Sorry, We're Closed

Downtown businesses are struggling to stay afloat

Phoenix is bound by nothing but desert, and the city has made no plans to stop suburban sprawl.

And today, it's Phoenix suburbia that has all the amenities lacking in downtown. Spread throughout the Valley are major theater complexes, popular clubs and concert venues and most of the city's finest restaurants.

"In Phoenix, you have nine downtowns," says Bruce Allen.

Behind Alex Patane are some of Artisan Parkview's 35 row houses. Patane lives in one of them.
Emily Piraino
Behind Alex Patane are some of Artisan Parkview's 35 row houses. Patane lives in one of them.
Jason Rosendahl, manager of Sky Lounge, no longer lives downtown because "there's nothing for day-to-day needs."
Emily Piraino
Jason Rosendahl, manager of Sky Lounge, no longer lives downtown because "there's nothing for day-to-day needs."

But Pat Grady, the director of Phoenix's community and economic development department, says assisting small businesses can prove difficult.

In the past, he says, the city has helped retail development through a sales tax reimbursement, which meant giving back to a business roughly 50 percent of the sales tax it paid to the city, for a period of three to five years.

But this money can only be used for public improvements, such as cleaning the streets, the alleys, the curbs, or planting trees. "But [these public improvements] often don't benefit the retailer," Grady says, "because the retailer is looking for cash in his pockets."

Public improvements also include the parking garages of Bank One Ballpark and America West Arena. So the millions in cash the city gave those big projects were earmarked for the parking structures that sit near the facilities, freeing up the developers' money for other uses.

Mayor-elect Phil Gordon suggests helping small business by simply increasing the sales tax reimbursement, something he pushed for as a councilman to no avail. While that wouldn't do much to help the businesses already in place, Gordon believes it would encourage new businesses to locate downtown, particularly to long-vacant buildings that need substantial public improvements.

Most states still have far more legal leeway when it comes to helping with redevelopment or providing assistance for small businesses, says Dave Roderique, economic vitality general manager for the City of Scottsdale.

Roderique says there is a "gift clause" in Arizona that prohibits governments from giving public funds for private benefits.

It's "very unfortunate," Roderique says. "[Arizona] continues to do everything to make retail development more difficult."

For instance, Roderique says, most other states allow tax-increment financing for small businesses. Tax-increment financing, or TIF, benefits a business through the way its sales tax or property tax is set and structured.

Let's say a business moves into a blighted area and generates $100 of sales tax for the year. Under TIF, the city sets $100 as the amount of sales tax that the business will generate in each future year, Roderique says. So the next year, if the business does better and generates $300 of sales tax, the business still pays the $100 worth of sales tax it did the year before, but the extra $200 goes to a TIF bond. And this bond is set up to give money back to the retailers that have developed in the area.

Arizona does not have a TIF policy in place, Roderique says.

"And then we wonder why there's sprawl," he adds.

Though rare, the City of Phoenix has helped some small businesses beyond improving streetscapes.

In 1996, the city-owned Rosson House-Heritage Square Foundation, along the 100 block of North Sixth Street, had trouble bringing visitors to its historic sites. After discussions with Chris Bianco, a local restaurateur, a deal was struck. According to public records, Bianco paid $5 a square foot to open Pizzeria Bianco, now a popular restaurant located within Heritage Square. It was a great deal for Bianco, well below the market rate paid by others in the area. Even now, Bianco pays $8.33 a square foot plus interest. Other restaurateurs downtown say market value per square foot ranges from $17 to $24.

Still, moving downtown "was a gamble on his part," says Beth Cole, Heritage Square's manager. "We didn't have enough business from the customers that came to the park."

Now, she notes, there are so many customers to Bianco's small eatery that people often wait more than an hour for a table.

Still, she adds, it's a "rare case" when the city helps a retailer as it did Bianco.

In Mike Hogarty's case -- another of the few instances in which the city offered financial help -- it took two and a half years to get through complicated paperwork and a tedious approval process for a shopping center in a building that had sat vacant for well over 20 years.

Hogarty is the general contractor for the Gold Spot, located on the northeast corner of Third Avenue and Roosevelt. According to public records, in 2001, the Gold Spot received $400,000 from the city's historic preservation department to redevelop a building built in 1925.

The Gold Spot has 12,300 square feet of commercial space available. Still, the building is only about 25 percent leased. This month, at the Gold Spot, Calabria Italian Grocery and Deli is set to open, as is Western Horizon Mortgage. But this still leaves available 9,000 square feet of commercial space, Hogarty says.

He is grateful for the city's help, but says its involvement has actually slowed down his ability to lease space, primarily because of the inspection process. "When we bring in the city, it's a slower process. Once it's [a] historic [redevelopment], we can't do anything to it without approval of city, state and federal. Their rules are not consistent. The federal rules may not apply to state rules."

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2 comments
patientlywaiting
patientlywaiting

I'm not sure I agree with the reason why Daniel Malventano of Daniel's states for not expanding in the downtown area. I think he couldn't afford to expand, PERIOD! I've been waiting months for payment of an invoice (which, by the way, is under $150.00). He must have fallen into dire financial straits, poor fellar.

patientlywaiting
patientlywaiting

I'm not sure I agree with the reason why Daniel Malventano of Daniel's states for not expanding in the downtown area. I think he couldn't afford to expand, PERIOD! I've been waiting months for payment of an invoice (which, by the way, is under $150.00). He must have fallen into dire financial straits, poor fellar.

 
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