On Thin Ice

Scottsdale may think it's fixing Los Arcos Mall. But it's really paving the way for a Coyotes arena in Glendale.

As a fierce competitor myself, I can't help but respect, if not admire, a player who leverages the strength of his opponents in an all-out effort to win the game.

Because that's what Phoenix Coyotes owner Steve Ellman has been attempting to do -- use his old enemies in Scottsdale to ultimately win the game of building a hockey arena in Glendale.

No one seems to have recognized the ultimate irony here, that the people in Scottsdale who chased Ellman away are now being asked to help him free up his finances, so he can build in Glendale the exact same plan he had for a site on Scottsdale Road.

Down in the dumps: While Steve Ellman is asking Scottsdale to bankroll big-box stores at the old Los Arcos site, he still hasn't closed on the land for his Coyotes arena in Glendale.
Kevin Scanlon
Down in the dumps: While Steve Ellman is asking Scottsdale to bankroll big-box stores at the old Los Arcos site, he still hasn't closed on the land for his Coyotes arena in Glendale.

The latest uproar has been over Ellman's proposal that Scottsdale spend up to $42 million so he can build a Wal-Mart Supercenter, a Sam's Club and a home improvement center at Los Arcos, the site of the demolished shopping mall at Scottsdale Road and McDowell.

Let me repeat this: Scottsdale, long known for its big, bad, bold tax incentives and subsidies that attracted the likes of Nordstrom, fine car dealerships and the super-upscale Promenade shopping center, was being asked to pay millions of dollars for a Wal-Mart. There's a gorgeous irony for you.

This caps years of outright political war over the site, which at one point included plans to build the Coyotes arena, along with a retail center that was touted as being the salvation for a badly deteriorating part of south Scottsdale.

Voters in Scottsdale said twice that they wanted an arena built at Los Arcos. And the election results were far more in favor of this plan than the vote we took in Maricopa County on financing a new stadium for the Cardinals. Nonetheless, Ellman's most vocal opponents wouldn't stop telling him to go away. And, after putting together a lightning deal with Glendale, he did.

In the meantime, Ellman has invested a total of $56 million in the 42-acre Los Arcos site. At a current market value of between $13 and $16 a square foot, Ellman's in deep with his $31-per-square-foot investment. He wants to unload this eyesore, and the city wants him to do something about it, too.

But that has only set the stage for what has to be one of the most bizarre political ploys attempted -- even in a state that's used to some of the wackiest behavior imaginable.

It has come down like this: Ellman decided the city needed to make him whole on his investment in Los Arcos and it needed to do so quickly. And why not? After all, the city did issue a request for proposals to redevelop Los Arcos, and it did pick Ellman to orchestrate the plan. He spent a lot of money on predevelopment costs -- and on swaying the vote in two public elections -- to get his entertainment mecca built.

Having learned from the debacle that forced him to relocate his Coyotes arena to Glendale last April, Ellman approached three Scottsdale city council members who had vehemently opposed his original plan: George Zraket, Tom Silverman and Ned O'Hearn. He invited these councilmen to meet behind closed doors to discuss building what the neighborhood wanted. Nothing wrong here, either legally or ethically. Except that Zraket has built his political reputation on the fact that he doesn't meet with developers behind closed doors.

What breathtaking hypocrisy. Zraket now says that he has in the past refused to meet with anyone "who has an application in front of city council," and that his meetings with Ellman were strictly informational. He adds the $42 million figure is irrelevant, that he merely wanted to jump-start the discussion about revitalizing Los Arcos.

"We need to let Ellman know what we want at Los Arcos," he says.

The developer announced his plan at a February 5 public meeting. And when he did, it played out like an out-of-body experience for anyone who has closely watched Scottsdale City Hall.

Residents who passionately hated Ellman because of his earlier arena proposal suddenly testified that he was now their hero, because he wanted to build a Wal-Mart. One former Ellman hater even cried. This wasn't spontaneous support for Ellman; it appeared to be part of a bigger plan to pressure at least one more member of the council to give him the money, and to do it sooner rather than later.

Zraket wasn't there that night. He didn't need to be, because his right-hand man, attorney Alan Kaufman, was there to serve as his proxy. Not on the dais, mind you, but very prominently canoodling with the developer in the crowd. And when Councilwoman Cynthia Lucas introduced a motion that could have thwarted Ellman's plan, keen observers may have noticed that Kaufman actually made hand signals to O'Hearn and Silverman, who in turn questioned the motion. Kaufman denies he was directing traffic that night. "I'm just an animated guy," he says.

O'Hearn and Silverman were not immediately available for comment.

After hours of public comment and sometimes rancorous debate among council members, the six councilors voted unanimously to have city staff study both the Ellman plan and a $170,000 proposal produced by the city's consultant, to see if they can't be merged.

Now, I can't fault the developer for trying to force the city council to subsidize what has become a black investment hole. He thought he had nailed three votes, and he pressured Councilman Robert Pettycrew to be the fourth.

"Steve's at the table and he's desperate," Pettycrew says. "And we're not going to bail him out."

But why is Ellman so desperate?

The answer lies not in Los Arcos, but across the Valley in Glendale. According to sources who have a stake in the outcome of the Glendale project, the arena plan is in trouble.

Ellman has already busted the deadline for closing on the land he needs to build the arena, and as of press time he still hadn't. Plus, local businessman Jerry Moyes recently bailed out the $60 million loan Ellman took out to buy the team in the first place. This is on top of Moyes' $20 million initial investment and the millions he's poured into covering the team's losses.

In short, Ellman needs all of the cash he can find to reach his arena dream, and he hoped Scottsdale would help him out.

Scottsdale likely will help out Ellman at Los Arcos -- just not with an unprecedented up-front subsidy. The $60 million parking garage subsidy the city provided for Nordstrom, for instance, has been paid for with city sales taxes.

And Ellman likely will pull off the Glendale arena deal, just the way he pulled off buying the Coyotes franchise in the first place, if only because Moyes has too much invested not to help him out. Ellman is famous for pulling off amazing last-minute deals.

A representative from the Ellman Companies declined comment.

For his part, Councilman Zraket denies he's been used as a pawn by Ellman; but he certainly has set aside one of his strongest beliefs in order to shepherd through Ellman's plan. If anything, the fact that even the famously anti-development Zraket has taken it upon himself to play the role of the peacemaker between the city council and Ellman shows how much has changed in Scottsdale. Perhaps George thought he'd be hailed as the savior of Los Arcos, not a bad thing when you're facing a March 12 election. Too bad he's spent his political clout on an ill-advised Wal-Mart plan, instead of a project that might put Scottsdale's interests ahead of those of a developer.

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