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ASU, Omni Hotels break ground on development under legal cloud

AG Brnovich has fought the hotel since 2019

ASU President Michael Crow, Tempe Mayor Corey Woods, Sparky the Sun Devil, Omni Hotels President Peter Strebel, Regent Bill Ridenour and ASU Vice President of Real Estate Development John Creer take part in a groundbreaking ceremony on Sept. 17.
ASU President Michael Crow, Tempe Mayor Corey Woods, Sparky the Sun Devil, Omni Hotels President Peter Strebel, Regent Bill Ridenour and ASU Vice President of Real Estate Development John Creer take part in a groundbreaking ceremony on Sept. 17.
Omni Hotels

When leaders from the city of Tempe, Arizona State University, the Arizona Board of Regents and Omni Hotels broke ground on a brandnew hotel on Sept. 17, they did so with an Arizona Supreme Court case looming overhead.

The $125 million Omni Tempe Hotel is officially set to open in spring of 2023 at Mill Avenue and University Drive on ASU’s campus. Peter Strebel, president of Omni Hotels & Resorts, was there for the event alongside Tempe Mayor Corey Woods, ASU President Michael Crow, Regent Bill Ridenour and John Creer, vice president of real estate at ASU. The groundbreaking occurred just days after the state’s highest court agreed to review two lower courts’ decisions regarding Arizona Attorney General Mark Brnovich’s lawsuit against the development.

The 16-story, 330-room hotel, according to a news release, will include 11 suites, four dining options, an elevated pool deck with a lounge and the “largest, continuous ballroom in Tempe.” The design will highlight Tempe’s culture and integrate nods to ASU throughout the hotel, as well as artwork from local artists and university alumni. ASU and Omni Hotels also hope the hotel will be a destination for meetings and conferences, with almost 36,000 square feet of meeting and event space.

“This hotel is not only a collaborative effort that will have a significant benefit to our community, but this prominent corner will ultimately be developed into a thriving and bustling space, accessible to locals and visitors,” said Mayor Woods in a prepared statement. “I look forward to the synergy that is created with the organizations, businesses, teams and families that will come to enjoy Omni in Tempe.”

Mayor Woods’ sentiments were echoed by Omni Hotels, which hopes to “further put Tempe on the map” with the new development.

“The city of Tempe and ASU have created an excellent environment for students, visitors and locals, and we are thrilled to be a part of this exciting time of growth and change in the Tempe community,” said Peter Strebel. “Omni is a recognized leader in the destination hotel market, constantly redefining and reimagining the traditional city-center hotel as well as luxury resorts. We look forward to bringing an entirely new hospitality and meetings experience to the city that will further put Tempe on the map as a destination.”

But not everyone is thrilled with the partnership: AG Brnovich has been fighting the hotel’s development since 2019.

That year, he filed a complaint against the deal alleging that ASU and ABOR lacked the authority to grant tax exemptions to private businesses and development projects, which he said allowing Omni to build on university land would do. The complaint also claimed that ABOR is also violating Arizona’s Gift Clause ban by giving Omni Hotels nearly $37 million dollars in discounted property valuations, and funding a conference center and parking garage for the company.

Omni purchased the land for $85 per square feet, while a property across the street sold for $212 per square feet, he said.

“The Arizona Constitution requires ASU to provide students with instruction that is nearly as free as possible,” AG Brnovich said at the time. “Giving a mega hotel corporation millions of dollars in discounted property valuations and amenities in this development drains university resources that could be used to reduce tuition and improve instruction.”

The Arizona Court of Appeals upheld in April Tax Court Judge Christopher Whitten’s first ruling that Brnovich’s office didn’t have the authority to file the original lawsuit and then further expand it after the one-year statute of limitation had expired.

With the Arizona Supreme Court set to review the case, Brnovich sees it as a win for transparency in the state.

“This is a big win for Arizonans seeking transparency in higher public education,” he said. “We look forward to a legal debate on whether ABOR shielding corporations from paying taxes is what the law allows.”

Spokespersons for Omni Hotels and ASU did not immediately respond to requests for comment on the lawsuit. A spokesperson for the city of Tempe said it was not involved in the litigation but added that construction on the hotel is still underway.

In 2019, the regents and ASU stated that Omni Hotel paid a “fair market value” for the land and that it was not a one-sided gift, as the hotel will provide the university with rent payments and much-need conference and hotel rooms.

Arizona Board of Regents Chair Lyndel Manson was not concerned by the high court looking into the matter.

“Two courts have already rejected the Attorney General’s claims,” she said. “We are confident in our position and we look forward to the Arizona Supreme Court’s consideration of this issue.”