Silly Con Valley

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That's something the department doesn't do for other customers.
Just ask the plant's next-door neighbor.

East of the Sumitomo site and across 56th Street, a similar, unimproved plot of state land went on the auction block in January. The 216-acre parcel was sold to the Mayo Clinic, which plans to put a 132-bed hospital on the site.

The Mayo parcel is twice as big as Sumitomo's.
It's in the same neighborhood, under the same zoning restrictions.
And its value was estimated by Mark Wirth, the same appraiser who judged the price of Sumitomo's acreage.

But only a month after he decided Sumitomo's land was worth $37,000 per acre, Wirth recommended that Mayo's land--only hundreds of feet away--should carry a price of $57,000 per acre.

Asked about the discrepancy, Jones, the state's chief appraiser, suggests that the market may have changed in the time--one month--that elapsed between the two appraisals.

The big discount the state wanted appraisers to give to Sumitomo for off-site improvements (as if Sumitomo were paying for them) are nowhere to be found in the Mayo appraisal. "This appraisal assumes the infrastructure and street improvements for the Sumitomo Plant will be installed by the City of Phoenix," writes Wirth.

When the City of Phoenix announced that it was paying for $7 million to $10 million in infrastructure improvements, city officials said that the improvements would benefit both Sumitomo and the Mayo hospital, and that in any case the roads and sewers would be needed regardless of who was moving into the neighborhood.

In other words, after the City of Phoenix promised to build streets and sewers for Sumitomo and Mayo, Wirth gave Sumitomo credit for paying cash for the improvements, but didn't give Mayo the same discount one month later.

Mayo seems to have been stiffed.
Mayo officials declined to comment, but sources close to the deal between Mayo and the state say that Mayo knew about Sumitomo's discount but didn't press for the same treatment.

Mayo officials, sources say, knew that the company didn't have the clout of the Japanese giant.

The reappraisals ordered by the Land Department will save Sumitomo $60 million over the 99-year life of the lease.

The lease itself is written in the most forgiving terms. In the first five years, Sumitomo will pay only $58,711 annually to lease 131 acres of prime desert real estate. It's ten years before increases for inflation kick in. And Sumitomo will incur no penalty if it backs out of the lease in the first 15 years.

In the high-tech field, that's almost an eternity.
If Sumitomo does move on to greener pastures after 15 years, it will have paid only $3.3 million in rent--which is less than half what the land is worth, according to the original appraisal.

"It's still $100 million, no matter how you slice it," says state Land Commissioner M. Jean Hassell when asked about the reappraisals and terms of the lease. (Actually, the lease requires Sumitomo to pay $90,377,087 over 99 years. Using Chierighino's original appraisal, however, Sumitomo would have paid $149,999,440.)

Hassell says that despite what the governor says in his September 5, 1995, letter, Symington never asked him to come up with a cut rate for Sumitomo.

"The governor never called me or said one word about Sumitomo to me. That's just garbage," he says, and suggests the governor may have been confused. "The only people who talked to me about Sumitomo were people at Commerce." Hassell says former Commerce director Sara Goertzen-Dial stressed verbally to him the importance of the Sumitomo plant, but made no mention of appraisals of state land.

"These were good appraisals," he adds. "[Chierighino and Wirth] do a lot of work for the Land Department." And Hassell says it's not important that the appraisers didn't follow state instructions to the letter. "If they came up with another way to value it, then [chief appraiser] Jones would be a damned fool not to consider it."

And Hassell disagrees that the Sumitomo deal spells trouble for the Land Department.

"New Times thinks everything looks bad. I can't control what you think. I just do the best I can do. To us, Sumitomo was just another deal."

In fact, Hassell stresses, even after the appraisals were done, Sumitomo wasn't guaranteed to win an auction for the lease. For that reason, Hassell says, he and his employees never gave Sumitomo any more consideration than they would any other applicant.

Months before the auction, however, Sumitomo, city officials and the developers of Desert Ridge had made sure that nothing so messy and unpredictable could possibly take place.

Northeast Phoenix Partners Inc., a development partnership, had "first refusal rights" on the Sumitomo parcel. That meant that whatever anyone bid at the auction, Northeast Phoenix Partners had the right to match it and win.

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Tony Ortega
Contact: Tony Ortega