By Amy Silverman
By Olivia LaVecchia
By Monica Alonzo and Stephen Lemons
By Chris Parker
By Michael Lacey
By Weston Phippen
There is a fundamental conflict between two important tenets of city revenue planning, says Mary Jo Waits of ASU's Morrison Institute for Public Policy. To pay for fire, police and other services, cities need an adequate sales-tax base. Consequently, they strive to lure large merchants inside their borders. But zoning large parcels of land for retail means that there is less space left for companies that produce stable, high-paying jobs--which are also extremely important to a city.When a city finds itself running out of available land, as Tempe is, the choices it has to make about employment versus revenue can become agonizing.
"It would be good if Arizona towns could focus on high-quality, high-paying jobs that offer benefits and enough money for people with families to live on," she says. "The question is how towns will use inducements. Will they try to get those kinds of high-tech businesses and services, or will they go for retail?"
In this deal, Tempe comes out the loser inany comparison with Chandler regarding bang for incentive bucks. Tempe will reimburse the Great Mall's developers $14.5million from sales-tax revenues for infrastructure already under construction to make the property accessible. The developer will receive 70percent of the sales-tax revenues from the mall for 12 years, or until the $14.5 million is paid off, whichever comes first.
The city will pay an additional $8 million for improvements to the roads surrounding the Great Mall. For its $22million effort, then, Tempe will get a development that beefs up its sales-tax bottom line by about 6percent annually.
Chandler has agreed to pay back the $2.6million it will "borrow" from Mills for its own infrastructure improvements with sales-tax refunds to the mall. For this relatively small investment, however, the city will see its annual sales-tax revenue nearly double.
Another key factor in deciding the amount and type of incentives for a large retail development is employment. Is there an ironclad agreement that the business will hire employees from inside the city?
While Tempe's Great Mall is expected to provide thousands of jobs, there is no agreement about where tenants will find the people to fill them. Guadalupe Mayor Anna Hernandez has waxed enthusiastic about the Great Mall, saying it will provide much-needed work for underemployed citizens of her town. She also boasts that the mall will be within walking distance for her constituents, more than 40 percent of whom do not own cars.
Without some commitment from mall retailers, however, the question must be asked: With a labor pool made up of thousands of young, energetic ASU students just minutes away, how many Guadalupe residents will find jobs in the mall? Developers are happy to accept endorsements from local politicians, but neither PDK-Taubman nor Mills has made anyone any promises in this respect. Nor has any of either mall's confirmed tenants.
The war of the malls has also raised the question of whether predatory business practices may affect companies considering a move to Arizona.
Chandler Mayor Jay Tibshraeny says the outlet-mall battle has stretched tactical and strategic boundaries dangerously.
"It's kind of uncharted territory," Tibshraeny says. "What we may be doing to ourselves in the long run, I don't know. The only ones really making out here are the consultants and the lawyers."
Paul Gilbert says he thinks Arizona is considered a good place to do business by other parts of the country. And that perception may change if politico-legal conflicts like themall war occur on a regular basis. Competition is a good thing--but there is a point when you can have too much of it.
"I don't think it's healthy," Gilbert says. "We're sending all the wrong messages out. Competition is good when it's about improving the quality of your product, but that's not what is happening here. We're only trying to slow each other down, to hurt each other's chances of getting off the ground.
"I have not enjoyed this fight.