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January 25, 2010


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"Make downtown the easiest and cheapest place to do business in terms of fees, permits and the speed of approval..."

I was thinking along these lines too, but with respect to small business, which not only provides most of the economy's jobs but would also give a nicely urban and "human" feel to the downtown area.

The city could work closely with the SBA and community banks, perhaps arranging some sort of quid pro quo for lenders, from the city and/or the federal government, in exchange for accomodating lending terms. Something similar might be arranged with property owners in exchange for discounted rents.

Perhaps tax breaks could be offered for locally owned businesses for the first five years of operation, which would give the businesses time to get established, work out the kinks, and (individually AND collectively) attract a customer base. (Nearby office workers would be the most obvious source.)

These businesses would be more likely than nationally owned chain stores or other corporations to bank and spend the profits here, further stimulating the local economy.

It would also be easier to attract tenants to small, affordable spaces (of the kind small businesses are likely to need) because the initial capital investment and monthly rent could be low enough so that high sales volumes or profit margins aren't necessary for a project to be feasible. Additionally, by partitioning larger properties for multiple small business use, the rent opportunities are both multiplied and made more flexible.

An innovative approach would be to mix residential apartments in for use by local owners/managers/employees. In some cases these might be located over shops; in other cases in adjacent buildings.

As more people worked downtown, there would be more need for local apartment housing and more opportunities for housing builders, developers and renovators; the increased community population would in turn present more opportunities for small businesses (clothiers, restaurants, barbershops, furniture stores, etc.) and help lure them in. These factors could create a self-reenforcing growth cycle. As the downtown space filled up, the same tactics could be adapted to blighted, underdeveloped nearby areas.

Also, with respect to empty, blighted land packets owned by absentee investors, the city has at least two additional options: (1) pass a land tax applying specifically to unsold downtown properties of this description; a VERY expensive property surtax might serve, and those who refused to pay promptly would find themselves facing tax liens and heavy fines; (2) use of eminent domain in such cases would be morally justified and could possibly be legally justified. I don't think ANYONE from the local chamber of commerce to the average citizen would present political challenges on behalf of these kinds of nonproductive, absentee land hoarders.

Here's a list to show the diversity which a vibrant small business community could bring to downtown; not every listing is appropriate, but a great many are:


I'll bite.

I gave up on downtown Phoenix. I think Chandler has the better 20 year plan and the guts to pull it off.

1. Deal with the land bankers.

Most of the empty lots are owned by land developers committed to Chandler and operate out of Chandler. They are vested in the community.

In fact, they purposefully buy buildings/lots as soon as they go on the market to make sure outside developers don't ruin what they are building.

In fact, the land owners are the ones to pressure the city to rezone downtown and put in over 12 million in walkability improvements.

2. Create critical mass

The city and the developers started with a 1/2 mile block and moving to a second 1/2 mile block. Actually, finishing something before spreading out. They have food, art and are quickly adding retail and most importantly companies that employee PEOPLE.

AZ Avenue improvements are being done to ensure walkability as does the rezoning.

3. Hire a downtown/Central Corridor economic development outfit.

Chandler has a top notch economic development department, but even added a division SPECIFICALLY for downtown economic development.

The Downtown Chandler Community Partnership also aids in this area. Getting Bus Rapid Transit that connects to the light rail is another big commitment.

4. Leverage the Phoenix Biomedical Campus.

They are leveraging the shit out of Intel, Wells Fargo, Avnet and their other big anchors. Adding the Innovations Bio Incubator to the price corridor doesn't hurt either. As with it comes UofA. Unlike Phoenix's operation it's actually already attracting valuable tenants.

5. Think livability and human-scale in every decision.

BRT, Az Ave improvments, downtown rezoning and other measures including connecting parks/trails shows this is improving every year.

6. City Hall has done much; most should now be up to the private sector.

The city has poured millions into the area and is continuing to pour more. They are by far investing the most per area. Salvaging nearly every historical building. You may remember that Chandler was the first master planned city in Arizona. I believe it's planning was done in 1926.

Derek, how has Chandler updated its master plan? What does the plan call for today?


Chandler has a decent future plan but is unfunded and not even a mandate - therefore it will be ignored at every key milestone. I second that their Economic Development team is first rate. However, the plans of the past (or the lack or plans) created a city built uniformly as a conventional suburb, severely limiting them going forward. "Downtown" Chandler walkable? It's a dressed up strip mall and the rest looks like east Van Buren. Painting some crosswalks and actually installing landscaping in planters is not considered an "improvement" in any genuine city - but rather, a basic service. “Revitalization?” It's a joke.

Chandler, like other suburbs in Phoenix, is a story of lost opportunity. They did a good job facilitating the development of the tech cluster; however, they failed to coordinate the rest of the City operations to capitalize on that hard-fought-for agglomeration.

Historic preservation was neglected - not even small remnants of the original farming character were saved. Zoning was not implemented to help create urban living districts. Transit wasn't and still isn't taken seriously (BRT on AZ Avenue is not going to be a game changer in any sense of the term) Education suffered the same fate as every other community in AZ: among the worst in the country.

What could have been a mini Silicon Valley (Chandler even called itself at one point "Silicon Oasis of the Desert")is instead primarily a middle class chip fab town of assembly line workers. In fact, Chandler's abundance of workers willing to accept low wages is a primary reason why it "won" Intel's 2nd chip fab plant over a host of competing 3rd World countries (Intels fab expansions are now primarily in Latin America and India).

ASU turns out a miniscule amount of talent to begin with and those few that it does will not stay in Chandler because its lack of authenticity and culture combined with military bunker office “parks” and barracks-style neighborhoods results in a place that is ugly and boring. So Chandler fills the jobs and houses with Indian immigrants and low education xenophobic whites. The former do most of the knowledge work while the latter fight zoning battles with Asian grocery stores. This environment is obviously one that is not particularly attractive to R&D outfits or venture capital.

I'm not an expert on real-estate law but I think the land-banking issue is not one that can be addressed by a city council. Rather, there has to be legislation at the state level dealing with land use and taxation. In this vein, it became much more difficult to use eminent domain for public purposes after the passage of Prop 207 in 2006. But regardless of the jurisdictional authority, the problem remains the same. Property owners have deep pockets and are unlikely to countenance any new tax burden on themselves. In a political climate as taxophobic as this one, it will be next to impossible fighting these people. They have money, clout, and ideology on their side.

Here's a anecdote about the scope of this problem. In 2000, a company, Gray-Olson, was going to build a 300 unit apartment complex with ground-floor retail at the NW corner of McDowell & Central. They ended up selling the site instead to a Boise investment company for $12 million. That company sat on the parcel for several years before turning around and selling it to a Tel Aviv company for $25 million. It then announced a three-tower condo project as the housing boom was cresting. That land, needless to say, is sitting vacant and will continue to do so for the indefinite future.

Vacant land in and around Roosevelt Row is also overpriced. The ideal usage here would be low to mid-rise but only intensive high-rise projects can make the land investment pencil out. Again, this land will stay vacant for the indefinite future.

For the very few of us who actually care about cities, this is frustrating in the extreme. Phoenix's best possibilities are frozen in place by the the overvaluation of vacant land. Even if Phoenix gets "hot" once again, it will take a major miracle to undo this problem.

Chandler is a suburb with a big mall. It's not the central city. You've kind of missed Jon's point.

Soleri is pretty much right on the money about the over-valuation of land downtown. One issue is that zoning doesn’t by itself create market demand. So property owners will rezone a parcel for a high rise and then assume that their parcel should be priced for high rise development. The problem? No demand. Why no demand? A complex question. The biggest reason is the lack of a diverse, knowledge based economy in Phoenix – the kind of economy that demands office towers and urban housing. A larger hub/spoke mass transit system with commuter rail and intercity rail would certainly help in this regard, but another problem is that downtown Phoenix has poor design. Big projects such as AZ Center, Colliers tower, Chase Tower, Mercado and others didn’t create any “streetlife” due to their inward-focused designs and massive street facing parking structures. This has all added up to make Downtown Phx not even a real destination, let alone a prestigious address that attract businesses – as in most other downtowns.

What can the City do? Not much. Jon’s idea of a Land Value Tax would probably be the most consequential solution – but has no chance as long as the Kooks remain in power. Soleri’s observation that downzoning (reducing the scale and height of allowable development) is now impossible due to Prop 207 is absolutely correct. That leaves up graded architectural requirements, increased civic space investment, expansion of the transit system and a downtown business attraction program. Unfortunately, the City is broke.

Reading through these comments and ideas is satisfying, if only because I am reminded I am not alone in my frustration. Yet I am slightly alarmed at some of the proposed ideas for remedy. As a third gen native and long time hopeful for a legitimate urban core I am for most anything that speeds the process.
As an investor on Roosevelt, having tied up every dime of mine and many of my like minded partners, to build the kind of sustainable low rise high density mixed use you so rightly point to, I ask, how could anything have been built succesfully here in the last 5 years. I think there is some Armchair QBing here.

I won't comment on Soleri's remarks regarding Proposition 207 and its effects on the use of eminent domain -- at least, not at the moment -- because I haven't done the research.

With regard to this:

"I'm not an expert on real-estate law but I think the land-banking issue is not one that can be addressed by a city council. Rather, there has to be legislation at the state level dealing with land use and taxation."

I will disagree with the assessment that state intervention is required: "With the exception of centrally valued properties such as airlines, railroads, and mines, property tax in Arizona is assessed and administered in each individual county by the county assessor."


And we know that in Maricopa County, Metropolitan Phoenix is the 800 pound gorilla.

As for this:

"Property owners have deep pockets and are unlikely to countenance any new tax burden on themselves. In a political climate as taxophobic as this one, it will be next to impossible fighting these people. They have money, clout, and ideology on their side."

I think this misses the point argued. I was talking about absentee land-hoarders, who have owned local land for years while failing either to develop it or sell it, not local investors with political connections and influence. As for ideology, the best method to fight that is divide and conquer. Give local real-estate investors and developers a leg up, while penalizing non-productive absentee investors as heavily as possible, and, provided your legislation is targeted and explained to local movers and shakers, you'll find that the latter are, at worst, neutral. We're only talking about Phoenix downtown, which everyone locally, ostensibly, wants to see flourish, and (as much as possible) to get their own piece of that.

Do out of state or even out of county land speculators (with respect to downtown Phoenix lots) have any political capital to speak of? I don't think so. With respect to targeted property tax legislation and fines, I'm not talking about taking away land from absentee owners and giving it to communes; I'm talking about putting as much pressure as possible on absentee owners of specifically downtown land packets to sell to local owners for reduced prices: the legislation should give such owners the choice between keeping the land indefinitely without developing it, and losing money, or selling it now, to local investors and developers; and in a market like Phoenix, dominated by local land developers, this could scarcely be more appealing to local kingmakers.

Anti-government, anti-tax ideology is highly appealing when the choice is between government (public sector) and your own personal interests; but when government tax and penalty legislation benefits local investors at the expense of non-productive absentee speculators, the kookocracy will "rally round the family with a pocketful of shells". Guar-own-teed.

All it requires is art, organization, and diligent proselytizing. Make sure that the legislation not only exempts the local real-estate toffs (provided they're willing to play ball) but actually favors them by using the power of local government to advance their financial interests, and make sure they know it: then watch them line up to lobby the legislature in support.

The vision, done right, is broad enough to appeal to local real-state investors and developers, local financiers (community banks), and the local petit bourgeoisie (small business owners, would-be and otherwise). If that isn't enough to get the job done, then you're just not going about it properly!

I wish Wayne Rainey would tell us more about his experience here. There are not many like him who actually tried to work this unforgiving soil. During the boom, his RO3 project seemed like one of the most hopeful portents for an urban renaissance. What happened?

For those of us who have trudged through First Friday's gaping craters, Mon Orchid was an oasis in Roosevelt's moonscape. Yet what we've seen over the past few years is not a growing garden but increasing desertification, as if the economic dynamic here was primarily entropic. The destruction of more buildings along the 1st Street & Portland axis mocked our hopes that Phoenix would eventually knit together its disconnected and wounded parts.

There should be no illusions here about the real-estate industrial complex. It owns the legislature, the Republican Party, most elected officials, and what passes for the media. We care but few others. Tell me what to do because I'm hanging by a thread here.

The Arizona Republic recently ran a piece on downtown Gilbert, but there are points of similarity:

"Several new projects and businesses have recently brought increased energy to the town's historical heart. But vacant lots and blighted residences still dot the district, and commission member Ted Taylor said the area needs a brand."

Now, this is typical of city leadership today, that they think like ad men and not like city builders. The downtown doesn't need a "brand", it needs a community. The special character, if any, of downtown Gilbert, will emerge from that community, not from a slogan or a logo emblazoned on glossy pamphlets.

"A handful of new businesses have opened downtown and are experiencing marked success. A pedestrian-improvement project is currently underway, and the first phase is expected to wrap up by the end of May.

"And when an economic recovery takes hold, prospective developers are waiting in the wings to start new projects downtown, officials said."

I daresay they will. Any fool would hitch his wagon to a rising star, but there has to be one, first.

Instead of waiting for free-market moondust to manifest the miracle they hope and pray for, they need to use the powers of regulation, legislation, and taxation inherent in government, to set a framework which encourages the kind of community they want. Then they have to organize all the players: landowners, small business owners and investors, financiers, and others (e.g., federal grant source and SBA loan administrators). Not piecemeal, but as part of a systematic plan.

It won't accomplish itself. You can't make some cosmetic changes, bless your good fortune when a few hopefuls buy in, then sit back, as though the local sunshine will cause these seeds to blossom into an areawide renaissance. It won't, because the soil is too poor: that's the lesson of Wayne Rainey.

If the area has remained undeveloped for this long, it's because that's the natural dynamic; and the only way to change the situational momentum is to alter the framework of laws and regulations governing it, to change the risks and rewards governing the market, so that desired behaviors are encouraged and undesired behaviors discouraged.

". . .Several commission and council members said that neighborhood blight could significantly threaten the district's image, and lead to health and safety problems. Vice Mayor Linda Abbott said she has seen broken windows, scattered garbage and even rats scurrying across one downtown neighborhood.

"...While there is currently no town ordinance relating to residential aesthetics and beautification, the council may consider such measures in the future...'Maybe now is the time to consider a property maintenance code,' Councilman Les Presmyk said. 'And it needs to start in the downtown because that's the oldest part of the town of Gilbert.'"

Well, after all this, the town council is still uncertain whether blight should be fought by coercing irresponsible, absentee landowners into living up to their civic duties, by the only means they will understand: hitting them, hard, again and again, in the wallet. Broken windows: big fat fine; garbage; big fat fine; verminous infestations; big fat fine. Pass a special property surtax on downtown lots owned by absentee investors: call it a blight tax. Make it walloping big. See how fast they run to sell.

Who will they sell to? Not other absentee investors, because now the land is no longer worth holding indefinitely in the hopes of someday cashing in; now it's actually costing them money, big money, every year.

The only other market is the local developers, who, understanding that they now enjoy a buyers market, will hem and haw about the cost of bringing the property into compliance and of developing it, until the selling price is brought down to what it should be for a piece of blighted, undeveloped property in a blighted, underdeveloped area. When the locals do get hold of it, they could take advantage of a special exception to the maintenance codes which defer penalties but only for those actively preparing to develop the property. But only if the code is crafted that way.

Here's the link to the rest of the article:


Well, here's something informative and relevant, perhaps. The municipality of Litchfield Park, Arizona, which currently has no property tax, is holding a meeting of the City Council to put one on the ballot, to the order of $1 million dollars a year, in order to fund a mutually administered fire department with Avondale.

"With the proposed property tax, there would be money left over to save recreation programs and maintain parks and roads.

"At a town hall meeting Saturday, [Council member Peter] Mahoney asked how many people would support a property tax. About two-thirds of the 100 to 150 residents said they would."


And the two comments on this article are rather interesting as well:

(1) "What a cop out by the council but letting the voters decide if they want a property tax . Who is going vote for any kind of tax ? We elected you to make unpopular decisions so do what is right whether its popular or not. If you state we cant sustain basic services then you answered your own question. I dont want basic services I want more and better services so if you need to institute a property tax go ahead and do it. I will do what is responsible if I need to vote on it, but unfortuantely in the Me generation a majority of the voters will vote no and expect someone else to pay for it or expect it for free."

(2) "By state law, property taxes can only be levied by a vote of the citizenry. City councils cannot put in a property tax on their own."

The second comment, if true, is particularly important. However, so far as I can tell, it is mistaken:

"State law (A.R.S. §42-17107) requires cities and towns to provide notice and conduct a public hearing if their primary property tax levy, excluding amounts related to new construction, will be greater than the primary levy in the prior year. The Truth in Taxation law requires a public hearing on the proposed primary levy on or before final budget adoption. Further, the statute stipulates a roll call vote on the Truth in Taxation resolution."


So, at maximum, it appears, the city council is required by state law to post notice, hold a public hearing, and hold a roll-call vote, in order to pass a municipal property tax.

I confess that I am not expert on this matter: if anyone knows otherwise, and can document this, please do so.

Please note that much of the downtown vacant land is not only owned by the failed Mortgage Ltd., but also by the City of Phoenix.

Vacant unlandscaped land creates hardship for those who live next to it. By being taxed at a lower level by owning vacant land, the land bankers diminish the inherent value of the homes that surround them. Penalties should follow.

That's an important observation, Mr. Weiss. I tried searching the Internet for figures showing what percentage of downtown Phoenix land is owned by the city, but couldn't locate it. Do you (or others) have this figure?

Downtown Phoenix has it's problems, but there are solutions. We can't turn our back on it, just because it's taking a few steps back, though it cannot be allowed to stagnate as it is.
I don't know what to do except promote it as I can to my friends and clients and to spend my dollars there.
The acres of vacant land are becoming a drap characteristic which is starting to define the Central City.

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