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.

Tempe's financial commitment for Rio Salado also doesn't include $45 million spent by the state Department of Transportation and the Maricopa County Flood Control District to channelize the Salt River through Tempe as part of the construction for the Red Mountain Freeway in the mid-1980s.

Added together, state, county and city taxpayers could be looking at more than $204 million in past and future expenses to build Rio Salado.

Tempe has long touted the Rio Salado project as a "public/private" partnership where private developers will repay 60 percent of the capital and operating costs.

But this is misleading. By law, developers will only be required to pay 60 percent of the $45 million cost to build Town Lake--or $27 million--rather than 60 percent of the entire capital costs for Rio Salado.

Despite the rising taxpayer burden, the project continues to have solid support from a majority of city council members.

"I'm not looking at the cost to our city right now," says councilman Joe Spracale. "I'm looking at what it is going to reap us in the future."

If development around Town Lake goes as planned, Town Lake will create thousands of new jobs and tens of millions of dollars in tax revenue for the city.

Nevertheless, councilman Joe Lewis says the city should acknowledge it is spending far more on Rio Salado than the $45 million spent on the Town Lake portion of the project.

"I don't think anybody is trying to mislead anyone," Lewis says. "But we need to start changing the figure we put before the public."

Hugh Hallman knows how to cut a business deal.
The 37-year-old Tempe native majored in economics and political science at Claremont Men's College and earned a law degree from the University of Chicago. Hallman, a self-described "pencil-necked geek," has made a living negotiating more than $3 billion worth of business transactions for well-heeled clients.

Since being elected to the council in 1998, Hallman's sharp eye for detail and relentless questioning of city staff have occasionally turned routine council meetings into nerve-racking interrogations.

"I've had all six councilmen and the entire city staff glaring at me at once," he says.

Blunt and occasionally rude, Hallman has little patience for bureaucratic butt-covering.

During a March council meeting on Rio Salado, Hallman doggedly questioned city staffers about the details of the city's contract to purchase water for Town Lake.

One employee after another shrugged off Hallman's question, passing the microphone down the pecking order. Finally, the microphone was handed to a junior employee sitting a few rows up in the audience, who provided a direct answer to Hallman's query--an answer that contradicted assertions made by city brass.

It was just another day on the job for Hallman.
No city project has attracted Hallman's attention as much as Rio Salado. The city's handling, or, in Hallman's view, botching, of Rio Salado will likely serve as a central plank in Hallman's possible bid for mayor next spring against incumbent Neil Giuliano.

Hallman says the city turned what could have been a relatively inexpensive project emphasizing recreation and wildlife zones into a monstrous economic development labyrinth requiring an investment that will easily top $200 million to complete.

The city, Hallman says, has misled the public into believing the project could be paid for without raising taxes and that the public would get a lake, parks and trails for $45 million.

The reality, Hallman says, is that money from the 1993 sales-tax increase is contributing to the repayment of $45 million in bonds sold to build the lake. In addition, the city is simply diverting funds from other departments to funnel money into Rio Salado.

"Money that should have been spent on the police department went into Rio Salado," Hallman says.

Hallman says an independent study showed the police department was underfunded by about $2.6 million a year over the past five years, which is about half the sum diverted from the city's general fund surplus each year to help finance Rio Salado.

Hallman says the city is now scrambling to spend $13 million in the next few months to build parks along the Town Lake's shoreline so the public will have something other than rocks and gravel to walk on when the lake officially opens in October.

That's just the beginning of a wave of huge expenses to come, Hallman predicts.

Hallman is particularly critical of the city's deal with Peabody. Not only did the city offer Peabody $64.8 million in incentives to build the hotel (compared with $16 million in incentives the city granted for all of its Mill Avenue redevelopment projects), it gave Peabody the rights to develop property owned by others on the north side of the lake.

"The city agreed to condemn the land for Peabody," Hallman says.
Meanwhile, Peabody has failed to turn one spade of dirt since it supposedly became the city's partner nearly four years ago.

Conveying development rights to Peabody prevented property owners from moving forward with their own development plans.

"Peabody's development options are sterilizing the entire project," Hallman says.

Hallman led a successful uphill battle last year to convince fellow council members to put a February 1, 2000, deadline on Peabody's contract with the city to either start construction or quit the project.

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