SkySong's Scottsdale investment role in question

A developer’s plans to request a tax subsidy for a project adjacent to SkySong is raising questions about whether the high-tech research center is living up to its billing as a catalyst for private investment along McDowell Road in south Scottsdale.

GRAPHIC: Major investments along McDowell Road

Scottsdale already has invested heavily in the McDowell Road corridor and SkySong — a collaboration of the city, the Arizona State University Foundation and private developers. The area struggled after the closure of Los Arcos Mall in the late 1990s and subsequent failed hockey arena and “big-box” store proposals.

In addition to the up to $120 million SkySong price tag, Scottsdale spent $600,000 for a marketing subsidy to the Motor Mile auto dealerships, built a $12 million senior center, expanded its trolley system and is in the process of creating a consistent look for landscaping along improved sidewalks.

And while there is interest in the land adjacent to SkySong, the latest proposed projects are being subsidized, plan to seek a subsidy or are the type of businesses not envisioned to serve the planned influx of high-tech workers.

The $150 million Los Arcos Crossing project to the east plans to turn a nearly vacant shopping center into high-end apartments, town homes, offices, stores, an updated Bashas’ supermarket and restaurants.

But the project — although primarily a private venture — will need an undisclosed subsidy to create a public connection from SkySong to the Indian Bend Wash and pay for other infrastructure costs, said developer Rick Sodja, CEO of PDG America.

The city also plans to sell the developer 3 1/2 acres of land at an undisclosed price.

“We need SkySong and SkySong needs us,” Sodja said. “It takes these two projects to have an anchor for this part of town.”

To the south, Community Services of Arizona’s has used about $1.25 million in federal dollars allocated by Scottsdale to acquire rundown apartments and build a new 44-residence town home project on Belleview Street. About two-thirds of the units will be at market rate, with the remaining one-third reserved for families below 80 percent of the county median income, CSA President Brian Swanton said.

Construction is expected to start late next year.

City Councilman Jim Lane said he’s not happy with the trend.

“I’m not interested in south Scottsdale just becoming a subsidized neighborhood, whether it’s work force housing, subsidized government buildings and now with Los Arcos Crossing, economic development,” Lane said. “From my perspective, this doesn’t really have the desired effect.”

The former Breuner’s furniture store near the northwest corner of McDowell and Scottsdale roads will be the new home of Scottsdale’s main post office, thus eliminating an area for private reinvestment.

And the new private businesses closest to SkySong are a pay day loan store to the north and Skin Cabaret owner Todd Borowsky’s planned carwash on the former Goodyear tire site on SkySong’s southern edge.

And while the car dealers have discontinued their marketing subsidy, at least one dealer is relocating to Mesa.

But that is not to say private investment has not followed the city’s lead. There is the Lowe’s Home Improvement store, the McDowell Village senior apartments and retail center, Miller Crossing condos a half-mile south, a rebuilt Big O Tires store and the planned Villa Contento and Project Miller high-end condo projects.

“It is early, but there’s been some investment down there, which is positive but not as much as we would like to see,” said Scottsdale economic vitality general manager Dave Roderique. “SkySong is a great first start, but there’s going to be more that is needed. It needs to be an ongoing process.”

Planned private investment, including SkySong’s 1.2-million square feet of research, office and retail space at buildout, is estimated at about $375 million for the McDowell Road corridor. Planned city investment, including SkySong’s $120 million city price tag that includes interest, is close to $160 million, according to a city economic report released in September.

Mayor Mary Manross, who said the long-term revitalization process along McDowell is already showing results, said Los Arcos Crossing’s expected subsidy request does not negate from SkySong or other development in the area.

“SkySong was a worthwhile, long-term investment and it shows confidence in the community,” Manross said. “And all the (SkySong) businesses that will open in a few weeks feel that way, too.”

At SkySong, ASU and other tenants are expected to start moving into the first building before the end of the year. The project has broken ground on its second commercial building with apartment units and a parking garage to follow in the next couple of years.

Kevin O’Neill, owner of O’Companies and a member of the Scottsdale Planning Commission, said SkySong was a reason he created the 16-unit Project Miller urban condo project just south of McDowell. O’Neill said the project is being sold to a new owner that plans to complete the project.

“One of the things that attracted us to the SkySong area is knowing there would be newer innovative things going in related to design,” O’Neill said.

Scottsdale Area Chamber of Commerce President Rick Kidder said redevelopment projects such as Los Arcos Crossing and others that could one day occur on McDowell are more costly than building a new project on vacant land. They also can become more political.

“This will be a great litmus test for the city on how it deals with redevelopment,” Kidder said.