Preserve may cost millions more - East Valley Tribune: News

Preserve may cost millions more

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Posted: Wednesday, August 27, 2008 9:39 pm | Updated: 9:56 pm, Fri Oct 7, 2011.

Scottsdale could be facing a shortfall of more than $270 million in completing the McDowell Sonoran Preserve if recent purchases of conservation land by Phoenix are used as a guide, as state land officials suggest.

Jamie Hogue, deputy state land commissioner, said Phoenix has purchased a total of 1,700 acres of state land for preservation within the last year. That land came at a cost of $50,000 an acre for land not conducive to development to $170,000 an acre for land that is conducive to development, she said.

However, Scottsdale can only afford to spend between $23,000 and $31,000 an acre on average to acquire nearly 20,000 acres of state-owned natural desert to complete the planned 36,400-acre McDowell Sonoran Preserve, according to figures from Craig Clifford, the city's chief financial officer and acting treasurer.

Planned McDowell Sonoran Preserve in Scottsdale. Map by Scott Kirchhofer/EAST VALLEY TRIBUNE

Clifford said the city currently has authorization to issue $460 million in bonds to be used toward acquiring the remaining 19,643 acres for the preserve.

"That's authorized by the voters but remains unused," he said.

That means the city can afford to pay an average of $23,000 an acre for all of the remaining acreage. Clifford added that if a statewide initiative on reforming how state trust lands are sold is eventually approved, the city would not have to buy about 5,000 acres that would be reclassified as permanent conservation land, meaning the city could afford to pay $31,000 an acre for the remaining 14,643 acres.

Officials will have to wait at least another two years to get the reforms on the statewide ballot, however, because Proposition 103 has been disqualified from the November election because of insufficient signatures.

Assuming an average price per acre of $50,000 - the low end of the scale for Phoenix - those remaining 14,643 acres would cost Scottsdale more than $732 million, which is $272 million more than the city currently has available in bonds.

But 3,543 acres within the planned preserve boundaries, mainly between Scottsdale and Pima roads and between Happy Valley Road and Dynamite Boulevard, is considered desirable for development, and its value could be a lot higher.

FORECASTING THE PRICE

Despite the state's projections, Mayor Mary Manross said she believes the city will be able to complete the preserve with existing resources. She said an average price per acre of $23,000 to $31,000 is feasible.

"Based on all the information we have as of today, those are realistic numbers," Manross said. "Between now and 2034 (when sales tax levies earmarked for the preserve expire), we will have completed this vision."

Land in the northern reaches of the preserve has little infrastructure like roads and water and is hard to develop, she said. That land will be sold at "open space/conservation prices," she said.

"The price would be much, much lower," Manross said.

On the other hand, city councilman and mayoral candidate Jim Lane said getting the land at $31,000 an acre or less is unlikely.

"Realistically, it's inadequate," Lane said. "If we can get it for that price, why aren't we buying it?"

Clifford said that up until now, the city has paid about $28,000 an acre to acquire more than 16,757 acres of preserve land, including the 393 acres it condemned from the Toll Bros. development firm.

He said fluctuating land values make it difficult to predict whether the remaining $460 million in bonds will be enough to purchase all of the remaining acreage.

"Until we know an actual price, it's hard to say whether these bonds and this cash flow are adequate to cover the entire acreage and purchase it," he said.

On Tuesday, the City Council approved settlements in the final three eminent domain cases involving privately owned land for the preserve. The city will buy the parcels, totaling 15.4 acres north of Dixileta Drive between 118th and 136th streets in far northeast Scottsdale, for more than $157,000 per acre.

BUSINESS PLAN

Proposition 103, the state trust land reform initiative that would have allowed Scottsdale to buy land directly from the Land Department at a negotiated price rather than competing at auction, has failed to make the ballot this year. This month, Secretary of State Jan Brewer said referendum petitions have come up more than 19,000 signatures short of the 230,047 required to put the measure before voters in November.

Voters defeated a similar measure two years ago. But initiative supporters like McDowell Sonoran Preserve Commissioner Carla (her legal name) say the city should bide its time for two more years, when another initiative can be brought to the voters.

Click on the chart for a larger view
Scottsdale finance officials say existing sales tax revenue and interest will be enough to cover expected debts to complete the McDowell Sonoran Preserve, McDowell Sonoran Preserve projections, Ari Cohn, Gabriel Utasi/TRIBUNE

"Don't give up yet. It's not over. If God forbid we fail and we're not on the ballot, wait two years. And let's just do what we've been doing from the beginning," Carla said. "It's premature right now to start picking apart the dream."

Lane said he wants to complete the preserve, but the city needs a business plan that prioritizes the parcels the city wants to acquire, provides a timeline, and supplies alternative scenarios depending on the potential value of the remaining land.

"I'd like to see it get done, and I'd like to seen a plan to do it," he said. "The failure to have a plan is a plan to fail. That's an old saying, but it does have some credibility to it."

Manross said the city has a business plan for the preserve it has been following since the 1990s. The first step was to buy land that was considered highly developable, which the city has done, she said. The second step was to acquire private lands through purchase or condemnation, which was completed Tuesday. And the third step is to acquire state lands, she said.

"We have been very strategic and thoughtful in how we've acquired all the parcels," Manross said.

City Councilman Tony Nelssen said residents are eager to get a better grip on the preserve's future.

"Everybody wants to know what this thing's going to cost," Nelssen said. "We hear all kinds of scary figures, and other figures are much more hopeful."

COVERING THE DEBT

But while debate continues about how much the land will cost, Scottsdale finance officials expect that current sales tax revenue will be enough to pay off the city's current bond debt, plus the $460 million in remaining bonds, including finance charges.

Lee Guillory, city finance manager, said officials have the authority to raise $460 million through bonds to buy land in the preserve. However, finance costs mean the city will spend $750 million to pay off those bonds.

Added to the city's existing bond debt of $436 million, plus $5 million the city has budgeted for trail construction, that means the city's present and future obligations for the preserve comes to about $1.2 billion, Guillory said.

Sales tax revenue earmarked for the preserve is expected to cover most, if not all, of that obligation, she said. Voters approved a .2 percent sales tax earmarked for the preserve in 1996, a tax that will sunset in 2027. Another .15 percent sales tax earmark approved in 2004 is slated to end in 2034.

A portion of that money goes into the preserve fund and collects interest. The fund currently has about $20 million in it.

Assuming a 2.55 percent annual growth rate in sales tax revenue, Guillory said officials expect to collect a total of about $1.15 billion over the remaining life of the tax levies.

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