Tempe to weigh revising lake plan
Developers may get financial incentives
The Tempe City Council took a leap of faith more than a decade ago when it sank $44.8 million into building a 21⁄ mile-long lake in the desert.
The council hoped that risking the debt to create high-profile waterfront property would pay off in the long run for Tempe, then a landlocked city desperate for new development.
But 14 years after the lake opened in 1999, city finance officials say Tempe is faced with a reality check that Town Lake is far from reaching the city’s development goals.
Tonight, the council is expected to consider revising a financing plan for Town Lake.
City finance officials have said the revised plan would give developers a financial break on their share of costs tied to the man-made lake, make private development more affordable and, ultimately, advance Tempe’s plans to secure sufficient lakeshore private development to ease the hefty public costs of maintaining Town Lake.
But critics argue that taxpayers have long carried the financial burden for private lake development.
The new plan offers no guarantee that economic breaks for developers will actually spur construction, argue Joe Pospicil and Art Jacobs, two longtime Tempe residents who regularly question city finances and criticize lake expenses.
If approved, the revised plan also would shift the burden of paying for a new west-end lake dam, which the city has estimated will cost at least $37.4 million, to Tempe taxpayers, freeing developers from sharing the expense to replace the dam.
Approval of the city proposal would mark the second time a Tempe City Council, aiming to drive development, has tweaked the original 1995 lake-financing plan in favor of developers. The first was in 1997.
Mayor Mark Mitchell said he believes the proposal merits more time in the public realm so that council members may gain sufficient community feedback.
But it remains to be seen whether Mitchell’s colleagues agree that the council has a responsibility to arrange future forums for the public to question and comment on the proposal.
As of Monday, the proposed changes were included on the agenda for today’s council meeting.
The finance proposal is not set for a two-hearing process, which would have allowed for public comment at the first hearing and then required a vote and a second opportunity for public comment at a future council meeting.
That means the council could choose to approve the revised Town Lake financing plan with little opportunity for public input.
But before the council agenda was posted on the city’s website Friday, Mitchell said he still had questions about the financing plan.
“When we initially developed the lake, we had a plan, but it’s a working document,” he said. “We might change it, we might not. (But) we’ll have enough time to thoroughly review (any formal changes).”
Mitchell said he expects staff today to merely explain the long-term impact of the proposed changes.
The proposed finance changes were triggered by an economic reality check, Roger Hallsted, the city finance analyst for the Rio Salado Community Facilities District, told T he Arizona Republic.
“From all of our original projections, (we were) thinking really by about this time ... the lake would be built out,” Hallsted said.
Tempe’s goal is for private development on 120 acres to generate assessment fees covering 60 percent of annual operations costs.
But a Republic analysis last year revealed that in the 13 years since the lake was filled, private development still only covered about 20 percent of operation and maintenance costs, well below the 60 percent envisioned in the original city plan.
Tempe taxpayers have and continue to pay the majority of the $2 million to $3 million in annual costs for operations and maintenance as well as most of the bill for the $44.8 million in original construction costs.
Private investment has spurred construction of about 24 acres of condos, high-rise office and commercial space around the lake. Town Lake supporters blame the recession for slower-than-expected development.
The proposed changes to the financing plan are aimed at making land surrounding Town Lake more attractive to private development, Hallsted said.
If the council approves the changes, Town Lake developers would pay less toward their share of payments for the original construction costs.
The proposal emanated from Tempe’s Enhanced Services Commission, Tempe Finance Manager Ken Jones said.
The commission includes representation from Jones; Town Lake developers; Nancy Hormann, the president of the group that manages the downtown Tempe district; and Arizona State University, which owns and is attempting to develop acres of lakeshore property.
A Republic review of public records from the commission meetings shows that commission members have spent the past year discussing development and maintenance plans for the lake.
At a January meeting, Jones asked for “the logic behind asking the council to cover the cost of replacing the dams,” according to public records of the meeting.
Hallsted said shifting the cost of the dams from being a shared debt with private developers to a taxpayer-only-funded cost is the result of the original rubber dam deteriorating years earlier than expected.
“These new dams, at $38 million to $50 million, if we were to put that in at the true cost, just the (Town Lake) infrastructure replacement budget would have gone from $531,000 (annually) to $2 million,” he said.
The city had to face facts, he said, that it would have to shoulder the dam’s cost rather than “bankrupting every single (lake) property owner,” Hallsted said.
The commission questioned whether it’s “more expensive to build at the lake than anywhere else in the Valley” and whether the city was “willing to offer an incentive to level the playing field,” according to public meeting records.
The commission recommended a plan that would lower an annual “holding fee” of sorts that developers pay until they build on their lake property.
If the revised plan is approved, that fee would be reduced from the current 5 percent to the rate of inflation, which is currently 2.2 percent, Hallsted said.
The financing proposal also includes lowering the annual interest rate developers pay over the 25 years they are allowed to pay back their share of lake construction.
The current interest rate is 5 percent, and the proposal would lower it to 3.64 percent, Hallsted said. He added that the proposal calls for the council to make the rate reduction retroactive to July 1, 2009.
If the council approves rolling back the fee, developers that have built existing commercial and residential development at the lake would receive credits on biannual debt payments they are currently making.
While critics worry that taxpayers are funding too much of the cost for Town Lake, Hallsted reasons that the revised plan will establish a realistic financing plan for the lake and encourage development that will help pay a greater share of the lake’s annual operations and maintenance costs.
“The key thing,” he said, “is being fair to the citizens, but try to make it more enticing for developers to come in.”