Taxpayers have been giving incentives to Tempe’s hometown airline since 1998 to construct a building that still doesn’t exist — but officials say it’s about to become real.
Though it’s unclear whether US Airways will keep its headquarters in Tempe given its hostile takeover bid for Atlanta-based Delta Air Lines, the company insists it’s still planning to expand its downtown presence.
US Airways recently developed drawings for a multistory building on Mill Avenue that the company says it will build soon, but it hasn’t given any specific dates. City leaders wanted to keep the Tempebased airline in town so much that they’ve pledged to pay about $15 million over 20 years as an incentive for it to stay and expand. Although the airline has missed two deadlines for the expansion, the city has been lenient, granting extensions.
US Airways approached Tempe with preliminary plans for a new building shortly before making the Delta bid, an $8.6 billion deal which could be a defining moment for the company. Despite the potential megadeal, US Airways spokesman Morgan Durrant said the company doesn’t expect it to slow efforts on the new building.
Tempe senses the airline will finally construct the overdue project despite missing deadlines — and in spite of the potential Delta deal.
“They’re right on the cusp of getting something done,” Vice Mayor Hut Hutson said.
Still, the airline is all but certain to miss another deadline — and to have the city reduce its annual payment.
The city gives US Airways $812,000 a year, but Tempe can cut that by $175,000 if the building isn’t done in February 2007 — an impossible deadline since the airline hasn’t even submitted blueprints.
In 2004 and 2005, the City Council refused to penalize the airline for missing other deadlines, including one to finish the building by July 2005. Instead, Tempe gave the company even more time.
Councilman Ben Arredondo approved the extensions before but said he won’t do that again.
“I expect them to show for something because I think they know the council is anxious to have something built on Mill Avenue,” Arredondo said. “And I would not anticipate this merger, if it goes through, to change anything.”
Arredondo added he’s found the airline’s efforts sincere.
If the city hadn’t approved an extension, it could have bought the L-shaped property that fronts Mill and Third avenues and resold it.
The land is among the downtown’s most valuable properties.
It has more space along Mill Avenue than nearly any other downtown site, sits across from the historic Hayden Flour Mill and is next to a light-rail station that will open in December 2008.
So far, the airline has shown the city only preliminary drawings of the project, which has multiple floors with space for shops on Mill Avenue. The company has pledged to return with more formal plans. For now, the drafts seem to satisfy Tempe’s vision for the area.
“I think they’re doing their best to comply with the development agreement,” said Chris Salomone, Tempe’s community development manager. “They’re just late.”
The incentive deal was struck when the company was America West Airlines, which merged with and took the name of US Airways this year.
Durrant said that merger has not stalled the project. But the airline isn’t ready to divulge any details or give a timeline.
US Airways hasn’t indicated whether it would move its headquarters to Delta’s Atlanta base if the takeover goes through, leaving uncertain whether Tempe will keep one of its best-known and largest employers.
City leaders said they expect the airline will still have a sizable presence here, regardless.
US Airways owns its Tempe buildings, but Delta leases much of its Atlanta space. Tempe Mayor Hugh Hallman said the arrangement would seem to work in favor of the company building here.
“I do believe they’re quite serious, but they obviously have a number of issues they’re dealing with immediately,” Hallman said.
For years, the city and other downtown landowners have been eager to have the property developed.
It’s mostly just a grass lot — and that lack of development makes the street feel dead and discourages pedestrians from the southern end of Mill Avenue from walking northward to Tempe Town Lake. The new building also would add more employees downtown — a perfect captive audience to boost restaurant and retail sales. Hutson said he never would have voted for the deal, but he doesn’t blame the airline for waiting until the real estate market surged and the property became more desirable. The downtown boom makes Hutson believe the airline is eager to build soon.
“I just think the market conditions right now tell them this is the time to act,” he said.