The developer of the long-awaited mixed-use project The Trailhead in north Peoria has said it will not be able to build the restaurant and retail establishments they promised unless they get help from the city.
Peoria Deputy City Manager Mike Faust said public infrastructure costs have risen from an estimated $3.8 million agreed to in the development agreement to $6.6 million.
Peoria City Council approved the development agreement April 19, 2022.
Phoenix-based The Pederson Group plans to bring retail, restaurant, multifamily residential, and a religious facility on 40 acres to the northeast corner of 83rd Avenue and Happy Valley Road, touting the project as a full service lifestyle center where people can hang out, shop and eat, with the Sunrise Mountain Preserve as the backdrop.
The project includes at least four “quality restaurants” in a pedestrian friendly environment, as well as a new grocery store, according to the development agreement.
The Trailhead has been in the works for more than seven years, and is comprised of five separate parcels from four separate owners, some of which have remained undeveloped because of the “difficulty of assembling them from the four separate property owners,” the development agreement said.
So far, only a new Safeway has begun to rise above the land.
Faust said in the absence of additional support, the restaurant and retail establishments planned for The Trailhead will not locate in the city. So Peoria staff is asking council to allow the city to enter into a retail development tax incentive for The Trailhead.
The council began this process by approving a notice of intent at its public meeting, Dec. 12.
State law requires the city give a 14-day public notice before bringing the amended development agreement before council, which is planned for a public council vote Jan. 16, 2024.
Faust said the additional support a retail development tax incentive will provide is important to make The Trailhead a reality. In April 2022, the city commissioned an economic impact study on the project and found it would generate $17 million in tax revenue and 430 jobs over 10 years that will support local growth.
“Working with the developer, ultimately what we are hearing in absence of additional support will preclude these restaurants and establishments from locating in the city,” Faust said. “You might ask, well hey, I see construction going on at this site. What you see is a Safeway being built. You are seeing the roof, block walls going up. If that’s all you want or that’s all that is desired, then a no vote would ultimately yield no additional support, and these other businesses won’t go there.”
The Pederson Group has overseen the development of 27 retail properties totaling more than 5,000,000 square feet in Arizona.
Founder and Chairman Jim Pederson said The Trailhead is a complicated project with many off-site needs including road widening, a traffic signal and drainage issues that required a costly drainage plan that was approved by the city.
Because of off-site water flows, The Pederson Group was required by the city to design a drainage system far more costly than any other project it has developed.
These off-site public improvements, although necessary, have been the leading cause of cost increases in the current situation, Pederson said.
“Anything north of Happy Valley Road faces an incredible influx of water that must be contained or diverted,” he said. “These costs aren’t typical with what we are used to building.”
He added that with interest rates and construction costs doubling, the project’s restaurant and retail portion may be shelved if the tax incentive isn’t approved.
But if it is approved, he said, the project will move forward.
“The project has been budgeted down to the last penny and we are looking for any way to preserve cost. Are we going to face challenges? Sure, but I think we can bring this in. But that key budget component of the development agreement is critical,” Pederson said. “I consider this a legacy project because of its special nature, and if we can surmount these difficulties with cost increases, then I think it will be a great contribution to the neighborhood and something the neighborhood will be proud of. So I hope we can get over this hurdle.”
The incentive acts as a rebate to the developer in an amount of the unrestricted portion of the transaction privilege tax generated in connection with the construction, development, or operation levied.
That is, the proposal is asking to use tax revenue generated from the site to fund public infrastructure adjacent to the property.
Peoria has never entered into a retail development tax incentive before but, Faust said, other cities have.
The reimbursement may not exceed $2 million or 72 months, Faust said, and if the thresholds are not met, then there is no out-of-pocket cost to the city.
The proposal states reimbursement generated from eligible sales tax will be 100% construction sales taxes; 50% restaurant, bar and retail sales taxes; and 25% grocery sales taxes.
“That would be one year for construction and essentially five years for public tax generation,” he said.
Officials say the proposed tax incentive is anticipated to raise more revenue than the amount of the incentive within the duration of the agreement.
Sales tax revenues in Peoria grew only about 5% in fiscal year 2023, and Faust said that residents are leaving Peoria to spend money in other jurisdictions, diverting revenue away from the city, which has put Peoria at the bottom of Valley cities with a gross sales per capita of $58,132.
“Ultimately we have to generate revenue at the city level to keep the community standards, which requires a sufficient level of revenue,” he said. “Absence of quality restaurants and retail establishments within the city limits is driving an exit into other communities. So economic development is pursuing development opportunities within the community and looking to responsibly add jobs and revenue into the area that the community is asking for.”
Philip Haldiman can be reached at phaldiman@iniusa.org, or on Twitter @philiphaldiman. We’d like to invite our readers to submit their civil comments, pro or con, on this issue. Email AZOpinions@iniusa.org.
Meet Philip Haldiman is an award-winning journalist who most recently took first place for investigative reporting in 2023 from Arizona Newspapers Association. He joined Independent Newsmedia, Inc., USA, in 2015, covering Sun City West his first year. Since 2016, he has covered the city of Peoria. Prior to coming to INI, he was a reporter with The Arizona Republic for seven years, covering numerous cities throughout the Valley. Before that, he was a freelance writer.
Community: Haldiman spearheads the Peoria Independent Hometown Heroes Awards program, honoring local individuals and businesses that give back to the community. He has hosted local candidate forums over the years and is a member of the Society of Professional Journalists. Haldiman also served as a member of the Journalism Program Community Advisory Board at Glendale Community College. Outside journalism, Haldiman served as a member of the city of Peoria Complete Count Committee for the Census, 2019-2020. Lastly, he has served as a member of his HOA governing board since 2021.
Education: Arizona State University with a BA in Journalism and Mass Communications and a BA in Theater.
Random Fact: Haldiman is a fourth-generation Arizonan as well as wrote and produced an autobiographical comic book about his time spent in Hollywood and his life as a cult film star.
Hobbies: He enjoys hiking Arizona’s mountainous landscapes and is currently working on a play for the stage.
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