CityNorth fight revives subsidy debate

Posted on August 13, 2007 | Type: In the News
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CityNorth will be a 144-acre complex of hotels, shops, restaurants, department stores, outdoor spaces, residences and parking garages. It is in the heart of Desert Ridge, the master-planned community surrounding the corner of Deer Valley Road and Tatum Boulevard, north of Loop 101.

Not only will CityNorth be large - by comparison, Kierland Commons covers 38 acres, and Desert Ridge Marketplace has 110 acres - it will be exclusive, with five-star hotels and retailers such as Nordstrom.

There also is every likelihood that it will be the metro area's new hot spot, and because of that, it is expected to pour tax dollars into city coffers like no other 144-acre portion of Phoenix. The prosperity of the area and the dreams of the developer are the big reasons why the deal did not sit well with many people.

The controversy was in full bloom in March, right after the Phoenix City Council voted 5-2 to support the deal. The uproar quieted in April and May, and by the time June rolled around, the controversy had all but died. By then, a new state law had been signed banning such tax rebates.

The key backer of that law, Sen. Ken Cheuvront, is a plaintiff in the lawsuit, which was filed by the Goldwater Institute. Even one supporter of the deal, former state legislator Clancy Jayne, said: "I guess the lawsuit is a good thing. It will cut through all the bull."

In documents leading up to March's City Council vote, city staff made clear that the city is not giving any current tax money to the developer.

That's the point that Jayne makes. Jayne, a community activist and business consultant, argues that if anything, the deal should be seen as a loan the developer is making to the city, with the city merely paying it off.

"It's not an incentive," he said. "It's a payback for something the city cannot do."

Consolidating parking in garages will minimize the need for surface parking, such as at Desert Ridge Marketplace nearby, where surface parking takes up about half the mall's 110 acres. With more surface area available, Jayne argues, more retail development can be built and more tax dollars generated.

Most of the parties immediately involved have declined comment or have been unavailable. Cheuvront was out of town, as was City Councilwoman Peggy Neely, who represents the Desert Ridge area.

As defendants in the lawsuit, city representatives have not commented.

Marla Ellis, a spokeswoman for the Klutznick Co., said it is too early to gauge the impact of a successful lawsuit.

Construction began on the CityNorth site late last year, and the first phase of the development is expected to open late next year.

A Desert Ridge resident who would live near the development said she can see both sides of the issue, and pointed out that regardless of which side is right, lawsuits are an expensive use of taxpayer money.

"Considering the CityNorth deal is only one of several tax incentive deals completed in the recent past, it seems like politics and sour grapes that the only deal targeted is the CityNorth one," said Cindi Aronson, a member of the Desert Ridge Homeowners Network.

Goldwater Institute attorney Clint Bolick said the institute has limited funds to file lawsuits, so it chose the CityNorth deal.

He said the institute would be glad to share its research with others who might want to sue other municipalities.

"I'd prefer that there be a statewide ban on developer incentives," Aronson said. She pointed out that a new state law banning tax incentives does not do that. "These restrictions need to be uniformly exercised," she said, "but that is unlikely."

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