There are incentives and there are incentives. What makes one government tax break for business a worthy investment in the community and what makes another nothing but corporate welfare is found in the ultimate result: What is a city truly getting in return for foregone tax revenue?
Shiny new buildings aren’t enough. And certainly, directly enhancing the bottom line of the corporate interest holding hat in hand should never be government’s task.
But that, in the main, is exactly what is going on as Tempe is being asked to give $7 million in tax breaks to developer Avenue Communities for what are proposed to be four towers, which, at up to 225 feet, would be the East Valley’s tallest buildings. This isn’t basic infrastructure, such as the ongoing renovations to downtown Tempe’s sewer system, but padding the developer’s bottom line.
When cities are in competition for valuable, regional commercial additions to their communities, incentives make sense. Chandler and Gilbert are in the midst of a back-and-forth battle of dueling auto malls, a situation that may well end with both of them being built. We are increasingly skeptical, however, of the crying need for office space in downtown Tempe that would justify the proposed $7 million windfall for Avenue Communities.
Recent history in the same neighborhood should be instructive.
The Brickyard on Mill received an earlier subsidy paid a few years ago while the city of Tempe suffered under a hiring freeze and other budget cutbacks. It has huge expanses of unoccupied space. Only Tempe’s moving some city offices and Arizona State University moving some academic departments into it has prevented the Brickyard’s upper floors from being mostly vacant.
(A newsroom wag suggested that if the proposed towers are built, they might as well be painted ASU’s school colors of maroon and gold, because ASU will probably be the only one to move in there anyway.)
Just up Mill Avenue, the Hayden Ferry Lakeside on Town Lake is the first of several office buildings planned for that area. Tempe, which invested millions into Town Lake and the overall Rio Salado Project, needs to start realizing tax revenue from office buildings, not keep shelling out more and more in incentives.
Meanwhile, in Scottsdale, the long-awaited Scottsdale Waterfront mixed-use retail project — like the Tempe plan featuring several tall office buildings, each 185 feet tall — moves ahead with no incentives other than traditional infrastructure.
The economy is in steady recovery. Employers are employing, developers are developing. Tempe still struggles, however, with its budget to meet residents’ city service needs. If there’s a market for more office space in downtown Tempe, undoubtedly one of the most coveted places in the Valley to work, live and play, then Avenue Communities will have no trouble making a profit there without city incentives.