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Janik: Does the City Council help developers at cost to the citizens?

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The City Council offers a “bonus” or an incentive to developers to design and build in areas that the council considers blighted or are highly desirable locations to drive growth.

When the city and the developer agree on a project, the council changes the zoning and grants a bonus to the developer to enable the project.

For example, let’s say you are living in an apartment complex that was originally zoned for multi-family, but the city and the developer want to build a high-rise office building. The council rezones the area so a high-rise office building can be built next to you.

The developer’s bonus is negotiated, and the building is constructed higher than original zoning allowed. When the building is finished, it blocks your views and brings more traffic, noise, crime, and congestion.

The City Council and the developer accomplished their objectives, but the quality of life of the existing residents was negatively impacted.

In the past, zoning changes and bonuses were only given to specifically identified parts of the city where the council recognized opportunities for growth consistent with protecting the quality of life in our city. Now these zoning changes and bonuses are being used throughout the city to induce developers to build anywhere.

Developers are allowed to build bigger, taller buildings, with reduced setbacks, than the zoning currently allows. The City Council votes to change zoning, and grant bonuses, at will.

Although the city staff is responsible for informing the council of the impact these zoning changes and bonuses on the city, and determine if there is a “public benefit” that justifies them, the council is able to over-ride staff recommendations.

Equally concerning, once the rezoning and bonuses are granted, the developer receives the benefits without ever having to build anything. The property is flipped at a profit because the new zoning makes the property more valuable, and a new developer is able to take advantage of the new zoning.

Whatever development plans, and stipulations, that were presented as reason for granting the rezoning requests and bonuses, don’t have to be followed. The result? Whatever possible public benefit there may have been often disappears.

The largest bonus or incentive was awarded in 2018. Nationwide Mutual Insurance Company bought 134 acres located along Loop 101. A mixed-use development is to be built in this location. It will feature 1.8 million square feet of best-in-class commercial office space, including a 460,000-square-foot Nationwide corporate facility. Upon completion, the area is supposed to feature nearly 1,600 residential units, hotels, retail, restaurants and walking paths.

To entice Nationwide to build in Scottsdale, the city agreed to reimburse Nationwide $21.9 million of the $33 million that company says it will spend on infrastructure on roads and drainage improvements. An additional incentive allows Nationwide to exceed zoning height by 31 feet.

Numerous objections by residents near the site informed the City Council they did not want the development as it would forever modify the character of Scottsdale that they moved here to enjoy. Unfortunately the City Council ignored the neighbors’ concerns, revised the zoning and approved the grant.

Calculations prepared by the Scottsdale firm, Applied Economics, show that the project could generate an estimated $24.15 million over the next 20 years.

Applied Economics attested they believe that the revenues generated during the term of the agreement will exceed the amount of the city reimbursement of $21.9 million.

According to the city’s economic department, the overall anticipated cumulative economic impact of this project over 20 years is $9.8 billion and $500 million annually following full build-out. It will result in a total of more than 5,500 jobs and 1,800 additional jobs supported by the site development.

Since the economic vagaries of a project like this can never be measured, it will be impossible to know if the forecasts are correct. However, what is known, is that most of the jobs created will not be taken by current Scottsdale residents.

We also know the actual income generated for the city’s General Fund will be about $8 to $9 million less than the $24.15 million forecast.

The projected income includes all sources of income to the city (bed tax, secondary property tax, etc.) of which a much smaller portion goes to the General Fund.

The question of bonuses granted to developers requires a thorough review of each project as it comes before City Council. All expenses need to be disclosed including infrastructure, maintenance, etc. Most important, the citizens need to be informed and supportive of these projects before approval.

Editor’s Note: Betty Janik is a candidate for Scottsdale City Council in the Aug. 4 primary election.