Venetian Blind

Will Scottsdale voters preserve "The West's Most Western Town," or opt for "a little bit of Venice"?

The state's legislative oversight committee gold-stamped the application. (Scottsdale conspiracy theorists point out the chairman of that committee was Scott Bungaard, a drinking buddy of political consultant Jason Rose, who ran Campana's last campaign and now works for Unger. Incidentally, Rose also drives a black SUV).

Last May, the Legislature repealed the loophole-riven theme-park tax law -- three months after the Canals plan snuck under the wire.

Unger's consultants predict the Canals of Scottsdale would draw 6.4 million visitors in its first year of operation.

Basic map of the proposed 27-acre Canals project (solid black represents the network of canals). Click here to see an enlarged map.
Basic map of the proposed 27-acre Canals project (solid black represents the network of canals). Click here to see an enlarged map.
Barbara Espinosa and Sam West of Save Old Scottsale, pictured near the proposed future site of a luxury hotel.
Paolo Vescia
Barbara Espinosa and Sam West of Save Old Scottsale, pictured near the proposed future site of a luxury hotel.

That's 1.4 million more people than visited the Grand Canyon last year.

Unger expects those numbers to increase every year, maxing out at around 20 million visitors in 2013. By comparison, the gargantuan Mall of America in Bloomington, Minnesota, attracts 35 million people a year.

Espinosa has two words for Unger's projections: "Horse pucky." And a few more words: "People don't come to Arizona to ride on canals and visit museums."

If she's right, and if local, repeat visitors don't make up the difference, the tax exposure could get severe.

According to the current budget for the Canals, taxpayers will owe its developers $195 million -- one-third of the total tab -- upon the project's completion. That's when Unger et al. would begin pocketing sales tax.

Unger's stair-step revenue projections -- which are based on his rosy attendance projections -- say it would take about 10 years for the public to pay off the developers.

He is careful to emphasize that he and his partners will start banking the $195 million when and only when the project is completed.

"We front all the money [$654 million]. Then, once the project is built and paid for, we get a portion back. If the project never happens, we get nothing. There's no risk to citizens."

No clear risk, anyway.

The concept behind the Arizona theme-park law is long-term investment -- the taxpayers give a developer money now, in order to get back more in the form of sales taxes later.

For example, retailers operating within the boundaries of the proposed Canals of Scottsdale district currently generate about $3 million per year in sales tax.

Consultants hired by Unger and Excel say the Canals project would rake in 10 times that, thereby fattening local and state tax coffers -- once the $195 million debt is cleared.

That's unless the Canals of Scottsdale pulls a Galleria and flops.

In that case, taxpayers would find themselves paying off the construction of a failure, with little hope of ever getting their money back.

Also, one critical facet of Arizona's theme-park tax law is that while it sets a minimum total cost of development -- $100 million -- there is no maximum.

Once the ride's in motion, keep your hands in the car, because there's no getting off.

Taxpayers will be forced to cover one-third of the costs for the Canals of Scottsdale, no matter how high those costs climb, and they have already begun their ascent. Two weeks ago, a team of independent consultants hired by Unger and his partners reported the conversion of the Galleria to a museum would require $32 million more than the developers had allotted in their budget.

As mountaineers say: "That's a lot of air under your butt."

Along with the magazines piled in the waiting room outside the mayor's office in Scottsdale City Hall, there's a book made by third graders.

One picture is of a clown hat.

"Mayor Campana wears a clown hat to attract tourists," the passage says.

But Campana is no fool.

She didn't stop a public vote on the Canals project, even though many advised her that public approval was unnecessary.

The Scottsdale City Charter requires any "new tax" must be approved by a general vote. Campana does not view the financing for the Canals as a new tax, and hopes others don't. But she agrees "there is a cogent argument to the contrary." Reasonable minds differ, so why not call a vote?

A vote of confidence would congeal the hot blood of controversy, and a vote of confidence is what Campana expects from the outcome of the September 7 election.

If not, she says, the project is finished.

"If they can't convince us it's in the best interests of Scottsdale, it won't happen, because in that case it shouldn't happen."

Make no mistake -- Campana is the Canals of Scottsdale's most prominent champion (she calls it "a museum-themed district"). But that doesn't mean razing a venerable section of her city's downtown rests easy on her mind.

"It grieves me to do this," she says. "But it's a surgical decision. It's not a catastrophe.

"Keeping downtown Scottsdale strong has been a top priority in this city since Herb Drinkwater was mayor and I was on the city council. [The Canals] is the best way to do that.

"We're the only city in the Valley with a canal running near our downtown. It's serendipity, and we're going to capitalize on it."

Campana describes the Canals as "a transition piece" for the city.

"Along with the unique [feature] of the canal in our downtown, Scottsdale also [has] the unique feature of the Fashion Square mall, which is really a suburban mall in the downtown of a city.

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