Mesa Moving on Bold Downtown Plan

Article originally posted on HERE on May 13, 2019

Mesa Downtown Construction Efforts

Mesa’s downtown is one step closer to a major makeover.

During a recent City Council study session, Downtown Transformation Manager Jeff McVay gave an update on a large downtown project and introduced two others — a new Arizona State University location at the Mesa City Center, accompanied by studios, and a Co+Hoots at Benedictine University.

The three projects are part of a larger effort to breathe life into the city’s downtown area while establishing an Innovation District, said McVay.

“There are multiple goals we’re trying to achieve here. The simple one is the basic desire to have a more active and vibrant downtown,” he said. “More specifically though, we’re trying to create an innovation district ecosystem, which is about trying to generate more opportunities for businesses and employment that will feed the general economy of downtown.”

Innovation districts, according to Brookings Institution, are geographic areas where “leading-edge” anchor institutions and companies cluster to connect with start-ups and business incubators. They are generally compact, transit-accessible and technically-wired and offer mixed-use housing, office and retail.

The potential payoff for creating this type of district, said McVay, includes job and economic growth and more municipal revenue.

“The reason these three projects came together is that we’re trying to create a very tech-focused environment that is going to attract corporate partnerships and entrepreneurial tech-startups,” he stated.

The satellite ASU campus will serve as the district’s anchor tenant.

The project — which Council approved last June — will train students in “transdiciplinary digital expertise.” It will incorporate the ASU Creative Futures Laboratory, including academic programs offered by the Herberger Institute for Design and the Arts that are related to digital and sensory technology, experiential design, gaming, media arts, film production and entrepreneurial development and support.

With a 99-year lease agreement, the ASU campus is projected to serve more than 750 students, faculty and staff.

“The types of programs that ASU will be providing at the new facility are truly the type that can easily be monetized,” said McVay. “It’s easy for a student to come out of that program with a skill set and an education background that would lead them to be entrepreneurs and create tech startups.”

The overall budget is $63.5 million and construction will begin next February. The goal, said McVay, is to have students attending classes by January 2022.

As part of its intergovernmental agreement with ASU, the city will also design and construct studios at the City Center to compliment the new campus.

The university will offer an Innovation Studio to provide a physical space for collaboration while connecting the startup community to academic programs.

“We’re providing a space where students from the ASU building, corporate partners and the general public can all be in the same space and get those chance collisions of ideas that end up becoming collaborations and the start of new downtown businesses,” McVay said.

The studios will be adjacent to the planned ASU campus and have a proposed budget of $8 million.

The third project consists of designing and constructing about 10,000 square-feet within Benedictine University’s Gillette Hall for Co+Hoots — the Phoenix-based company’s second location.

Co+Hoots is a shared office location that promotes collaboration while providing professional, inspirational and self-sustaining space to “grow and nurture entrepreneurship,” according to its website.

The company seeks to encourage collaboration and coworking between businesses and individuals through working in a shared environment.

“Adding Co+Hoots gives another advantage to these kids coming out of school.  They’re going to come out with a degree and educational understanding of business, but also with a real-world understanding after learning from the people in Co+Hoots,” said McVay.

“Our goal is to generate a bunch of new businesses that start in Co+Hoots and decide to stay in Mesa for a long time,” he added.

Co+Hoots and Benedictine will create a new entrepreneurial business program that will provide Benedictine students mentors, internships and discounted memberships.

The design and construction of this project is estimated to cost between $1.5 and $2 million.

Funding sources for these projects though, became a hot-button issue during the study session.

McVay told the council funding would come from proceeds from the sale of city assets, construction sales tax, excise tax revenue bonds and the economic investment fund.

Interrupting the downtown manager’s presentation, Councilman Kevin Thompson said the money should be put to better use.

“Why aren’t we using those funds to pay for projects that need to be done, like public safety facilities or libraries or other assets for the city?” he asked. “Instead of always putting them toward debt service or buying something else?”

While City Manager Chris Brady disagreed with Thompson, Councilman Jeremy Whittaker echoed his fellow councilman’s sentiments.

Whittaker suggested the money be funneled toward crumbling water infrastructure, but was quickly shot down.

“For anyone to suggest the utility is insolvent and not producing infrastructure is not a correct statement — we can uphold against any other system,” said Brady. “We have sufficient water. To say we are short-changing the utility is just not true.”

Because this was the first time the latter two projects were introduced to the council, they won’t be up for approval until a “guaranteed maximum price” is provided for both.

Mesa plans to use proceeds from the sale of several pieces of city land to avoid tapping into its Enterprise Fund for an estimated two or three years to pay off excise bonds sold to finance Arizona State University’s downtown center.

City Manager Chris Brady told the City Council that the final sale of land purchased decades ago in Pinal County, anticipated on July 1, would not only pay off the bonds on Sloan Park and Hohokam Stadium, but also contribute toward paying off the ASU bonds.

Among the other properties scheduled to be sold off to pay back the ASU bonds are the site for The Union, a large office complex planned for near Riverview Park, and a former Mervyn’s department store located on Stapley Drive north of Main Street, near a new Valley Metro light rail station.

The Pinal County land, originally purchased for water rights but later considered unnecessary, is only one in a series of land sales the city plans to raise funds that will partially pay off the controversial $63.5 million ASU campus, earmarked for high-tech digital education programs.

The Pinal County “water ranch’’ was purchased for $33 million in 1985 and included more than 11,400 acres near Coolidge and Eloy.

Selling off parcels from the ranch was a critical component in the city’s bid to build Sloan Park in 2010 and to prevent the Cubs from moving to Naples, Florida.

Brady reported that this year’s proposed budget includes no money from the Enterprise Fund that would be earmarked to pay off debt on the ASU building, billed as the cornerstone of downtown Innovation District.

Giles and other city officials consider the ASU building the centerpiece of an “Innovation District,’’ intended to spawn start-up companies and help create high paying jobs in Mesa, which has lagged behind other East Valley cities in education level and disposable income.

“We do not have any funds from the enterprise fund going to pay for this building,’’ Brady said. “We anticipate it will all come from the sale of city assets.’’

The Enterprise Fund, mainly fed by proceeds from Mesa’s electric utility, is one of three major sources of revenue that pays for government services, including police, fire, libraries and parks.

“Instead of having to tap into the Enterprise Fund to make the payments, we are using the sale of the land in Pinal County to make the payments,’’ Brady told council at a study session.

This year alone, Brady said the city is planning to transfer $110 million from the fund to the General Fund, a practice that has been used since 1945 to compensate for Mesa’s lack of property tax.

Giles said the property tax was abolished during the post-World War II boom and it is not politically viable to bring it back. Mesa voters have rejected efforts to do so in the past.

“We are using the 1945 system and it is working. If we try to monkey with it, I fear dire consequences,’’ Giles said.

But Giles’ efforts of Giles to scale back the project and  finance it with bonds — rather than a sales tax increase rejected two years ago by voters — created a continuing political split in the council.

The rift was evident when council members Jeremy Whittaker and Kevin Thompson criticized Brady’s plans to use the land sales to pay off the ASU bonds. Whittaker and Thompson both voted against the ASU building a year ago.

Whittaker criticized the city for failing to adequately replace infrastructure, including water pipes past their life expectancy.

Thompson said the money would have been better used on east Mesa public service facilities. East Mesa fire and police stations are included in a bond issue approved by voters last fall.

“I think there is a better use for those funds,’’ said Thompson, who represents growing southeast Mesa.

Jeff McVay, Mesa’s downtown transformation manager, said that ASU at Mesa City Center’s opening has been delayed for about three months to avoid overtime costs.

He said the final design should be completed in February 2020, when construction will begin on site immediately to the east of City Hall. The project is expected to be completed by October 2021. ASU would begin classes in January 2022.

“We are holding very hard to the $63.5 million cost approved,’’ McVay said. “We are doing a very good job to make sure we will not be over-budget.’’

Last week Brady sought to step away from comments he made at a council meeting a week earlier when he said the proceeds from the controversial sale of a 132-acre site near Red Mountain Ranch in northeast Mesa would also go toward paying off the ASU project.

Brady said the city’s intent in putting the undulating, saguaro-studded track up for bid was never related to the ASU project.

He said the site, north of Thomas Road, was intended as a substitute for a site south of Thomas that the city considers inappropriate for residential development because of its critical location in Falcon Field’s flight path.

“There was no conspiracy here,’’ Brady said.

Giles also said the intent was to sell the Thomas and Recker property as a substitute for the other site and to use part of the proceeds to develop a hiking trail through the property.

He said the proceeds from the sale of all city property, or any other one-time payment, go into the Enterprise Fund.

The mayor noted that voters had turned down a park bond twice to develop the Recker and Thomas property and that he viewed the auction as a way to retire debt and develop park facilities at the same time.

Giles has said he envisions a high-end residential development, but also a hiking and bicycling trail that would preserve some of the natural site, which includes a desert wash and commanding views of Red Mountain.

Although Blandford Homes has bid $21.1 million for the Recker and Thomas property, exceeding an appraisal that valued it at $15.6 million, the council has not decided whether to approve the sale, Brady said.

The top priority for any funds derived from the Recker and Thomas sale would be plowing about $4 million back into park facilities in northeast Mesa, Brady said.

That would ensure that the original funds spent for the site in 1998 are used for their intended purpose.

Council member David Luna, who represents the district that includes Red Mountain Ranch, said he never envisioned a direct link between the land auction and ASU and still doesn’t believe that’s the case.

Verl Farnsworth, Luna’s opponent in last year’s election and an outspoken critic of the council, said he is still hoping to block the land sale and leave the Recker and Thomas property in its natural state.

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