Garage Gratis

Why would two businessmen want to build a $6 million parking structure and give it to the state?

If you build it, they will come. That is, build a stadium, and entrepreneurs will cater to the resultant demands of the marketplace with shops, restaurants and bars.

And parking garages.
In response to the parking problems anticipated for the opening of Bank One Ballpark in 1998 ("Parking Breaks," November 7), an enterprising Scottsdale real estate speculator named Jule Dionne has proposed building a $6 million parking garage behind a couple of state agency buildings next to the nascent BOB. The building would be deeded to the state--for free. All that Dionne and his investors want in return is the after-hours parking concession for stadium and other downtown events.

And because the state buildings technically don't belong to the state, the whole deal can bypass the usually pesky and time-consuming and democratic bidding process.

The state gets something for nothing. The ballpark gets a parking garage. But what exactly do Dionne and his partners get?

In 1994, the state of Arizona decided to take advantage of a buyer's market in commercial real estate and went on a buying spree of distressed properties. The idea was to get its agencies out of leased property and into state-owned buildings. Then the state turned around and sold the properties to investors who held "certificates of participation," known as COPs. The state is buying the buildings back under "lease-purchase" agreements--essentially rent-to-own contracts.

The two buildings at 701 and 801 East Jefferson, which house offices for the Arizona Health Care Cost Containment System (AHCCCS), were purchased for $12.6 million and financed with a similar lease-purchase agreement. At the end of the 11-year term, the state will own the building.

The original COP was held by Ford Motor Credit. In September, Ford sold its real estate portfolio to Koch Financial, a Wichita-based conglomerate.

Enter Jule Dionne, who says he was involved in the original lease-purchase deal, and who is part owner of the warehouse just south of the AHCCCS buildings.

"This whole thing evolved because the building is underparked," says Dionne. "They anticipate a need for parking the way AHCCCS is growing."

And Dionne anticipated a greater need for parking next door at the ballpark.
The surface parking lots behind the AHCCCS buildings sit right across Seventh Street from the stadium. And because Seventh Street is elevated there, baseball fans who park there would not even have to cross the street, but could walk beneath it to the east entrances to the park. They could walk two blocks farther to reach America West Arena.

Dionne lobbied the COP owners to have the surface lots behind the AHCCCS buildings released from the lease-purchase agreement so that he could build his parking garage, and then he made his pitch to the state Department of Administration, which manages the state's real estate.

Dionne proposes a three-story structure with 974 parking spaces inside and 49 outside. To sweeten the deal for the state, he added 7,590 feet of climate-controlled storage space for AHCCCS and gated parking for 28 state vehicles. Dionne would even provide shuttle-bus service to state employees who had to park farther from the building during construction.

All this would cost $6 million to build--though the state would not spend a dime. But when the project was done, it would be deeded to the state. The state would have exclusive use of the garage from 2 a.m. until 5:30 p.m. for every business day of the year. Dionne and his associates would use it the rest of the time.

"The state comes out absolutely best in this deal," Dionne says. "They get a free garage, they get parking for themselves, they get storage space, they get an impound area for their cars. It's a great deal."

The state couldn't argue. Because the state does not technically own the property, the parking garage did not have to be put out to bid. Since the state was not expected to cough up any money, it seemed a moot point anyway.

"It's more on the order of the state receiving a gift," says DOA spokesman Howard Boice.

DOA passed the paperwork on the project to the Legislature's Joint Committee on Capital Review with a note that says, "Preliminary discussions have been held with the Attorney General's Office and Bond Counsel with positive results."

DOA director Rudy Serino refused to comment on the project. Neither DOA officials nor JCCR analysts could remember a similar deal ever being proposed or approved.

And they didn't seem to know where the money was going to come from.
Dionne vehemently denies he's getting any financial help from the stadium tenants, Arizona Diamondbacks, but claims the money "is in the bank," a combination of private funds and financing.

His partner in the venture is another Scottsdale businessman, Doug Heltne, who recently put together a hotel deal at Scottsdale Road and Shea Boulevard.

Dionne claims that the parking garage will make money. "I wouldn't be putting six million at risk to be a good citizen," he says.

But other parking entrepreneurs are not so sure, especially for a part-time business.

"You've got to have daytime parkers, you've got to have nighttime parkers. You've got to have that parking structure full 18 hours a day in order to make it pay for itself," says Leon Woodward of U.S. Parking Systems. "It's going to take a hell of a lot of time to get your money back--unless there's a trick to it."

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