By Ray Stern
By New Times
By Amy Silverman
By Stephen Lemons
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By Chris Parker
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The agreement called for the city to begin construction of the lake, followed by Peabody breaking ground on the hotel so that the two projects would be completed at about the same time.
The city began construction on Town Lake in August 1997.
Peabody tried to line up financing to build the hotel, to no avail.
In July 1998, the city council amended its 1997 agreement with Peabody, giving the company another 18 months to begin construction or lose a $300,000 bond.
Peabody chairman Marty Belz says he is scrambling to secure $170 million in financing by a November 1 deadline. That would be seed money for construction of a $210 million hotel and $40 million worth of retail space.
Will Peabody be forced to seek another extension?
"It's going to be close, and I really don't know if we will have to ask or not," Belz says.
Peabody officials say they hope city council members will understand that the company is working diligently to secure financing and will agree to an extension if necessary.
"If they go back and look at what has happened in downtown Tempe, no developer was able to redevelop those properties within the original schedule," Belz says. "That's just the nature of redevelopment."
The city council, however, appears to have had its fill of Peabody's delays.
"I think we are on the last leg of the Peabody," says vice mayor Ben Arredondo. "I don't think we are going to have [a Peabody Hotel]."
If the Peabody Hotel project collapses, Tempe will be forced to seek a new master developer for the most important segment of the project--a process that will take several years to arrange and more time to construct.
The loss of the Peabody Hotel would have a negative impact on the city's budget. The city is projecting it won't receive "net positive revenue" from Rio Salado until at least 2015--and that's with the Peabody Hotel.
"If the hotel doesn't come on line . . . the city will need to carefully watch all other operating expenditures," according to an October 1997 memo prepared by Pat Flynn.
Operating expenditures already are being impacted. Last month the city council voted to take $2.5 million from the general fund and set the money aside in a reserve account for Rio Salado--which now totals $10 million. The fund will be used to help pay a portion of the lake's $3.3 million annual operating costs for the next four to five years.
(The lake will be costly because it is not your typical lake. The eastern half of the lake bed is extremely porous. To reduce the amount of water seeping into the ground, the city installed 10 recovery wells beneath the lake that will recapture water and pump it back into the lake. The lake's electric bill is expected to approach $800,000 a year. Since there will be no naturally flowing water into the lake once it is full, more than 750 million gallons of water must be released into the lake from Salt River Project canals each year to make up for evaporation. Estimated cost: $313,000.)
Peabody's possible departure might have a silver lining. Some council members say Peabody's exodus would give the city the opportunity to save tens of millions of dollars in incentives.
"Where in 1995, '96 and '97 the city literally gave away bunches of incentive money, I think we all agree that's not going to happen the next time around," says councilman Leonard Copple.
"We pulled our trigger, we spent our money, we did everything we could to make it a viable lake," he says. "Now, it's up to Peabody."
Tempe certainly did spend the money on Rio Salado.
Exactly how much has been spent is uncertain until the city completes a detailed accounting analysis of the project later this summer, Flynn says.
"The council would like to see what we spent the money on and, in addition to that, they would like to see where in the hell we got the money," Flynn says.
In the meantime, Flynn's rough estimates will have to suffice.
Flynn's records show the city has spent about $100 million on the project during the past 10 years and is committed to spending at least another $24 million in the next five years--much of it is going for parks and other amenities that will ring the lake.
The $124 million is four times as much as the city said it would spend on Rio Salado in 1993.
The spiraling costs have not generated much discussion outside Flynn's office. The city's public relations department focuses primarily on the $45 million outlay to build Town Lake.
But the city has spent tens of millions of dollars improving Rio Salado Parkway, building the second Mill Avenue Bridge, constructing bike paths around the lake, installing streetlights and building parks--all essential features of Rio Salado.
The $124 million committed so far doesn't include several major pending expenses. The city has plans for a $15 million marina on the north side of the lake. It would provide a safe haven for boats when the Town Lake's inflatable dams must be lowered to allow flood waters to pass through.
Another major expense faced by the city, and eventually developers, is to move high-tension power lines that run along the south shore of the lake site underground. The cost to relocate the power lines is estimated at another $20 million, a portion of which would be repaid by developers.