Two visions of Riverview in Mesa - East Valley Tribune: News

Two visions of Riverview in Mesa

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Posted: Sunday, May 1, 2005 6:54 am | Updated: 8:07 am, Fri Oct 7, 2011.

There are two Riverview at Dobson retail centers planned in Mesa.

One will put Mesa on the map with the popular Bass Pro Shops Outdoor World, generate large amounts of sales tax revenue for police and fire protection, bring new jobs and entertainment, and help revitalize all of west Mesa including the Fiesta Mall area.

The other is an $84 million taxpayer giveaway to billion-dollar developers and national retailers like Wal-Mart, a project that will kill Fiesta Mall, put west Mesa retailers out of business and barely break even over the long term.

The two visions are the product of the spin put on the issue by wellfinanced campaigns and politically savvy players. Vastly different views on the project can be both convincing and confusing to observers. Voters are being bombarded with signs, television commercials, newspaper ads and campaign fliers telling them how to vote in the May 17 election, which will determine whether the project south of Loop 202 at Dobson Road will go forward.

Voter interest has been high. The city has received more than 37,000 requests for early ballots, and officials have counted more than 16,000 votes. Voters have until Friday to request an early ballot.

Propositions 300, 301 and 302 must all be approved for the project to move forward.

If approved, the 250-acre project is expected to include a Bass Pro Shops Outdoor World, 16-screen Cinemark movie theater, Wal-Mart Supercenter and other "bigbox" retailers, three to five auto dealerships and a business park.

So whose vision of the project more closely resembles reality? The Tribune offers some insight into what we know about the project and how the two sides see things.

THE DEAL

Truths: Mesa has approved an incentive package for Kimco Developers and De Rito Partners Development that may rebate more than $80 million in taxes and fees. The money that will be rebated is not current General Fund money, but money that will be generated from the site through sales tax collections.

The package is divided into two agreements. In the first, the developers are eligible for $1.5 million if a 16-screen movie theater and 50,000 square feet of additional stores and restaurants open by July 2007.

To qualify for any additional rebates, the Bass Pro Shops Outdoor World must open by July 1, 2010.

Mesa will rebate 50 percent of sales taxes until the city has received $4.8 million. Then, the rebate increases to 75 percent of sales taxes until reaching a $35 million cap for the developer. The developer also is eligible for $25 million in interest and an additional $5.5 million in rebates of fees and construction sales tax.

For the auto dealerships, the developers will be reimbursed 75 percent of sales tax in years 11 to 20 of the agreement, without a cap. That figure is estimated at $13 million, but could go higher. Today, Mesa’s city sales tax is 1.5 percent of every purchase, including the 0.5 percent "quality-of-life" tax approved by voters in 1998. The rebates will be taken only from the 1 percent sales tax, not the "quality-of-life" portion that will be reduced to 0.25 percent in July 2006.

Supporters say: Mesa is not at risk for any portion of the development and if the developer is making money, the city is making money. The city does not write a check to the developer until benchmarks are reached and revenue is flowing in. And after 20 years, Mesa keeps all of the money. Supporters only recently acknowledged the incentives on campaign materials.

Opponents say: The rebated amount will be $84 million and could go higher. They point out that the recipient of this money is New York-based Kimco Realty, the largest publicly traded owner and operator of neighborhood and community shopping centers. The other developer, De Rito Partners Development, is based in Phoenix. Opponents do not say that the $84 million is being fronted by the city, but at the same time are ambiguous on when the $84 million will be paid.

BUSINESS RELOCATION

Truths: The general manager of the Tracker Marine Boating Center at 1350 W. Main St. in Mesa, told the Tribune his showroom will be moved to the Bass Pro Shops store.

John Randall said there would be 55 boats on display compared to 15 at his current store, and two additional lines of Tracker boats will be available. Randall said the store is owned by John Morris, founder and owner of Bass Pro Shops and Tracker Marine. Bass Pro Shops spokesman Larry Whiteley said a decision on that store has not been made and the dealer could stay on Main Street.

Randall said last year his store did $8.5 million in total sales including parts, with about $6 million in boat sales, contributing about $127,500 to Mesa in sales tax revenue. He expects to double his boat sales inside a Bass Pro Shops. But at Riverview, half and then three-quarters of the 1 percent sales tax will be rebated to the developer.

The Tribune previously reported that Big Two Toyota at 1301 W. Broadway Road in Mesa has purchased land in Kimco and De Rito’s Chandler 202 Auto Park. The deal was recorded March 28.

Honda Cars of Mesa at 1320 W. Broadway Road and Brown and Brown Nissan at 1701 W. Broadway Road also are expected to go to Chandler or Gilbert, city officials said.

The Tribune has made daily requests for the past week to speak with Kimco Developers president Jerry Friedman and De Rito Partners Development CEO Marty De Rito to ask whether Honda Cars of Mesa and Brown and Brown Nissan will be moving to their Chandler auto mall. All interview requests have been refused.

Mesa paid $58,162 to Ernst and Young for a Riverview market analysis. The report states annual revenue for auto dealerships in Arizona averages about $68 million per dealership. Using that figure, Kimco and De Rito could be taking about $204 million in sales out of Mesa each year with the three dealerships, or about $3 million in sales tax revenue a year.

A Wal-Mart spokesman said if the company signs a lease at Riverview, it will close its existing store on the southwest corner of Main Street and Alma School Road.

The report factored in the expected closing of the Wal-Mart store, but did not factor in that Riverview’s car and possibly boat sales will only replace existing sales.

"Ernst and Young was hired by Mesa to estimate total retail sales to be generated by the proposed project, not net retail sales in Mesa," a followup letter to the city states.

Supporters say: The auto dealerships were moving south to Gilbert or Chandler anyway because the manufacturers are demanding better freeway visibility. Their relocation only emphasizes the importance of approving Riverview to recapture some of that revenue.

Opponents say: In addition to Tracker Marine, Wal-Mart and auto dealerships, the developers also are negotiating with companies that have stores near Fiesta Mall, which could hurt that area’s revitalization. They say Kimco and De Rito could actually take more money out of Mesa than they bring in.

THE REVENUE

Truths: Nobody knows for sure how much tax money will be generated. But there are some educated guesses. The developers project Riverview will generate $170 million in new revenue for Mesa over 30 years. A less publicized developers’ projection shows Riverview will generate $73 million in city sales tax revenue over the first 20 years. The nearly $100 million projected in years 21 through 30 come after the incentives expire. According to the developers’ projections, the actual amount going to Mesa per year will be $3.65 million for the first 20 years, not the $5.6 million figure being used on campaign materials.

The $3.65 million number — $650,000 more than the annual sales tax contributed by the three Broadway Road dealerships — does not include a possible decrease in sales tax collections from other Mesa sites, such as the Fiesta Mall area or the shops and restaurants at Stapley Drive and U.S. 60.

Supporters say: In addition to the $170 million in new sales tax revenue, the center will generate $2 million in property taxes to Mesa public schools each year and create 5,000 jobs. Bass Pro Shops will bring in new revenue and customers from throughout the state. Riverview will bring more merchants to Fiesta Mall, and the project also will keep sales tax dollars in Mesa instead of Tempe and other cities.

Supporters say the $170 million will benefit Mesa’s fire and police departments and parks. The money will go into the city’s General Fund, which does fund those services. However, the money will not be earmarked for any specific purpose, and city officials could use the money to pay for roads, employee salaries or arts center operations.

Opponents say: The "No" side hired a former Arizona State University economics professor to conduct its own analysis, which concluded the center will only generate between $21 million and $56 million in sales tax revenue over 34 years and create between 1,180 and 2,500 jobs, not including the developers’ projected 1,500 at the business park. They also say Riverview will pull shoppers away from Fiesta Mall, accelerating the area’s decline.

WAL-MART

Truths: The developers and Wal-Mart both say they are negotiating a lease, but no deal has been reached. According to the agreement between the developer and Mesa, "Developer agrees that no economic incentive payments shall be paid by developer to any owner of a Wal-Mart or Sam’s Club store."

The Ernst and Young report stated that Wal-Mart’s rent would be $0.00. Ernst and Young said that was not intended to imply Wal-Mart would not pay rent. Reasons for the $0.00 amount on the report range from the city taking a conservative estimate to calculate projected rental tax revenue to a misunderstanding that Wal-Mart would not have to pay a ground lease because it was constructing its own building. Both the developers and Wal-Mart say the retail giant will pay a commercially reasonable and fair market rent. Wal-Mart distributed a letter to its customers one weekend stressing that it will not be receiving incentives. Friedman offered the city a look at the lease, if and when it is signed, to assure Wal-Mart would be paying rent.

Supporters say: Wal-Mart will receive absolutely no incentives for opening at Riverview, including reduced or free rent or other perks made possible by the incentives. They say they don’t know how to make the issue any more clearer. All supporters — and Ernst and Young — quote the agreement when asked about Wal-Mart and incentives. And if the developer violates the restriction on Wal-Mart, Mesa has a right to terminate the agreement, costing the developers $80 million. The developers say they would be foolish to take that risk.

Opponents say: The "No" campaign has grouped Wal-Mart and the $84 million in incentives in the same sentence. They question why Wal-Mart has not been included in any of the campaign literature despite appearing on a Kimco and De Rito recruitment flier. They raise the issue of the $0.00 rent and wonder why no one questioned or disputed the figure until it appeared in a Tribune article. They say a literal reading of the development agreement — no economic incentive payments to Wal-Mart — allows Wal-Mart to receive other perks besides direct sales tax rebate checks.

Riverview deal

Terms of the estimated $80 million incentive package for Mesa’s proposed Riverview at Dobson

retail project:

PHASE 1 (Theater District)

City impact, planning permit and building permit fees:

$500,000 cap

Dobson Road infrastructure improvements:

$1 million cap

TOTAL: $1.5 million

PHASE 2 (Remaining project, except planned business park)

City impact, planning permit and building permit fees:

$1.8 million cap

Eighth Street, Alma School Road and on-site road infrastructure improvements:

$3 million cap

Construction sales tax:

$700,000 cap

Retail sales tax rebates:

$35 million cap

(The city shall rebate 50 percent of sales taxes received by the city for retail sales, service, leasing, admissions, exhibitions, amusements, restaurant, bar, hotel and other taxable activities until the city has received $4.8 million of retail sales taxes. After that time, the city will rebate 75 percent to developer.)

Interest of 7 percent on $30 million of the $35 million:

$25 million cap

(Begins accruing after Bass Pro Shops Outdoor World opens)

Retail sales tax rebates for between three and five auto dealerships:

$13 million (estimated)

(The auto dealerships will be reimbursed 75 percent of retail sales taxes in years 11-20 of the agreement, with no cap on rebate.)

TOTAL: $78.5 million

NOTE: The rebates will be on Mesa’s 1 percent sales tax. The 0.5 percent "quality-of-life" sales tax, which will be reduced to 0.25 next year, will not be subject to the rebates.)

TOTAL TAX REVENUE

(developer projections)

To developer during 20-year term:

$73 million

To Mesa during 20-year term:

$73 million

To Mesa during 30-year term:

$172 million

SOURCES: Mesa; Kimco Developers; De Rito Partners Development

TRIBUNE

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