By Amy Silverman
By Olivia LaVecchia
By Monica Alonzo and Stephen Lemons
By Chris Parker
By Michael Lacey
By Weston Phippen
Above the bold, silver letters of "Office of the Mayor" hangs a sign that inadvertently reveals how the nation's fifth-largest city operates.
Doing things the Diamondbacks Way means this: Do what Arizona Diamondbacks general partner Jerry Colangelo says.
No one has had greater influence over development in downtown Phoenix over the last two decades than Colangelo. And no person has benefited more.
Colangelo has mastered the art of shepherding tax dollars to further his private interests while providing the public with amenities and experiences it otherwise would be without. Arizona cheered a World Series victory in Bank One Ballpark, which he got built with $243 million in taxpayer funds, and Colangelo got to keep the money from the games.
Emblazoned on the same sign, just to the right of the Diamondbacks emblem, is the brown-and-white logo for Copper Square. It is the marketing brand for a shadowy business group that has made sure elected officials like Rimsza (who will be leaving office in January) implement the Diamondbacks Way.
Founded as a nonprofit group in 1990 by Colangelo, the Downtown Phoenix Partnership is an elite organization of downtown tycoons who quietly lobby bureaucrats and elected officials to spend billions of taxpayer dollars on projects that reap profits for their private interests.
For example, the DPP has a played a key role in helping Colangelo secure more than $300 million in taxpayer funds to construct three major downtown entertainment venues: America West Arena, the BOB and Dodge Theater.
About $1 million a year in taxpayer funds is helping finance the Partnership, whose official function is providing security, marketing, landscaping and shuttle busses for businesses within the boundaries of its downtown district: Seventh Street to the east, Third Avenue to the west, the railroad tracks to the south and Fillmore Street to the north.
Yet despite this heavy reliance on taxpayer money, good luck getting access to the Partnership's books. The secretive organization claims to be exempt from the state open-meetings and public-records laws and only reluctantly agreed to provide financial information to New Times.
The Partnership's audited financial statements reveal that generous funding by the city of Phoenix -- coupled with lax oversight -- has allowed it to build up reserves of $550,000 in cash and investments. The fat bankroll stands in sharp contrast to its miserly, $3,000 a year contribution to Artlink, a downtown arts group whose First Friday gallery walks bring 5,000 to 10,000 people downtown once a month.
The Partnership says its goal is to improve the quality of life downtown, make the core city a place where people flock to live, work and play. But 13 years after its creation -- during which time the DPP has helped funnel $2 billion in public and private money into large-scale projects -- downtown Phoenix remains a ghost town after dark.
That is, Colangelo and the Partnership's tap-the-public-treasury-for-big-box-projects philosophy has failed to generate the downtown economic revival that was promised each time they went hat in hand to the city and county for hundreds of millions of dollars worth of subsidies.
One simple statistic goes to the heart of the matter: There are 41 fewer downtown businesses today than in 1995 -- before Bank One Ballpark and Dodge Theater were constructed. Rather than nurturing small businesses, artistic centers and historic buildings that attract creative people who are the kindling for urban revival, the Partnership has encouraged the city and Maricopa County to systematically destroy such elements.
Development projects advocated by the Partnership have leveled historic buildings, uprooted people from their homes and wiped out emerging artist enclaves to make room for sports venues, a jail, office towers and parking garages -- all of which have wound up deadening the pedestrian experience and the opportunity for small, unique enterprises to flourish.
Following the Partnership's lead, the city has been a virtual no-show when it comes to providing financial assistance to small businesses, art groups and small-scale residential developments -- important elements in reinvigorating downtowns in other big cities.
Despite the hostile climate, Phoenix artist and developer Beatrice Moore is employing a bootstrap development philosophy that has been remarkably successful.
Eschewing public subsidies, Moore has rehabilitated old warehouses into inexpensive artists' studios, and that has fueled a street-level economic revival along Grand Avenue -- an area that lies outsides the Partnership's direct control.
"What's amazing to me is the city has let [the Partnership] so strongly influence the direction of downtown development," Moore says.
What she's talking about is, when the Partnership demands something, the city responds. In early 2002, the city backed the Partnership's effort to build the Arizona Cardinals stadium downtown, when it knew the deal would be a financial disaster for taxpayers.
The Partnership had at least one corporate board member, the Arizona Public Service Company, which stood to profit handsomely from construction of the edifice. An APS affiliate was in line to win a $60-million contract to provide chilled water from its downtown ice-making plant to cool the proposed football stadium.
The DPP's effort to land Cardinals Stadium ultimately failed, and now the stadium is under construction in Glendale. But the Partnership's jihad to land the 63,000-seat venue downtown further damaged its already tarnished image among many downtown residents, artists and small-business owners.
"I don't know of any artist or art-gallery people who feel that the Downtown Phoenix Partnership has helped First Fridays or the arts community," says Kimber Lanning, owner of Modified Arts on East Roosevelt.
Because of the Partnership's strong-arm tactics, there was vigorous opposition a few years ago when it attempted to expand its geographic area.
Angelos Peter Romas, a New York attorney representing a downtown property owner opposed to the expansion, notes that the Partnership acts as a "shadow government" by imposing taxes on small property owners that primarily benefit large businesses. He referred to the fact that the city allows the Partnership to assess public and private property in a 90-block downtown area.
Though the Partnership provides security personnel to downtown businesses, Romas claims its true purpose is to manipulate government spending for the private business interests of its board of directors.
"The city and the Downtown Phoenix Partnership are all in bed together," says Romas. "Let's face it."
Partnership Executive Director Brian Kearney counters that the DPP is simply a "business-improvement district trying to protect the investment that has been made [downtown] and facilitate additional investment in the area."
But whose investment? The taxpayers', or those of the Partnership's influential board of directors?
It goes without saying that there is a considerable gap between the development philosophies of artists like Beatrice Moore and those of Colangelo and the Partnership. But it is a chasm that both sides must be willing to cross -- and the time to do it is now.
Despite the fact that that the public's $300 million investment in Colangelo's entertainment facilities has failed to spur a downtown renaissance, there is reason for hope.
Thanks largely to the strong support of Vice Mayor Greg Stanton, the city is investing millions of dollars to build a cutting-edge biotechnology center that has started a chain-reaction of downtown investment.
The biotechnology project, combined with the promise of a light-rail system to connect downtown Phoenix and downtown Tempe, led to a stunning announcement last month by Arizona State University President Michael Crow. The university, Crow proclaimed, plans to build a downtown campus for 12,000 graduate students.
Within half a dozen years, downtown Phoenix could have what it has been missing for decades -- a few thousand young, smart, creative people living, working and playing in the shadow of the historic Adams Hotel.
How City Hall prepares for this rare opportunity -- and what it does to keep the momentum going -- will determine whether Phoenix can lay legitimate claim to the title of "world-class" city it has been bandying around for decades. It won't be enough to just cater to the big-business interests of Jerry and his partners on the DPP. City government will have to make sure small businesses and the artist community have a place at the table if Phoenix's downtown is finally to burgeon.
"I am an urban person," Jerry Colangelo says, as he relaxes in a comfortable leather chair inside his spacious Bank One Ballpark office.
"I think right now Phoenix is a second-tier city. I would like to be in the first-tier. I have done my share to try to raise the bar with the things I'm personally involved in."
The Chicago native is best known as the man who controls the Arizona Diamondbacks and the Phoenix Suns. But Colangelo engineered his evolution into sports czar by doing what he does best: developing real estate on a grand scale.
His projects have ranged from the Cotton Center industrial park on the border of Tempe and Phoenix to a vast new planned city 40 miles west of downtown on 35,000 acres of unspoiled desert called Douglas Ranch.
Yet the $500-million sports-entertainment complex in downtown Phoenix is Jerry Colangelo's biggest accomplishment.
Colangelo says these big venues -- America West, the ballpark, the Dodge -- came about because he saw opportunity in downtown Phoenix when other businesses were fleeing it in the 1970s and early 1980s.
A pivotal moment came in the early '80s when construction began on the Arizona Center downtown. Through a public-private partnership among the city, the Arizona Public Service Company and the Rouse Company, Arizona Center was to become the first major new structure downtown in decades.
"Immediately after that, I came along with the purchase of the Suns and indicated that we needed to have a new arena. My druthers were, I wanted to be downtown. I felt that we belonged in an urban setting. That's where I thought the future was for arenas and stadiums."
The location on which Colangelo focused was downtown's deteriorating warehouse district, also known as "The Duce," a nickname derived from the produce distributors that lined both sides of the railroad tracks south of Jefferson Street.
The Duce was a rough-and-tumble zone, but it also was an area where a number of artists were utilizing cheap warehouse space to do their work and make their homes. At the time, the city of Phoenix was considering making the area an arts-and-entertainment/historic-preservation district. The desire was to gradually convert the warehouses into a series of nightclubs, restaurants, galleries, studios (where artists would live and work) and street-level stores. The hope was that the district's synergy would invigorate downtown.
Naturally, Colangelo's plans for the arena generated uproar from artists living in the area -- some of whom had invested substantial personal funds in warehouse-redevelopment projects. The brouhaha was not enough, however, to stop America West Arena. The city provided some relocation funds and moved the artists out.
Colangelo got the arena, but the seeds of distrust were sown.
America West was built with $45 million in city funds and about $50 million provided by Colangelo and his partners. It opened to great fanfare in 1992, although many had their doubts that suburbanites would regularly venture into downtown to see the Phoenix Suns and other events.
"One of the big highlights for me was the first event that we held at the arena," Colangelo recalls. "I was upstairs looking down on the streets of Phoenix watching people walk to the arena. This was emotionally a big moment . . . because so many skeptics had said that it would never happen, that the arena would never be successful."
Soon after, Colangelo turned his focus toward bringing professional baseball to Phoenix. The Maricopa County-owned site for what became Bank One Ballpark is just a few blocks east of America West. The $365-million ballpark was financed by a dedicated $243 million sales tax, with the balance covered by Colangelo's investors. It opened in March 1998.
A year later, Colangelo and his partners struck a deal with the city to build the 5,000-seat Dodge Theater in the western part of downtown.
The city of Phoenix provided two acres for the project at no cost. And well aware that Colangelo and his partners had a proposal in the works, the city allowed only three weeks for developers to submit complicated plans for the site. When the deadline came, the city had only received one response: Colangelo's.
His group invested $35 million to build the Dodge. Like the arena and the ballpark, the theater would be publicly owned -- allowing Colangelo's investors to avoid paying property taxes. The city wound up leasing the theater to Colangelo with the bonus that he owes no rent for 10 years, and allowed Colangelo to rent 1,200 spaces in the city's Adams Street parking garage for the bargain-basement rate of $250,000 for the first five years; Colangelo projects the garage will generate more than $2.5 million in parking revenue during that period.
There's more. The city agreed to pay $600,000 to prepare the theater site for construction and -- in an usual provision that caused other venues to cry foul -- agreed it would provide no financial assistance to other facilities that might possibly compete with the Dodge.
Despite the huge injection of public funds into his enterprises, Colangelo isn't exactly a freeloader. He and his personal business partners -- including the APS and the Arizona Republic (whose executives are also directors of the Downtown Phoenix Partnership) -- have invested $107 million in the 50,000-seat BOB and close to $80 million in the 20,000-seat America West, including recent improvements.
There's no doubt that Jerry Colangelo's three venues have been powerful magnets for attracting people downtown. About five million visitors a year attend events at the three facilities.
But the mobs of concert fans and seasonal sports fans have not stimulated widespread economic development in the surrounding area.
To the contrary, a concentration of parking structures (built by the city and county to accommodate Colangelo's patrons) create a barrier between the BOB, America West and the Dodge and small downtown bars and restaurants.
Indeed, Mayor Rimsza says of Bank One, "I think the ballpark does a great job of keeping business inside the doors. You go to the ballpark and eat there."
So instead of serving as a boon to smaller venues that make downtown diverse, Colangelo's trioka, along with the parking garages, have been a death knell to many. It's true that for almost every small business that has moved out, another has moved in, but consider this:
There has been nearly no increase in the number of businesses operating in downtown since 1991. City records show there were 231 businesses there in 1991 before the opening of the arena, ballpark and theater. By the end of 2002, that number had increased by just seven, to 238. That isn't to say that a number of small businesses didn't open in anticipation of capturing a share of the bucks from downtown sports fans. There were 279 businesses operating in downtown in 1995.
The fact that 41 fewer businesses were operating downtown seven years later suggests that the increase in money spent downtown must be being captured by Colangelo's operations. And there has been a huge increase in money spent downtown.
In 1991, total downtown sales for restaurants, bars, hotels and retail was $90.5 million. In 2002, with the addition of the arena, ballpark and theater, total downtown sales nearly doubled to $179 million.
Part of this increase is due to inflation, but Colangelo's venues generate five million visitors a year. And even if each person attending an event at one of his three facilities spends only $10 inside for food, drinks or souvenirs, that accounts for $50 million in sales.
While the magnitude of these numbers make it appear that downtown is a major player in Phoenix's overall economy, it isn't. Which makes it all the more apparent that something else needs to be done.
The huge public subsidies used to build the arena, ballpark, theater, parking garages and other projects -- including the Phoenix Civic Plaza (which loses $30 million a year) -- are generating an extremely small percentage of the city's overall economy. Downtown's taxable sales last year accounted for only 1.3 percent of the city's $13 billion in total taxable sales for bars, restaurants, motels, hotels and retail activities.
Meanwhile, income to the city from these downtown activities is a pittance. Total downtown tax collections hit $4.2 million last year and accounted for only 1.7 percent of citywide sales tax collections of $247 million for these categories.
So for the inordinately large public investment in downtown, there has been a very small return.
Here are some more daunting statistics. Last year, downtown taxable sales for restaurants, bars, hotels and retail establishments declined 5.8 percent compared to the city's overall decline of .7 percent. In 2001, such taxable sales downtown declined 5.5 percent compared to 2000, while the city as a whole expanded 1.5 percent.
Pat Grady, the city's director of Community and Economic Development, says downtown's downward trend is attributable in part to the sluggish national economy that has curtailed tourism and convention business. But, he says, the city is closely examining another, more worrisome factor: competition from other Valley areas.
And the situation will only get worse. Cities across the Valley have built or are building entertainment centers that compete with downtown Phoenix as a destination. Glendale is building the Cardinals football stadium and the Phoenix Coyotes hockey arena, both of which will compete directly with the BOB and America West Arena for non-sporting events. Mesa and Tempe are building performing arts centers that will challenge the Dodge Theater and downtown venues such as the Herberger Theater and Symphony Hall.
You don't have to be an urban-planning genius to see that the competition for patrons -- plus the fact that the large-scale projects in downtown Phoenix have done little to create a bustling central city -- validates arguments for downtown diversity that a cadre of artists have been making for decades.
The artists, many of whom invested in downtown before Colangelo built even America West, have long said that historic preservation is a must. They have also insisted that there must be strong civic support for artists, musicians, small-business owners, independent restaurants, avante garde galleries and moderate-income housing. Without such an environment, they maintain, downtown will always be dead after dark. It will neither be a destination point nor a place where creative people want to live, work and play.
"What really creates the interesting, diverse fabric of a neighborhood are the smaller arts [endeavors]," Beatrice Moore says. "That's what you need to nurture."
Ironically, Colangelo and the Downtown Phoenix Partnership are now advocating small-scale development projects in addition to huge ones like a planned city-owned $300 million, 1,000-room hotel probably destined to be across the street from America West Arena.
Colangelo's already preparing for the hotel's likely opening on the corner of Third Street and Jefferson by investing about $30 million in the arena to add a nightclub and an upscale restaurant.
"Eventually, there is going to be about 75,000 square feet of entertainment and restaurants on the corner," he says. "That corner has about 10 million people a year that cross that intersection, which is an amazing number."
Even though he's preparing for his big venues to capture a large share of the revenue generated by the future hotel, he's making noises that he's ready to share some of the wealth. It's now time, the entrepreneur says, for a dense web of businesses to come in and make downtown great.
"The bottom line is . . . you need infrastructure first," Colangelo says. "Then you fill in.''
In sharp contrast to the sterile, destination market he has created downtown, Colangelo says he would like to see 10,000-more homes built there to serve all income levels. Along with that, he thinks a major retail center featuring an "icon" department store would be great. He now says downtown should have streetscapes made for people rather than cars.
The beneficiary of tens of millions of dollars worth of ugly aboveground city- and county-built parking garages, Colangelo now says he wants to create a vibrant street scene fueled by light rail.
"The future is to narrow the streets, slow everyone down," he says. "Let's have boutiques and art stores and coffee shops and restaurants."
His sudden interest in something similar to what the arts community has been trying to make happen for decades has urban visionaries like Helen Hestenes and David Therrien shaking their heads. Their proposal to create a cultural renaissance in the city's warehouse district on West Jackson Street was crushed when the Downtown Phoenix Partnership backed Maricopa County's plans to level several artist warehouses adjacent to the Icehouse art-and-entertainment venue to make way for the high-rise jail, the new county administration complex and one of those massive parking garages.
"The DPP is funded by the city, yet it supported the county's decision to destroy warehouses that were supposed to be protected by the city's historic warehouse preservation district," Hestenes says.
The DPP's Kearney responds that the Partnership didn't want to see the jail moved out of downtown because it meant many more jobs than the artists' warehouses.
So now, with Colangelo's backing, the Partnership is scrambling to find ways to fill a void that was created after it backed the destruction of what might have been a major arts-and entertainment district.
"Our challenge clearly is that we need to continue to focus on activities that create 24/7 type of demand [downtown]," says Kearney. "That's the challenge. We recognize it."
Adds Colangelo, "In other words, you have to create a whole different atmosphere."
It all sounds good, the artists community says, but can Colangelo and the DPP be trusted with such a task? Will they not find a way to take all the money from this diversification for themselves and cut out the little guy? Will they not be inclined to create a Disneyland-style Main Street U.S.A. downtown that is devoid of soul and sophistication?
In other words, do they really get it -- or really even want to get it?
Beatrice Moore knows what kind of atmosphere she would like downtown.
"You need an interesting mix of all different kinds of people together," she says. "That's what makes for a truly exciting and vibrant neighborhood."
Moore is the rare artist with the mind of a financier. While she has the hippie skepticism of government and big corporations that served as the backbeat of the '60s, she also understands the economic forces driving real estate development.
All reasons that she is outraged by what she considers blatant self-dealing at the expense of taxpayers by Colangelo and the Downtown Phoenix Partnership.
Moore is not afraid to speak out. Anti-war banners hang from outside her 15th Avenue studio tucked behind the Bikini Lounge, located in one of the buildings she owns.
A seasoned warrior from years of development battles, she has not let the struggle diminish her creative fires. An explosion of colorful paintings fill the interior of her studio where she continues to hone her painting skills.
"Moore is one of the truly interesting characters in downtown," says downtown artist Therrien, who like Moore, has long irritated city officials with outspoken views on downtown development.
Nor surprisingly, Moore has polar-opposite opinions on development, neighborhoods and the role of artists than Colangelo and the Partnership. She believes in E.F. Schumacher's "Small is Beautiful" motto.
For Moore, a rich life is not one that revolves around accumulating money. Rather than cashing in on her extensive real estate holdings that she and her partner, Tony Zahn, have acquired over the last decade along Grand Avenue, the couple wants to eventually place the properties in a trust so they can be used as low-cost, studios for young artists for decades to come.
Moore and Zahn arrived in downtown Phoenix in 1986, setting up housekeeping in a bungalow near 15th Avenue and Fillmore. The couple rented an art space in the Madison Studios in the warehouse district near Second Street and Madison.
By early 1989, they began hearing rumors about Colangelo's plans to build an arena in the warehouse district. In March 1989, they helped organize the first Art Detour, which has since become an annual event that spurred the creation of Artlink, the downtown arts group.
They used the first Art Detour to alert politicians, including then-Mayor Terry Goddard (now Arizona's Attorney General) that there was an active artist community in the warehouse district that should be protected from the wrecking ball.
Despite loud protests that generated extensive press coverage, Moore and Zahn were among the artists moved out of the area to make way for the arena. The couple set up another studio on West Jackson Street, across from the Icehouse. That warehouse was later torn down by the county as part of its jail-expansion project.
Upset by the relocation, Moore says they began to look for affordable warehouses to purchase. They soon identified some properties along Grand and bought their first warehouse in 1992. Rumors of a coming baseball stadium began circulating a couple of years later and accelerated their efforts to acquire warehouse property.
The couple now owns buildings sprinkled along Grand and have converted most of them into low-rent studios. Sticking to a philosophy of "start small and build on it," Moore wants the studios to remain integrated into a diverse community of mostly homes and small businesses.
Grand Avenue is attractive, she says, because it's a neighborhood of "real businesses," including industrial enterprises that have been around for many years.
"As soon as it becomes all art spaces, cafes and cute little boutiques, the rents get very high and property taxes go way up," she says. In other words, she doesn't want to see the upward cycle spin out of control so that it becomes impossible for artists and long-time residents to afford to live in the neighborhood.
Moore says the city and the DPP have lost many opportunities to encourage relatively low-cost rehabilitation of older buildings downtown, many of which have since been destroyed.
"They basically eradicated areas that could have been interesting for mixed-use, that could have been small-scale infill that makes people want to wander around downtown.
"You have to have something that attracts people so they want to walk. If it's all concrete and huge buildings, there is nothing to draw somebody down to take a look. Unfortunately, they placed one concrete mega-block after another."
Jerry Colangelo, the DPP and their lapdog, the city, fail to realize the potential that exists in older neighborhoods, she argues.
"I'm really tired of the kind of development they do where they look at existing uses in neighborhoods as obstacles to be overcome instead of benefits to be integrated into the development they are getting ready to do."
The city, she says, could help spur redevelopment in older areas by simply improving sidewalks, putting up streetlights and planting trees.
Moore isn't just a cranky artist who likes to complain. She knows first hand how the DPP operates, having served on its board for two years in the early 1990s. It wasn't a pleasant experience.
"I was taken as a token arts representative," she says. "I didn't feel comfortable on that board because I felt I wasn't taken seriously."
Although many in the arts community want the city to get involved in a positive way -- that is start sharing taxpayer money that has traditionally gone to Colangelo and the DPP -- Moore says it would be best if city government stayed out of her neighborhood.
"Leave us alone!" she says. "We don't want the city over here. We are just better off letting what's happening here happen on its own."
About the Partnership, she says, "I wouldn't really want to go to a meeting even if they invited me to one. I don't trust them."
The city's decision to join the Partnership in its effort to put Cardinals Stadium downtown was the final straw for her. The location picked was once again an area where artists were beginning to create a vibrant scene.
"It's shocking to me that they can claim that they didn't know there were artists in that neighborhood," she says about the Partnership and the city. "Either they are very out of touch with what is going on in their downtown, or else they figured they could just railroad [artists] out because nobody would make a stink about it."
And why shouldn't they. That's exactly what's been done in the past.
Moore fears that city and Partnership backed efforts like the biotechnology project won't be good for artists and middle-income families.
"It's going to be another upscale playground for yuppies," she says.
Already, the city is working with a private developer to build 105 lofts just north of the biotechnology project at Seventh and Roosevelt streets that will have an average sale price of $175,000 -- which, Moore says, few people now living in the neighborhood can afford.
"You can see the kind of direction they are going in," she says.
Moore is skeptical about sudden pronouncements by the city, the Partnership and Colangelo that diversification is needed downtown. A task force sponsored by several Phoenix philanthropic organizations and headed by prominent developer Drew Brown is coming up with a plan to integrate the arts community into downtown, but Moore says Brown's group has yet to contact grassroots artists living in the area.
"They haven't taken the arts seriously, and I really don't think they will now," she says.
Embracing a revisionist history that doesn't bring up the early arts pogroms to make way for the arena, jail and county administration building, Kearney and Colangelo respond that the DPP has always strongly supported the arts community.
"I think we have a very good relationship with the arts community that has continued to improve over the last several years," Kearney says.
Colangelo cites purchases by his developments at Bank One Ballpark and America West of more than $1.3 million in art, not necessarily from artists here, as evidence of his support of the local arts community.
"I've been with the Partnership from day one," Colangelo says. "I don't believe the Partnership has ever engaged itself in ever doing intentionally any harm to the arts community. Period."
He declared, "I encourage the arts community to take the bull by the horns and come together and really represent themselves [so that] they are not the forgotten lot here."
Unifying the arts community and developing a strong leadership voice is easier said than done.
Greg Esser, co-owner of the Eye Lounge on East Roosevelt, says most artists are swamped with work and trying to eek out a living. They don't have a $2-million-a-year organization like the Downtown Phoenix Partnership to promote their interests.
"If we had the financial resources that the DPP has," Esser sneers, "we would have smashed the bull into the ground."
Nothing has done more damage to the Downtown Phoenix Partnership's image than its vigorous effort in early 2002 to build Cardinals Stadium downtown.
At the time, the city was also feverishly working to attract a biotechnology consortium to locate its headquarters in the same area where the Partnership wanted to build the stadium.
City officials knew the stadium project was a financial loser, while the biotechnology center held promise to be an economic grand slam.
"From my perspective, bar none, [the biotechnology project] is the most important economic development project the city has ever engaged in," Vice Mayor Stanton told New Times in February 2002.
Yet the Partnership, along with another powerful business group chaired by Colangelo, the Phoenix Community Alliance, was pushing the plan -- which was strongly supported by the Arizona Republic -- to build the stadium between Fourth and Seventh streets and Fillmore and Roosevelt.
"We were certainly an advocate for the stadium," Kearney admits.
Not only would the stadium have negative impact on the biotechnology center that was planned immediately to the south, the area it was to be built in was where artists had once again begun creating a series of small galleries and living-working spaces.
The threat of still another sports facility disrupting another emerging arts district -- and one that was attracting thousands of mostly young people to downtown for the monthly art walks -- ignited the often-disjointed arts community to take action.
Despite vehement public opposition to the stadium plan, the Partnership successfully lobbied City Council members to approve a rezoning plan that cleared the way for the project. Mayor Rimsza cast the deciding 4-3 vote in favor of the zoning change.
The stadium project was later derailed after the Cardinals, the city and the Partnership couldn't reach an agreement on how big the facility would be and how much parking it needed.
The Cardinals decided to trundle off to Glendale, but smoke from the stadium battle still lingers. Opponents were angered that the Partnership played a crucial role in trying to put the Cardinals on top of the arts district even though the location was outside the DPP's geographic boundaries.
Kearney explains, "We felt that it was going to be a significant benefit to the Copper Square area."
The Partnership not only lobbied City Council members, it got directly involved in acquiring land from private property owners through a non-profit subsidiary it created called the Downtown Phoenix Community Development Corporation.
The Partnership's CDC hired a real estate broker who tried to strong-arm property owners by telling them the city would condemn their land if they didn't agree to sell. This would mean they wouldn't get moving expenses. What the CDC was offering -- $27 a square foot for much of the property -- was ridiculously low.
"The land was worth a lot more than that," says Thaddeus Matson who owns a 14-room Victorian home on Seventh Street just south of Garfield. Matson refused to sell his land, but most of the property owners in the area agreed to the deal.
The CDC continued to seek purchase options for the property even after the Cardinals Stadium deal collapsed. Last summer, the city exercised the purchase options collected by the CDC, agreeing to pay up to $14 million to owners.
The CDC's real estate broker was Mike Lieb, who at the time was chairman of the Phoenix Board of Adjustment, a powerful panel appointed by the city to resolve development and zoning disputes. Lieb was also a member of the CDC's board of directors.
Lieb stood to pocket as much as $700,000 on the land play based on his five percent commission working as a salesman for Cherokee Development. Lieb declined to discuss his involvement in the land purchases, saying only that his commissions were "far less" than $700,000. He said further questions about his role should be directed to the DPP's Kearney.
The Partnership's executive director refused to disclose how much Lieb earned on commissions. Kearney says Lieb did not vote as a CDC board member on stadium issues and subsequently resigned from the CDC board.
(The city is now considering how to develop the property in conjunction with the biotechnology project now under construction at Seventh Street and Van Buren. There is speculation that the property could become part of ASU's downtown campus.)
The DPP's stadium proposal also presented a direct conflict of interest for one of its board members, the Arizona Public Service Company.
An APS affiliate, Northwind Phoenix, owns and operates a water-chilling plant used to cool downtown buildings, including Bank One Ballpark and the county's new jail. Northwind stood to land a lucrative contract to cool the stadium worth more than $60 million over 30 years if the Cardinals Stadium went downtown.
The heavy-handed real estate play had made residents and the arts community angry, but learning that a Partnership board member stood to gain royally if the stadium located downtown made them apoplectic.
The experience further exacerbated the widespread belief that -- despite what Colangelo and Kearney now say -- the Partnership is only interested in developing mega-projects that benefit big shots. That unless the city wises up and stops letting the DPP run the show downtown, stops giving most all the money to a select few, stops letting Jerry Colangelo call the shots, it will be a long time before a diverse downtown flourishes.
Comments Kimber Manning of Modified Arts, "When we were trying to save ourselves from the wrecking ball, there wasn't a person down [at the Partnership] who cared about us,"
The Downtown Phoenix Partnership's board of directors is a virtual Who's Who of Valley powerbrokers.
The appointed board includes executives from major financial institutions, including Bank One, Bank of America and Wells Fargo; developers representing Opus West Corporation and the Ryan Companies; a utility kingpin from APS; a media mogul in the form of Arizona Republic publisher Sue Clark-Johnnson; and the director of the biotechnology center now under construction.
The board is chaired by Phoenix lawyer R. Neil Irwin, but there is no doubt that founder and current vice president Jerry Colangelo's the group's thousand-pound gorilla.
Meeting dates and locations are not widely publicized and, in the past, the Partnership refused to provide information on upcoming meetings to New Times, claiming that the organization is exempt from the Arizona Open Meetings law.
Kearney has since softened the Partnership's stance, and now says the public is welcome to watch the board in action. The next meeting is scheduled for 11:45 a.m., October 28, in the Yuma Room at the Phoenix Civic Plaza.
The Partnership has also taken a strident stance against releasing its financial records. As with the open meetings law, it maintains it isn't subject to the state's public records law either.
This despite the fact that its annual budget and duties are approved by the Phoenix City Council -- which definitely is subject to both statutes -- and that the aforementioned publisher of Arizona's largest newspaper (who presumably has some interest in the public's constitutional right to know) sits on its board.
The Partnership's quest for secrecy even led it to refuse to produce copies of its federal tax returns when New Times first sought the documents in February 2002. "Our attorney has indicated that we do not need to provide the [tax returns] you are requesting," Kearney said at the time.
The Partnership's lawyer was wrong. The IRS requires nonprofit organizations to make their tax returns available to any member of the public. Soon after New Times informed the IRS that the Partnership was refusing to produce its tax returns, the DPP relented and made the documents available.
Such stonewalling only reinforces the widespread perception that the Partnership is an elitist enterprise that prefers to keep details of its cozy and lucrative relationship with elected officials secret.
Incorporated as a nonprofit organization 13 years ago, the Partnership was officially created to contract with the city to provide additional services to the downtown business community, including security guards, marketing, streetscape improvements, shuttle bus operations and parking services.
To fund the Partnership's contract, the city created the "downtown enhanced municipal services district" in 1990, which allowed a special property tax assessment to be imposed on private-property owners between Seventh Street and Third Avenue, the railroad tracks to Fillmore.
The assessments are collected by Maricopa County and forwarded to the city. Each year, the City Council approves an operating budget for the Partnership that has risen from $900,000 in 1991 to a proposed $2.1 million in 2004.
About half of the Partnership's funding is voluntarily provided by the various governments operating within its district. The city provides 35 percent, followed by Maricopa County at five percent and ASU and federal facilities at 2 percent each.
Bank One Ballpark contributes 10 percent of the partnership's budget through an assessment paid by the Diamondbacks. Assessments on private downtown businesses and surface parking lots within the district make up the remaining 46 percent of the partnership's budget.
The bulk of its money is spent on providing additional security and marketing for downtown events. The Partnership plans to spend $726,000 next year on such personnel -- called Downtown Ambassadors -- who patrol the area on bicycles wearing badges that say, "Ask Me".
The next biggest line item is $573,000 set aside for marketing, business development and arts-and-cultural activities.
Of this amount, a measly $3,000 is earmarked to directly support arts activities.
The bulk of the Partnership's marketing activities is devoted to promoting upcoming events in Copper Square, most of which are hosted in one of Colangelo's three big venues. "Bank One Ballpark is one of the big beneficiaries" of the partnership's promotional campaign, admits Rimsza.
Administrative expenses, including executive director Brian Kearney's $130,000-a-year salary, total another $500,000. Another $150,000 will be spent on the DASH shuttle buses and $150,000 on street-improvement projects.
Providing these downtown services is the Partnership's official role, but what the organization is really about is influencing elected officials to spend money on projects that benefit downtown businesses. Especially those of its board members.
It engages in lobbying, even though its incorporating papers state "that no substantial part of the activities of the organization shall be . . . attempting to influence legislation."
The DPP doesn't lobby by wining and dining public officials, however. Extensive accounting records would have to be maintained in that event. Pressure is applied more subtly through board members' personal contacts with elected officials.
The DPP's cozy relationship with city bureaucrats makes it difficult to determine where City Hall stops and the Partnership begins. Kearney was formerly a city bureaucrat who worked directly with former Partnership Director Margaret Mullen. He joined the Partnership after Mullen resigned several years ago.
With Kearney at the helm, there has been the appearance that the Partnership sometimes directs city operations.
According to a 1999 city audit of the Partnership's financial operations -- the last time the city audited the DPP -- city staff provided more than $127,000 in services to the organization. The audit concluded that state law requires that all such administrative costs be repaid to the city from the assessments. The city attorney rejected that assessment, and the money was never repaid.
Even regarding routine city operations, Kearney has a powerful voice.
A September 9 e-mail from the Downtown Phoenix Partnership director to Phoenix Community and Economic Development chief Grady suggests the nature of their relationship. In the communication, Kearney urges Grady to send city employees to the International Downtown Association annual conference in Cleveland -- even though Kearney acknowledges the city was facing budget restraints.
"I'd like to keep the city involved in IDA" Kearney wrote.
Grady dutifully complied, agreeing to send the workers to the four-day conference. That e-mail was just one of at least a score exchanged between the two during a recent 30-day period.
While Kearney keeps close tabs on the day-to-day operations of the city, Colangelo, and other members of the board of directors, have used the Partnership to pressure city and county leaders to enact policies that shape central Phoenix.
"I see the downtown partnership as having the ability to deal with the city, understanding the process, being a facilitator, and looking out for the interests of all of the members of the partnership," Colangelo says.
In other words, the Partnership is supposed to be lobbying the city to promote the interests of all downtown businesses -- even those that moved in to take advantage of the arena and the BOB but folded when the DPP influenced the city and county to build the massive above-ground parking garages that act as a barrier between them and the sports crowds.
Along with Kearney, several Partnership board members, including Colangelo and Irwin, are registered lobbyists with the state.
While it may not be surprising that the partnership's board flexes its considerable muscle to influence city, county, state and federal legislation, it does so at the risk of violating Internal Revenue Service regulations.
The Partnership was granted tax-exempt status by the IRS and must comply with regulations that greatly restrict its lobbying activities. Critics say the Partnership is violating IRS regulations by engaging in its extensive lobbying campaigns.
"They can't lobby, they can't be political and they can't be propagandistic," says Phoenix artist Rick Handel, who once assisted the IRS in getting a religious organization stripped of its nonprofit status.
Revocation of the nonprofit status could make the Partnership too expensive for even Colangelo and the other high rollers to keep going, since it might have to pay massive back taxes.
The IRS declined to comment on the Partnership's lobbying activities -- but the feds might be interested in the DPP's 2000 and 2001 federal tax returns in which it claimed it has not "attempted to influence national, state or local legislation."
In addition to the largely anecdotal evidence cited above, Partnership and city records show a pattern of lobbying activities where board members routinely contacted elected leaders about pending legislation.
Last spring, for example, board members played a crucial role in pressing the Arizona Legislature to approve a $300-million appropriation to the city that will allow renovation of the Phoenix Civic Plaza. "A number of DPP ...board members personally spent time at the Legislature working on this, including [Chairman] Neil Irwin, [Bank One President] Kris Garrett [and] Jerry Colangelo," states a June 20 e-mail sent by Kearney.
In March 2001, Kearney urged the board to contact Congressional leaders to approve funding for the light-rail project. Kearney provided contact addresses and a form letter for members to sign.
"I hope you will be able to encourage our delegation members, particularly our House representatives at this time, to request that . . . funds be earmarked for the Phoenix project," Kearney stated in a letter summoning the board to initiate lobbying.
Kearney even acknowledges that part of his role is to lobby elected officials on behalf of the Partnership. However, he claims such activities constitute a small portion of the Partnership's function and fall within IRS guidelines.
Elected officials tend to downplay the significance of their contacts with Partnership board members.
"My sense is they are primarily a marketing organization for downtown, Copper Square, but I don't know how they allocate their resources," Rimsza says.
But Rimsza's claim rings hallow. As mayor, he has approved the Partnership's budget each of the last nine years. He also attends Partnership board meetings, where budget matters are routinely discussed.
Despite his supposed lack of attention to the DPP's financial details, Rimsza acknowledges that the organization "is very active" in downtown affairs.
Vice-mayor Stanton, a former non-voting member of the DPP, says Partnership board members naturally command attention from elected officials but that he's never felt "pressured" by board members to cast his City Council vote a particular way.
"I think the folks involved in the DPP are influential," he says, "but they are influential because they are business leaders who take a lead in community issues, not because of the fact they have the DPP next to their names."
Jerry Colangelo's entertainment empire has received the lion's share of the comparatively small amount of economic incentives offered by Phoenix City Hall to fuel business and residential development downtown.
These have come in the form of the city's $45 million direct investment in America West Arena, $2 million in land given for the Dodge Theater and $700,000 provided annually to the Downtown Phoenix Partnership.
(Colangelo also benefited immensely from an unpopular sales tax that Maricopa County Supervisors approved in 1994 that raised $243 million to pay for the BOB. Two of the three supervisors who voted for the tax were routed at the ballot box later while the third, Mary Rose Wilcox, was shot and wounded in 1997 by a man who was angered over the appropriation.)
Compared to many other major cities -- such as Houston and Denver that have successfully revitalized their downtowns -- Phoenix's investment in downtown redevelopment is a pittance.
"Phoenix has been a piker with incentives," Phoenix City Manager Fairbanks admits.
Though this is hardly what anybody has in mind when it comes to energizing downtown Phoenix, Fairbanks notes that Scottsdale plans to give away $163 million to a private developer to build a Wal-Mart at the old Los Arcos Mall site on Scottsdale Road.
"That one project is more money in incentives than everything the city of Phoenix has provided in downtown since the early 1980s," Fairbanks says. "We are small potatoes compared to what other cities provide."
Since critics of the way downtown issues have been handled consider him part of the problem, Fairbanks may not be the best authority on incentives, but he insists that all downtown needs to do to attract more people is provide a wide array of cultural venues in a safe and attractive environment.
"I think the value of incentives gets overplayed. If people don't want to come back to the center of the city, you can't pay them enough money to drag them there," says Fairbanks.
Besides the city's direct investments in Colangelo's projects, it has given incentive money to a few other big downtown players.
It has provided $6.5 million toward non-construction costs for the Phelps Dodge Tower and agreed to abate $1.3 million a year in property taxes for the 20-story office building for eight years. Phoenix is also abating the same amount in property taxes for another downtown high-rise, the Collier Center, for eight years.
The city passed along a $10-million federal grant to assist construction of the Renaissance Square project and threw in a $13-million tax-exempt bond to trigger development of the Arizona Center project.
As for downtown housing, the city provided $2.3 million to help purchase land for the 105-unit Artisan Village project to begin construction later this year at Seventh Street and Roosevelt. It also kicked in about $2 million for the 90-unit Orpheum Lofts development, plus a few million more bucks to a handful of other residential projects in the downtown area. The incentives will help construct about 300 downtown residential units.
Beyond this, the city is providing no significant funding for small businesses, grassroots art groups or low-intensity residential development.
One notable exception to the city's tightwad approach approach to anything outside Colangelo's empire is its $21.5-million investment in a building that will serve as the headquarters for the biotechnology center currently under construction.
Given the positive response to that project, the city might consider expanding its incentive programs. The biotechnology project has already triggered an additional $27-million construction project by ASU and the University of Arizona to build a biosciences research facility adjacent to the biotechnology center.
That's just the first of what's expected to be a substantial investment in downtown by ASU. The university is studying the possibility of opening a night law school, a nursing program and design school downtown in the next few years. It is anticipated that the expansion will bring in more than 12,000 graduate students to the area, many of whom will live downtown. Northern Arizona University is also projecting it will expand its science programs that will bring another 3,000 students to downtown.
Many communities across the country have developed economic incentives to foster art and cultural districts, notes the city's draft development plan for the area along East Roosevelt, where art galleries and cafes are springing up even without any economic help from the city.
Among the incentives in other places have been low-interest loans, tax incentives and tax credits for the purchase and renovation of existing buildings and for development of pedestrian-friendly streets.
Mayor-elect Phil Gordon says he wants to modify the city's building code to take into account the unique challenges in restoring historic properties. The current code often makes it prohibitively expensive for small businesses to rehabilitate older sites. "Small businesses often say it's not worth the money and the headaches," he says.
Fairbanks' point of view notwithstanding, economic incentives have proved extremely valuable in triggering a return to urban living in western cities like Denver and Houston.
Denver's remarkable downtown renaissance came about largely because of historic preservation, a major investment in the arts and construction of a regional light-rail system. Rather than bulldozing its entire warehouse area, Denver embraced artists who had flocked into what became the Lower Downtown Denver Historic District in the 1980s.
The city also put money into downtown amenities and beautification projects. The Denver Urban Renewal Program invested $40 million for an amusement park, the cleaning up of the Platte River, the development of 40 miles of cycling parkways and the construction of the Denver Pavilions retail-and-entertainment complex.
In Houston, economic incentives triggered revitalization of a downtown that was deserted a decade ago.
Tax abatements to all kinds of businesses helped attract nightclubs, restaurants, hotels and the Major League baseball stadium.
The pedestrian-friendly scene now is a far cry from the downtown Houston of 10 years ago, when streets were mostly deserted at night and a high crime rate kept businesses and patrons at a minimum.
Almost $3 billion in construction projects have been completed in downtown Houston since 1995, and another $347 million are in the pre-construction phase.
Downtown Houston residential construction also is booming, as old industrial and office buildings are getting converted to lofts and condominiums. About 6,000 residential units -- compared to the 300 in the pipeline in Phoenix -- have been added to the downtown cityscape in recent years.
Some of the primary inducements that bring companies to downtown Houston and keep them there are tax incentives, said Pamela Lovett, president of the Greater Houston Partnership's economic development division.
Property tax abatements and franchise tax abatements have lured big companies to Houston's redeveloping downtown.
"These incentives give us a big advantage over cities that don't offer [them]," says Lovett.
"You have to offer them to be in the game. "
What happened to two vastly different local developers sums up how public funds are doled out for downtown projects here.
Jerry Colangelo's vision for a ballpark and arena in downtown came to fruition -- with the help of $300 million in taxpayer money. While the BOB and America West Arena are tremendous successes as far as baseball and basketball venues go, they have done little to generate a vibrant downtown.
Colangelo maneuvered government officials to allow his projects in the heart of a warehouse district, where he saw nothing but rot and a few artists. Looking back, he says, "There was no future for the neighborhood standing on its own."
But based on Denver's experience with warehouse redevelopment, the buildings Colangelo detested held great promise.
A few blocks west of Colangelo's venues is the Icehouse on Jackson Street. Reacting to a promise from the city to nurture what was left of the arts-and-entertainment district in the historic warehouse district, the Hestenes family invested hundreds of thousands of dollars toward rehabilitating the historic building and drawing up architectural plans for an arts district that incorporated half-a-dozen buildings and the old Sante Fe Railroad station.
But the city reneged on its promise to protect the remaining warehouses, caving in to the county and the Downtown Phoenix Partnership's desire to build the jail and adjoining parking garage. The city, meanwhile, placed onerous building-code restrictions on the 70-year-old Icehouse that will cost hundreds of thousands of dollars to address.
"We really haven't had anything in the way of significant support or encouragement from the city," says David Hestenes, an ASU mathematics and physics professor, who has financed the project that has been managed by his daughter, Helen, and David Therrien.
What the Icehouse could really use, Hestenes says, is a relatively small subsidy from the city to help defray the cost of bringing the building up to code.
"If we are going to use this historic place for the arts, there are tremendous code requirements that must be met," he says. "[The cost of] that has pretty much consumed us."
Without a dime of support from the city, the project has stalled.
If downtown Phoenix is to burgeon -- become a vibrant nighttime entertainment destination, as well as an interesting place to live -- the city needs to give small-time players like the Icehouse a chance of making it. City Hall must spread the wealth, stop giving nearly all of the taxpayers' money for core-city projects to big developers.
Colangelo now advocates making downtown more livable, but does his vision include people like the Icehouse owners and Beatrice Moore? It never has in the past. The artists' community fears that what Colangelo is talking about is turning downtown into a prefab theme park.
It's true that Jerry Colangelo and the Downtown Phoenix Partnership need to get it, but it's also true that leaders of the arts community like Moore must reengage with corporate executives and city leaders. The two sides have to hash out their differences, listen to each other, says Mayor-elect Gordon.
The new chief executive of Phoenix says he is committed to increasing the amount of city funds going to small businesses and the arts.
"It is crucial to the success of downtown and the city to make sure small businesses prosper," he says.
Gordon -- who was the only City Council member to vigorously oppose the county's destruction of the warehouse district -- says he will create a small-business-advocate's position in his office.
He disagrees with city manager Fairbanks' assessment that incentives are overrated. He says he is investigating ways for the city to make direct investments in small businesses. They must be able to improve their locations, he says, without incurring crippling additional debt.
Most importantly, Gordon vows to break the iron grip the DPP has had on core-city development. He says he and the City Council should be calling the shots.
"I want to make sure everyone has a seat at the table," the incoming mayor says. "I can do that. I believe in that."
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