CityNorth: We’re Giving Away $97 Million for This?

I went shopping last week.

I've been trying to spend less money — if this country's really about to enter its next Great Depression, I don't want to be the idiot who wasted her last paycheck on champagne and a new cocktail dress. But my resolve evaporated when I read about the new shopping center open for business in northeast Phoenix. What the heck, I thought. I've got to buy my year-old nephew a Christmas present anyway.

So I found a gift. (Spoiler alert for Nathan: You're getting a pair of corduroy overalls from Gymboree.) And, okay, I got something for my little dog, too. (What puppy doesn't long for a pair of strap-on antlers to amuse Mommy's friends?)

I managed to justify the expenditures with some positive thinking: Hey, I'm helping the economy! Hey, the city of Phoenix needs every penny of sales tax it can get!

The trouble is, the city of Phoenix didn't get all the usual pennies. Not for these purchases.

That's because I was shopping at CityNorth.

CityNorth is the gorgeous new retail/office/residential development just a little bit to the north and the east of Desert Ridge, at the 101 just east of the 51. Despite the fact that it's a 30-minute drive from anything remotely urban, it's intended to be a new sort of city center. Instead of an indoor mall, you get an avenue of walkable streets; people are meant to live upstairs and stroll around this little faux-SoHo to get their lattes rather than hitting a drive-through Starbucks.

But that's not where the problem comes. I suppose people are going to move out there eventually. Why not give them their own regional shopping and offices rather than expect them to schlep downtown? Especially when downtown, for the most part, blows?

The problem is that city officials were so desperate to make CityNorth happen, they actually committed $97 million in sales tax revenue to the developer just for building it. The developer gets one-half of every sales tax cent collected by CityNorth retailers. So when I spent $66 on kids' clothes and puppy paraphernalia, the city collected $5 in tax — but it kept only $2.50.

The other $2.50 goes to Thomas J. Klutznick & Company of Chicago.

The city justifies this as a way of creating revenue. We're not losing a penny, it insists. Even with the developer's cut, that $2.50 is still $2.50 more than we'd otherwise have.

But when it comes to my CityNorth experience, it simply isn't true.

If I hadn't gone to the Gymboree at CityNorth, I would have just gone to the one at Paradise Valley Mall. (Name aside, that's within Phoenix city limits.) And if I hadn't gone to the little doggy boutique at CityNorth for those others, I surely would have eventually bought my pup something similar at Three Dog Bakery at Biltmore Fashion Park, where I usually shop. The city would have been $2.50 richer.

The only loser would have been the developer.


The timing was a bit ironic, to say the least. But last week, just days after the CityNorth's grand opening, a three-judge panel heard arguments about whether or not Klutznick & Co. ought to get its $97 million.

The Goldwater Institute, the libertarian think tank based here, had filed a lawsuit soon after the Phoenix City Council approved the tax giveaway, arguing that it was a "gift" to the developer — and that the Arizona Constitution strictly forbids government entities from giving "gifts" to private parties. (See "Revolting Development," September 6, 2007.) After a Maricopa Superior Court judge ruled in favor of the city, Goldwater's litigators promptly took their fight to the appellate level.

In the appellate courtroom, the arguments for both sides were strong, if highly technical. But even as the appellate court attempts to address the legal issues at play here, something much easier to understand is going on in Phoenix.

Sales tax collections are plummeting, for both the city and the state. Last month, the city collected nearly 11 percent less than it did in the same period during 2007, according to its records. (State sales tax revenue was down an equally alarming 9 percent in the same period.)

And to say Phoenix is heavily dependent on sales tax is like suggesting that tweakers enjoy meth. Sales tax collected from city retailers makes up roughly 40 percent of the city's general fund — and sales taxes remitted from the state's shared pool make up another 13 percent.

That means more than 50 percent of the city's main budget comes from consumer purchases. It also means, these days, that the city is in trouble. Mayor Phil Gordon announced last week that Phoenix may have to trim nearly 1,000 jobs.

Could there be a worse time to be handing out zillions to a wealthy Chicago developer?

I've been stunned over the course of reporting on CityNorth just how flippant city officials are when confronted with the audacity of their giveaway. They act as though anyone questioning the purchase is in desperate need of Economics 101 and start lecturing about how this is revenue the city never had, so it's all gravy. As if we're too dumb to realize that, even in flush times, the retail market is finite — CityNorth shoppers are not people flying in from Las Vegas. They're former Paradise Valley Mall and Biltmore shoppers.

1
 
2
 
All
 
Next Page »
 
My Voice Nation Help
9 comments
Clif Freedman
Clif Freedman

Peggy Neely will NEVER be elected Mayor of Phoenix. As a trusted representative of District 2 she violated her fiduciary obligation to her electors. She has "sold out" to commercial interests like Westcor. She has a clear conflict of interest by having Paul Gilbert, a zoning attorney for Westcor on her campaign staff helping to raise money for her failed bid for Mayor. As head of Transportation for the City of Phoenix as a City Council member, Peggy Neely gerrymandered Sonoran Blvd, a road that was supposed to link the new 303-loop east to Route 51. Upon information and belief she was paid off by Westcor with the help of attorney Paul Gilbert to not only change the name of Sonoran Blvd but to actually build the road so that it aligns with Westcor's property in Northern Phoenix and NOT Route 303. This, of course, enhances the value of Westcor's 80 acre commercial parcel of property. Why is this important? Because now motorists who are traveling on the new extension of 303 won't be able to travel east of I-17 to get to Route 51. Peggy Neely for political purposes "broke" the loop and has caused motorists irreparable harm. Not only that but because of her blind ambition to become Mayor, the road Peggy Neely is building, the NEW Sonoran Blvd., will dead end in a Phoenix residential community causing massive traffic and confusion for NOT only the local residents but for the folks who will be traveling WEST from North Scottsdale, Cave Creek Road area, and Carefree who think they are going to I-17 or 303. They will dead end at the intersection of North Valley Parkway and the NEW Neely Sonoran Blvd. This is called the Road To Nowhere. However, there a simple solution, build the Road To Somewhere. The Road To Somewhere is where the road was originally supposed to be built. This road is ONE mile south of the Neely-Westcor Freeway and perfectly aligns with the new Route 303. In fact, there is funding for this road and not for the Neely-Westcor Road. I am President of the Sonoran Citizens Improvement Association. My name is Clif Freedman. See www.sornorancitizens.com

anon
anon

What Sarah does not realize is that the $97 million thing does not even kick in until CN builds more than 1 million square feet of retail, and that will not happen until the department stores are built. So, Sarah, your entire pathetic sales tax went to the city, not half. In addition, the deal is for half the taxes for 11 years 3 months or the $97 million, whichever comes first. so Eric's comment is right. I dont mind opposing this subsidy, but I do mind when it is opposed without the facts.

Eric
Eric

"Despite the fact that it's a 30-minute drive from anything remotely urban" I laughed pretty hard at that statement and knew the tone of the article from then on out. I found it interesting how there was no mention of the um... largest (in AZ) 950 room JW Marriott just a quarter mile North of City North. Tell me how the people renting segways are going to make it down to anywhere else but City North and The District? And yes we will still mention the tourists that will choose to walk across the street as well or also take the provided transportation courtesy of the hotel. Also lacking was the mention of the current population of 6,000 (My family of 4 included) people and projected 50,000 residents that will call the 5,700 acre development called Desert Ridge home, oh wait.. I am supposed to be making a one sided argument so my point was to mention only how the guests from the JW would be spending what they otherwise wouldn't be spending at too far away shops...) As someone who frequents Press coffee at least twice a week for meetings (and it's an Americano not a Latte for me FYI) and then taking my wife and 2 daughters to Mojo Frozen yogurt every Saturday, an event that wouldn't happen if it was not there. I would be curious to know how long the $97m is projected to take for fulfillment and then take the total sales tax revenue for Phoenix in that time frame 2,3 5 years... and compare it as a percentage lost. Maybe that's asking too much from the writer who seems to like to fill an article with arbitrary fluff (quote above... lattes... etc..) and not actually take the time to compose an insightful opinion. Let's instead hype and fluff a number like $97,000,000 for an eye catching headline.

Person
Person

Great article, I love the idea of all the efforts by writers and media that show the negative consistency we all need right now. HARD TIMES, POOR PLANNING, DOWN MARKET, BAD PLACE TO SHOP AND SPENDING NEEDLESS MONEY!!! When is someone going to actually write something positive, like CityNorth will be a great place in the future, and we SHOULD SUPPORT the "LOCALLY" owned business located in a this shopping center WHO DO pay taxes. But nevermind all that, let someone like this continue to ride the high road and use CityNorth as a copout for the lack of success or talent he or she has had. If I had that much talent in writing, I'd be sure to use it where it actually made a postive difference. But who am....just a tax payer hoping to retire at a decent age.

Mike Norton
Mike Norton

Richard, I don't know what "business" you are talking about... Is the city the business? Because that flies in the face of what government is supposed to be.

Your argument that the City will get the money back and then some is absurd because I've seen nothing to indicate an increased net gain. More likely (as was stated in the article) this revenue will come from a decrease in sales at other area shopping centers and an increase in overall population in the Northeast Valley.

The idea that subsidy helped the community here is idiotic. Moreover it hurts other valley businesses who are not competing on a level field because they didn't get a subsidy for their business.

If the city really just needed to get rid of $90M, then they should have just decreased taxes a fraction of a penny so that revenue decrased by that amount. Anyone who has taken Econ 101 will tell you that the net impact would be the same or better by offering the sales tax revenue to everyone instead of just one company.

Richard
Richard

Wow, I love to read journalists who have no concept of business. She must have appeared nude at her interview for New Times instead of investing in a business suit for the interview.

That's what the $97-million is for the city. Over 20 years, the city will get that back double.

Now, tell me what you got for that $700-billion the government is giving away in bailouts, plus the trillions for "incentive" checks, auto bailouts, etc.? Maybe the writer should be writing stories about what happens when the government prints money for these projects. It's called inflation, and it is worse than having cancer.

As they said about Germany after WWII, soon in the U.S. you'll need a wheel-barrow to buy a loaf of bread. Imagine a $35 loaf of bread, and you're still making $28,000 per year! The bailout money of $700-billion will put a gallon of gas near $10 in five years, same $28,000 in salary.

Yet the city makes a WISE investment, and everyone jumps all over it - everyone who is so sheet arse dumb they write columns in a rag read by.... (or work for the Goldwater Institute) and have no concept of business.

David Wilbur
David Wilbur

"Buy locally" = support Chicago? Genius!

David SB
David SB

I'm no fan of CityNorth, but this article overlooks one major argument the Gordon administration has made in defense of the deal: That having a parking garage instead of surface lots frees up more land for retail development, resulting in increased sales tax revenue. It's a weak argument, especially since the economic meltdown will make it hard to lease the space already developed, but it should have been acknowledged in any critique of the arrangement.

Jimmy T.
Jimmy T.

You summed it up with this, "At CityNorth, the parking lot is empty � and the stores aren't much better." And Gordon's head is empty as well. Do you actually think he could PASS a freshman economics course?

I believe that they also asserted that this losing project would create jobs. Then they cut the city bus services. So we have poor city dwellers taking two hours (to and from) to get to a minimum wage job. Might as well stay on welfare.

Sarah, put this in the "Debit" column along with the $1.5 billion doller "Light Snail" loss.

 
Phoenix Concert Tickets
Loading...