(From The Wall Street Journal)
Douglas Feiden
Arizona State University is opening up a large tract of lakeside land for future development as part of a plan to finance a rebuilding of the iconic, 70,000-plus capacity Sun Devil Stadium, where scenes from the 1996 movie “Jerry Maguire” were filmed.
ASU will lease 300-plus acres of its Tempe campus to developers who would build a master-planned community with commercial, residential, retail, hotel, conference and athletic space. The developers will prepay long-term leases, some up to 99 years. Commercial tenants wouldn’t pay state property taxes but will make annual, in-lieu lease “assessment” payments to ASU. The arrangement will enable ASU to issue construction bonds to fund an overhaul of the football stadium and finance the debt service with the assessments.
“This a real-estate-development project generating a long-term revenue stream to meet the long-term capital needs of the university,” said Morgan Olsen, treasurer and chief financial officer of ASU.
The financial and development plan illustrates the urgency with which state-sponsored colleges are seeking to fund critical construction projects as funding for such colleges is declining or rising slowly.
The cost to modernize and rebuild Sun Devil Stadium, which ranges from $100 million to $400 million, depending on the ultimate scope of the work, would be difficult for any college to fund through traditional methods, such as asking taxpayers to foot the bill.
ASU has received some criticism for its approach. “It’s an impulse toward mission creep and empire-building,” said Stephen Slivinski, a senior economist at the Goldwater Institute, a conservative think tank. “They could have sold the land, put it back on the private tax rolls and taken the proceeds for Sun Devil Stadium. Instead, they’re rolling out a new product line, distorting the local market and competing unfairly with private property owners.”
ASU’s Mr. Olsen counters that the finance plan is a “unique tool that lets us help ourselves,” adding that “the taxpayer would have been much more directly burdened by providing a direct appropriation.”
Driving the ASU development is a bill passed by the Arizona State Legislature in 2010 that authorizes a special revenue district on land owned by a state-supported university, waiving property taxes on new private development in that district and letting the school impose in-lieu assessments instead, which can be used to finance the construction of intercollegiate athletic facilities.
Known as the University Athletics Facilities District and unfurling on a swath of ASU land along the arc of Tempe Town Lake, the site—occupied by a golf course, parking and smaller sports arenas that will eventually be relocated—could support from 7.5 million to 11 million square feet of mixed-use development, with 2 million feet available for immediate construction, according to yield studies cited by ASU.
ASU launched a competitive bid process for a developer in 2012 and identified a short list of five candidates last December. Last week, ASU received business plans from two of the finalists: Scottsdale, Ariz.-based DMB Associates Inc. and Oakland, Calif.-based Catellus Development Corp.
ASU expects to select a development team in early 2014 and a ribbon-cutting for the first buildings could take place in late 2016 or early 2017.
The companies declined to provide details of their business plans.
Built in 1958 with 30,000 seats, Sun Devil Stadium today boasts a capacity of 71,706 after multiple expansions. It has been dubbed the “House of Heat” because game-day temperatures can easily top 100 degrees. In one possible renovation scenario, ASU may literally attempt to lower the thermometer. Carrying a price tag of as much as $80 million, a giant, suspended shade canopy, could reduce temperatures in the stands and on the field of the rebuilt stadium by 20 degrees or more.
