A Fortune Runs Through It

Tempe has long given the impression its Rio Salado project costs $45 million. The actual taxpayer tab could surpass $200 million.

Tom Sands is poised to open the floodgates. On June 2, the Salt River Project engineer will begin diverting water from a canal in Papago Park into Tempe's Town Lake, the centerpiece of the city's Rio Salado project.

About 100 million gallons of water a day will cascade into the Salt River channel, filling Town Lake in about two months and culminating more than 30 years of dreaming, planning and building to return water to the river.

Wedged between inflatable rubber dams, the two-mile-long Town Lake will slowly take form in the shadow of downtown Tempe's twin buttes, where pre-Columbian Indians etched petroglyphs overlooking a vibrant river that nourished a thriving corridor of cottonwoods, mesquite and wildlife.

The Salt River flowed year-round through the Valley until 60 years ago, when completion of upstream dams diverted nearly all the water into irrigation canals. Before long, the dry riverbed became the Valley's dumping ground, host to scores of landfills.

In 1987, Maricopa County voters soundly rejected a $1.5 billion property-tax boost to finance a grandiose, $3 billion plan to transform 26 miles of the Salt River bed into parks and new developments. The next day, then-mayor Harry Mitchell vowed that Tempe would proceed with its own Rio Salado project.

Twelve years later, the most visible symbol of that effort--Town Lake--is imminent.

But $1 billion in commercial, retail and residential development that is supposed to go hand in hand with Town Lake is not imminent. The grand Peabody Hotel the city has touted may not be built, which would impact the city budget in other areas.

Meanwhile, the price Tempe's citizens have paid--some say unwittingly--for their own version of Rio Salado has escalated beyond anyone's wildest expectations.

What was supposed to be a $45 million project has consumed more than $100 million in the past decade, with an additional $59 million in expenses on the horizon. Throw in $45 million more in state and flood-control district expenses and, to paraphrase Everett Dirksen, you're talking real money:

$200 million-plus.
That's twice what the City of Phoenix spent to build America West Arena.

Tempe's three-decade obsession to transform the trash-strewn river bottom into a huge public water park bounded by $1 billion worth of private development is as bold as it is controversial.

"I think the Town Lake is to Maricopa County as Central Park is to New York," says Tempe developer John Benton, whose team plans to break ground on a 275-room hotel and an eight-story office building on the Town Lake's south shore later this year.

Critics take a more jaundiced view, claiming the project is a massive subsidy for developers and that the money would have been better spent on other civic projects.

"The public has never known what Rio Salado is all about," says former councilwoman Barbara Sherman. "They never knew what these costs are really. It's all been fluff."

The city has skillfully--some say deceitfully--negotiated its Rio Salado project through a daunting array of obstacles to move the lake from the drawing board to reality. (Tempe's Town Lake and Rio Salado project should not be confused with Rio Salado Crossing, the massive football stadium/convention center proposed along the riverbed in Mesa.)

Tempe's pathway has been paved with money. Lots of money.
Boosted by a robust economy and a 20 percent sales-tax increase--the 1993 tax hike was promoted as necessary to fund increased fire and police protection--Tempe has generated steady budget surpluses the past six years. The budget surplus is now averaging $15 million annually, and one-third of it is earmarked for Rio Salado.

But budget surpluses alone were not enough to fuel Rio Salado.
In 1995, the city council adopted a clever financing plan to build the $45 million Town Lake portion of the Rio Salado by selling bonds without the public's permission. The plan allowed the council to avoid what would have been a contentious election campaign.

With that financing plan in place, Tempe announced with great fanfare in May 1997 that the Peabody Hotel Group would construct a 1,000-room luxury hotel and convention center. The project, the city said, would "trigger" massive development around the lake and contribute $1.3 million a year in fees to help pay for lake operations.

Soon after the Peabody agreement was announced, the city began "building" the lake--shoring up the banks, realigning Rio Salado Parkway, constructing foundations for the inflatable dams, installing groundwater recovery wells and diverting sewer lines.

Yet as engineers prepare to turn on the spigot and fill the lake, the much-heralded Peabody Hotel and Resort remains unfunded and unbuilt. Peabody's failure to begin construction has forced the city to set aside an additional $5 million to cover the lake's operating expenses.

Incredibly, the city has never compiled a detailed accounting of the overall costs of Rio Salado, the largest capital project the city ever has undertaken. Spurred by New Times' inquiries, council members last week finally requested a concise, itemized budget.

Informal estimates obtained by New Times show the city already has spent $100 million on Rio Salado during the past decade and has committed another $24 million over the next five years. Additional outlays of $35 million loom.

Rio Salado's staggering costs, back-room bond financing plans and failure to lure timely private development have created fertile ground for political upheaval.

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