A plan to build three “big-box” stores at the site of the former Los Arcos Mall could bind the city and developers to a 99-year partnership, according to deal points that will be outlined in a formal proposal this week.
A team of Ellman Cos. executives and city staff members emerged from closed-door negotiations this weekend after working 16-hour days for most of the last several weeks, said Dave Roderique, Scottsdale’s economic vitality director.
The two sides struck an accord on key points needed to move a redevelopment agreement forward on the 42-acre site at Scottsdale and McDowell roads, Roderique said. A formal agreement will be delivered to the City Council by Wednesday.
“The deal is predicated solely on the basis that this thing is still up and running successfully. If it closes after 20 years, it’s a 20-year deal. Period,” Roderique said Monday. “Now, of course, we hope it goes 99 years and is wildly successful and we pay Ellman the maximum amount because then the city is going to generate an awful lot of revenue off of that.”
According to the new terms, the controversial tax subsidy for the Los Arcos Town Center has been lowered by $5 million. Ellman would receive a portion of sales taxes generated at the site, which would be capped at $36.75 million over 40 years.
If the shopping center is still operating after the tax deal expires, the tenants would lease the proposed parking garage from the city at a rate of $16 million over an additional 35 years. After that, the tenants would lease parking from the city at “fair market value” for an additional 24 years.
The City Council is scheduled to vote on the proposal July 2. A narrow majority of council members have said they support the plan, which would include a Wal-Mart Supercenter, Lowe’s Home Improvement Warehouse, a Sam’s Club, as well as specialty shops and entertainment venues.
Council supporters of the plan — Ned O’Hearn, Tom Silverman, Wayne Ecton and Cynthia Lukas — said the new details seem appropriate.
“It’s important that the city be collecting some rent on that parking lot after year 40,’’ O’Hearn said, adding that the decrease of the overall tax subsidy is favorable.
Business leaders say the deal points are “artificial” because the likelihood of a power center and accompanying parking garage lasting nearly a century is next to impossible.
“I can’t think of a reason to structure a deal for 99 years. Perhaps that really lends to the bigger issue: What is the value of this agreement to this community?” said Virginia Korte, president and CEO of the Scottsdale Area Chamber of Commerce. “Mr. Ellman has every right to develop . . . on that property. I respect that. Though, I do not respect that he feels he has a right to ask the public to pay $42 million, or now $36.75 million.”
Chief critics on the City Council, including David Ortega and Mayor Mary Manross, said Monday they are dissatisfied with the latest proposal.
Under the new terms, a big-box store could sit vacant for up to four years. If two of the three anchor stores are vacant for four consecutive years, the deal would dissolve.
Manross said she thinks it is “outrageous’’ that one big-box store could shut down and be empty for four years.
“There’s not too much of an incentive for those developers to fill those spaces,’’ Manross said.
Bob Kaufman, senior vice president for The Ellman Cos., said the overall deal points benefit the city and taxpayers.
“Bottom line, the deal has gotten much better for the city and everyone has worked hard to get where we are,” Kaufman said.
Mayor Mary Manross on Monday night called for a council work session at 5 p.m. June 23 at City Hall. The meeting, however, is pending whether a quorum of the council will attend, and should be decided today.