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Old Posted Feb 15, 2007, 1:50 PM
soleri soleri is offline
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'Economics' working against downtown
Feb. 15, 2007 12:00 AM
by Jon Talton

Hearing of the latest downtown mega-project, Phoenicians can be excused for feeling like Charlie Brown when Lucy promises that this time she really will hold the football for him to kick it.

So many times before the football has been pulled away at the last minute, and we have landed on our duffs in frustration and disappointment. Will the Jackson Street entertainment district be any different?

I'm open-minded. The Jackson Street team includes a businessman with an interest in the area (Diamondbacks co-owner Dale Jensen) and a developer who is actually building something downtown (David Wallach of the Summit).
Yet they, along with the developers hoping to do CityScape, contend with the strange economics of downtown Phoenix. These dynamics have ensured that most of the projects announced with glitzy renderings and models went nowhere.

Unlike cities with successful downtowns, power in Phoenix is oddly distributed. We have few corporations expanding or relocating there. Similarly lacking are real estate players with the means and intentions to really build.

Rather than being in a helper role, City Hall has become a kind of master developer, a role city government is poorly positioned to play. Plans, studies and overlays never seem to change the blocks of empty, blighted land.

Yet behind the scenes, the city's actions have become a kind of real estate "derivative" with its own value. For example, a "player" might present a plan that requires a zoning change or special waiver on, say, height. Once approved, this change makes the land more valuable. Then the temptation to flip the land to the next "player" can become irresistible.

Yet at street level, the football has again been pulled away, and we're left upended amid the blocks of wasteland, dotted with signs promoting dead projects, in the heart of America's fifth-largest city.

Not all the deals are insincere. Among the barriers faced by developers are very high land prices (a consequence, in part, of previous City Councils zoning too many parcels for high-rise, and land bankers holding properties for unrealistically high prices). Developers are left to offer enormous condo towers with units way out of the reach of the average Phoenician.

Many of these projects can never sell beyond 30 percent of the available units, so financing fails, and flipping the land becomes the only way out.

Another strange problem is the local fetish for large, "master-planned" projects. LoDo in Denver and the Gaslamp District in San Diego are not the result of big, integrated projects. They were developed organically, a little at a time, by scores of developers and businesses.

That approach proved more doable compared with going to the capital markets for hundreds of millions in one gulp for a largely unproven downtown. And we lack an Ernest Hahn, the San Diego mall developer, who built Horton Plaza downtown, against all expert advice, because he loved his city.

We also seem to lack the ability at City Hall to do things government should, such as historic reuse. If Phoenix had been in charge in Denver, LoDo would be vacant lots.

The results so far have left downtown Phoenix competing for spec investment against Tempe and Scottsdale, and losing. I hope Jackson Street and CityScape can turn that around.

Does it matter? Yes. Competitive cities offer choices, suburban and quality urban. And the city of Phoenix risks a long eclipse if it can't fix its core.

I start to wonder what would happen if the city would simply say: No more deals. We'll fix historic reuse and code impediments to doing business downtown. No more teardowns. And higher taxes for empty land.

Other than that, let the market work on a thousand parcels of land.


Reach Talton at jon.talton@arizonarepublic.com. Read his blog at taltonblog.azcentral.com.
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