The current economic crisis could actually spur Mesa voters to support a $51 million bed-tax incentive for two resort projects near Phoenix-Mesa Gateway Airport, according to independent political consultants and project supporters.
The March 10 election for Proposition 300, as it’s known, seeks voter approval to decide the fate of the highly billed Gaylord resort and convention center project, as well as another resort. The bulk of the incentive would go to Gaylord Entertainment Co. of Nashville.
Jason Rose, president of Rose & Allyn, said he believes Mesa voters have in the past shown a willingness to pass tax subsidies for major projects, including Riverview mall and Waveyard, a proposed water park. Rose is not affiliated with the project.
“In both of those cases, you didn’t have the all-star caliber of developers that you have behind this project,” Rose said, adding that the timing is, in fact, helpful for the project. “People are looking for positive economic news. They want more tax revenues, jobs.”
Mesa residents recently voted to initiate secondary property taxes, Rose pointed out.
“This is an electorate that is obviously understanding of the city’s financial difficulties, so it’s saying it wants to help spark investment,” Rose said.
Mesa faces a $62 million budget deficit up to June 2010.
Political consultant Bob Grossfeld of the firm Media Guys said all that may be true, but some people might have deeper questions.
“We have massive numbers of job layoffs being announced, more and more small businesses shutting down or already closed, so on the one hand, an argument can be made that Mesa really needs this economic stimulus to reverse that course,” said Grossfeld, who is not connected to the project.
“On the other hand, you’ve got voters who typically have shied away from major projects, for what they perceive as tax incentives, especially when times are so bad.”
There will be people saying “these are not the kinds of investments that will replace the kinds of jobs being lost,” he said.
The campaign for Proposition 300, paid for by DMB Associates and Gaylord, is heavily pushing the message of added jobs and revenue to Mesa.
Grossfeld expects more public scrutiny.
“Those who follow these things carefully would want to know how this project improves the community, will the city get well-paying jobs, and not just cheap labor being brought in to service the resorts,” Grossfeld said. “Jobs and revenue is a good bumper sticker, but at this stage, voters who tend to pay attention to things will be curious about more than just that.”
A bed tax is a 3 percent tax on the room charge. That tax is usually transferred to the Mesa Convention and Visitors Bureau to promote tourism in the city.
Mesa’s bed tax collections in 2007-08 were $2.4 million. This fiscal year, collections are expected in the $2.1 million range.
According to Mesa’s deal, Gaylord Entertainment Co. will retain the full 3 percent. Another resort, still unannounced, will get 2 percent of the bed tax, with 1 percent going to the Chamber of Commerce.
Gaylord has developed convention centers in Texas, Washington D.C. and Florida. Scottsdale’s DMB Associates owns 3,200 acres at Mesa Proving Grounds, near Elliot and Ellsworth roads, where the project would be built.
Proponents say Gaylord would bring tourism and kick-start other development in Mesa, especially given other factors, such as easy freeway access and the proximity to the Phoenix-Mesa Gateway Airport.
Unless the project is built, there are no revenues to be shared.
The project would spur millions of dollars worth investment and millions in construction sales tax revenue, which would trigger the bed taxes, supporters say.
From the city’s perspective, Gaylord would promote its property and the surrounding area to draw visitors, activities similar to what the convention and visitors bureau would have done too.
Mesa Mayor Scott Smith said since it is a billion dollars of private investment, the project is at the mercy of the economy.
“One of the criticisms is they won’t build it, but by the time Gaylord gets ready to build, the economy hopefully would have recovered. This is not a bunch of amateurs and it’s a substantial company.”
Gaylord would have more of an economic impact on the East Valley than any stadium, Smith said, a reference to failed plans to locate the Arizona Cardinals football stadium to Mesa.
Paul Bentz, a senior account executive for HighGround, the firm handling the campaign, said the current economic climate helps their case because “if you look at the Valley, very little is happening in terms of jobs and revenue, while Mesa will have $1 billion in private investment.”
The two resorts are expected to trigger 8,000 construction jobs and 4,000 permanent jobs. That should translate to $5.5 million annually in new revenue for Mesa and $45 million annually in terms of state and county revenue, Bentz said.
There’s no word yet on who is developing the second resort.
Meanwhile, some opposition is beginning to surface. Valley Business Owners (and Concerned Citizens) Inc., a nonprofit organization that had opposed the Mesa Riverview project, is making the case that the incentive is a bad deal.
David Molina, president of the group, has recently exchanged e-mails with Mayor Smith, expressing concern over the legality of the tax incentive. Molina said he likes the Gaylord project, but in light of the recent court ruling against a tax subsidy to another Valley project, CityNorth, which provided a sales tax incentive, the group would like more clarity on how the bed tax incentive is not violating the state’s gift clause.
In reply, Smith wrote: “We do not believe that the concerns raised by the court in its ruling are relevant to the Gaylord agreement … I am confident that the Gaylord arrangement would withstand any court challenge relating to the gift clause.”