to give flexibility in acquiring land. A question was raised regarding the City having to subsidize Spring training programs for major league baseball. It was indicated if the City did not provide financial support Spring training would not stay in the area. It was indicated Phoenix would like to have a major league baseball team, however, they won't come unless the City helps financially. Some discussion took place regarding the problems that resulted from the Arizona citizenry not adopting a Martin Luther King holiday. Mr. Fairbanks indicated Phoenix has had a Martin Luther King holiday for years, however, the rural areas of Arizona voted against the holiday and therefore it failed. Forty conventions were lost due to that failure. Discussion ensued regarding the millage rate and it was indicated eight percent of the City's budget comes from property tax. A major portion of their dollars come from sales tax. There is a state income tax and there are 20 school districts all having a different tax. The meeting recessed at approximately 5:20 p.m. on April 24 and reconvened at approximately 7:00 a.m. on April 25 at which time the Mayor left the meeting. The remaining Commissioners and staff drove to the City of Scottsdale and arrived there at approximately 7:30 a.m. They were met by John Little, Assistant to Mayor Drinkwater of Scottsdale. The Commission then met with Gary Rowe, Planning Director; Martha West, Downtown Manager; David Roderique, Economic Development Specialist; and Sally Wier, Planner; all from the City of Scottsdale. Michael Wright, Clearwater City Manager, reviewed Clearwater's situation and stated the Commission had come to Scottsdale in order to visit a community similar to Clearwater. Donald Hunter, City of Clearwater's Consultant, reviewed what was seen by the Commission on April 24. Mr. Rowe indicated it seemed Clearwater was a lot like Scottsdale. He indicated the key element to their program is flexibility. They have maintained a close relationship with downtown individuals and have an incentive-driven program not a punitive one. He stated the plan needs to be user-driven and realistic. The City has backed up the project with infrastructure including parking, streets and other support systems. He stated this has been a $40 million investment for the City of Scottsdale. He reviewed the history of downtown Scottsdale and stated it evolved into a tourist community. It was noticed downtown was not getting any new retail development and instead was getting low scale suburban-style office development. When the City asked why this was happening they were told the land costs were too high and their ordinances were too restrictive for development in the downtown area. It was also stated nighttime activity was non-existent. They approached the problem by first interviewing key community leaders and getting their perceptions. Second, they hired a consultant to do an economic study of downtown. Third, they did traditional planning research. They then listed the findings of this research and developed goals for downtown. In reviewing their plan, Mr. Rowe stated there is an architectural review district which Scottsdale enforces. The ordinance for downtown development is based on floor-area ratio incentives with the biggest incentives being given for those things people are most likely not to do. In response to a question regarding their tax base, Mr. Rowe indicated sales tax is the major source of their revenue. They have a 1.2 percent sales tax and a three percent bed tax. They receive $40 million of revenue from the sales tax source. David Roderique listed accomplishments of the downtown project stating they had developed a dual-couplet street system to take the burden off the main street, Scottsdale Road. Forty million dollars were spent on capital improvements and over $100 million have been spent by private development. Another $700 million of private development has been approved with an additional $200 million having been proposed. This generates revenue of about $8 million a year, creates new jobs and brings new residents into the downtown area. Basically, for each dollar the City invests, two dollars in revenue will be received. They stated community perception had to be overcome and a lot of work is needed to build trust in the City and its development. They stated it was difficult to explain the concept of spending $40 million on a one-square-mile area and how it would benefit the citizens at large. They stated, however, that proof has been in the success of the projects and people now want to take ownership of the program. Martha West reviewed the downtown area stating there are essentially three areas. First, the Fifth Avenue area which will include a new development called the Galleria; second, the West Main area which contains galleries and specialty retail; and third, the Old Town area that has a western frontier town character. The Streetscape program was developed and there was a strong partnership between the downtown area and the City in this regard. Half of the cost was born by the property owners, the other half by the City. It was indicated there are pedestrian connections between the centers and the specialty retail areas. Mr. Rowe again emphasized the need for flexibility stating the Galleria project was originally planned so that all of its facilities were inward. The City worked with a developer so that the Galleria opens up into the specialty retail area. At that point, other business people in the area became supportive of the project. In response to a question, Mr. Rowe indicated the developers came to the City with the concept and then again using flexibility, put the package together. In response to a question, it was indicated the City has made no investments in the project other than infrastructure. It was indicated that for the IMAX Theater, the City is rebating one-half of the sales tax for ten years. Sally Wier, Planner, reviewed the Canal Bank project stating the canal bisects the city and is viewed as a barrier. The goal is to strengthen this as a pedestrian and vehicular link in the city that would link downtown to the area to the north. It is hoped to turn this into an urban activities center. The City's commitment resulted in a vote to raise the bed tax for special funding to get this project started. It is hoped to turn the canal area into a major destination attraction. Mr. Rowe indicated the downtown plan tried to look at the downtown as a whole with interactivity between the retail centers, hotels, and entertainment. If it is found that one component is not going as well as others, that component is focused upon. Discussion ensued regarding the growth of the City of Scottsdale with it being indicated before a major annexation, the City of Scottsdale was only 40 square miles. It is now 180 square miles. It was indicated there are no tax disincentives for annexation as the bulk of revenue for cities in Arizona is the sales tax, not property taxes. The population of Scottsdale is approximately 130,000. The Commission boarded a trolley to take a tour of Scottsdale. Mr. Rowe indicated the City's plans were to include office with retail. The planning for the City office expansion was most challenging. Core downtown has an Old West character and look and ordinances were passed to hold the height down as they wanted to maintain the old town character. In response to a question, Mr. Rowe indicated the downtown plan originally drove property prices up and the market had to straighten itself out. He stated the downtown plan is an incentive plan versus blanket approvals. He indicated the sign ordinance is fairly restrictive in that it is against neon and the signs have to be against the building. Work on the Streetscape program will begin May 20. As the Commission passed the Fashion Square Mall, it was indicated this is two malls being connected by a walkway and expanded. When it is finished, it will be one of the largest malls in the West. The group visited The Borgata, a high-end specialty retail center of 90,000 square feet. The Commission toured the Galleria, a major retail development still under construction. Martin Pollack, General Partner of the Scottsdale Galleria, provided the tour. He stated the project began in August, 1986 with the unique concept of an anchorless mall. The mall itself was to be the attraction. He stated they had tried to assemble an array of unique stores and an elaborate water feature is at the center of the mall. Each level of the mall has a theme. He stated the project could not have been done without the City to bring it together. As the Commission left the Galleria, they were met by Mayor Drinkwater of Scottsdale. He reviewed the history of the downtown plan stating in the 1980's the citizens were saying the downtown area was not doing well. The council directed hiring a consultant who studied the area for two years, met with all the merchants and came up with recommendations. Public hearings were held and a plan was developed. In response to a question, he indicated while most of the people were for the project, not everyone was convinced. Opposition to the height of 36 feet was one of the major concerns. Mayor Drinkwater stated the council was supportive of the program. He indicated if the downtown is not alive, it is a detriment to the taxpayers. He stated downtown Scottsdale is now the taxpayers friend due to the revenue it produces. Mayor Drinkwater emphasized there were no public monies in the Galleria Project and the City's monies have gone into the Streetscape and roadway programs. In response to a question, Mayor Drinkwater indicated there is a 50/50 split on the cost for the infrastructure improvements with $40 million being paid by the City and $40 million being paid by private industry. Mayor Drinkwater also stated people are coming to downtown for other reasons than retail. They are coming for arts and cultural events. Mayor Drinkwater emphasized through the consultants, who did the preliminary work, they were able to get the citizens and the Council interested in the project. He again emphasized if you do not have a good downtown it will cost the people money and people who were against the project in the beginning are now proud of the downtown area. The meeting adjourned at approximately 10:30 a.m. The Commission and staff then returned to Phoenix Airport and flew back to the City of Clearwater, arriving at Tampa International Airport at approximately 9:00 p.m.