FRESH STOPS
Non-profit fund boosts construction along light rail
Light rail has spurred the development of several housing, office and retail projects in Phoenix, Tempe and Mesa. But more than a dozen of the new developments might not be open or under construction without the help of a $20 million non-profit fund created to support housing and redevelopment near the tracks.
The Sustainable Communities Collaborative is a partnership of more than 35 entities powered by money from the Local Initiatives Support Corp. and the Raza Development Fund. Leveraging that mon-
ey has helped finance about $150 million in projects along metro Phoenix’s light-rail corridor.
Since 2011, the collaborative has spent $11 million of its funding on 15 projects, including redevelopment of the old Beef Eaters restaurant on Camelback Road in Phoenix, affordable housing with a day-care center above a thrift store along Tempe’s Apache Boulevard and a senior residential project across from the arts center in downtown Mesa.
More than 900 apartments and condominiums that have gone up near the 20-mile lightrail line have been developed with funds from the Sustainable Communities Collaborative. The group still has $9 million to spend.
“Sustainable Communities has been a complete gamechanger for all types of development along the light-rail line,” said Brian Swanton, Arizona president of Gorman & Co., the developer of three projects with the group’s funding aid, including the Tempe thriftstore project called Gracie’s Village.
“The collaborative has worked directly with us to solve complex political issues transit-oriented developments often raise, especially the issue of introducing density to areas.”
Building partnerships
The Valley’s light-rail system began service as the economy and real-estate market were crashing in 2008. Several projects planned during the boom to go up along the emerging transportation corridor suffered or failed with the rest of the region’s housing market.
Arizona growth analyst Shannon Scutari believed the needed housing and commercial development along the light rail could be built during the downturn if the cities and other entities involved banded together.
The former growth adviser to Gov. Janet Napolitano was working for the Arizona Department of Transportation in early 2011 when the opportunity came up to receive money from the national non-profit LISC and create a fund to spur development along metro Phoenix’s light rail.
Scutari worked with LISC’s Phoenix leader, Teresa Brice, to plan a daylong trip on light rail for Michael Rubinger, the nonprofit’s New York-based CEO. The first stop was a meeting with then-Phoenix Mayor Phil Gordon, then lunch in Tempe with Hugh Hallman, then Tempe mayor. And the last visit was with Mesa Mayor Scott Smith.
“All three mayors were enthusiastic about a partnership to develop vibrant urban environments and transit-oriented communities with a mix of housing starts, new community-health centers and entrepreneur startups along the rail line,” Scutari said.
LISC, a non-profit community-development financial institution created by the Ford Foundation, committed $10 million. Rubinger called his colleague Tommy Espinoza, CEO at Phoenix-based Raza, the largest national Hispanic community-development loan fund in the country, which then also committed $10 million.
Scutari, who left ADOT in mid-2011 to start a collaborative with its funders, calls the group “a confluence of money, momentum and community leadership coming together to reshape the Valley’s development patterns.”
She said the group works with all levels of governments, real-estate developers and neighborhood and community associations.
Funding infill
Developing projects, espe- cially affordable housing, in central-city areas is usually more expensive and difficult because of higher land costs and detailed zoning and construction requirements.
But infill projects are important for growing metro areas because they save residents money on transportation.
“We know that people who drive to qualify for a home on the fringe may pay less for their home, but their combined housing and transportation costs average 65 percent of their gross monthly income,” said Michael Trailor, director of the Arizona Housing Department, a partner of the collaborative.
He said combined housing and transportation costs for people who live closer to their jobs are only about 45 percent of their income.
The Housing Department has awarded developers federal tax credits administered by the state agency to help finance several projects near light rail.
The type of funding developers receive from the collaborative varies by project.
“Each project comes to us with a developer who has a set of partners and financial institutions they already have relationships with,” said Brice, executive director of LISC Phoe- nix. “Our funds can be used for acquisition, predevelopment and bridge financing if needed.”
Development diversity
Light-rail project needs vary greatly.
The Newton development is in a high-traffic area at Camelback Road and Third Avenue. Phoenix-based Venue Partners is redeveloping the former Beef Eaters restaurant. Beef Eaters, opened by Jay Newton in1961, was for decades a favorite gathering place for diners who came for the prime rib, steaks and seafood. The restaurant closed in 2006 and had been vandalized many times before Venue took it over.
A Changing Hands bookstore, a restaurant created by the owners of Beckett’s Table and a workspace called the Lively Hood will anchor the Newton, and owners of the three businesses are also investing in the development project.
Alliance Bank of Arizona worked with the collaborative on financing for the Newton.
“The bank has a longstanding interest in downtown redevelopments.“said Ed Zito, Alliance president. “Developments like the Newton will sustain Valley communities, and it takes bipartisan collaboration between many entities for those projects to happen.“
Union@Roosevelt in downtown Phoenix, another project getting help from the collaborative, soon will be under construction. The apartment/retail development will be built next to one of the Valley’s busiest light-rail stations at Roosevelt Street and Central Avenue.
“We had to assemble a number of smaller parcels that had been vacant for 50 years, relocate utility lines, water lines, etc., as well as abandon an entire lane for traffic that was running through the middle of our property,” said Matt Seaman, a partner with Union@Roosevelt’s builder, Metrowest Development.
He said the collaborative’s help allowed Metrowest to make the necessary improvements, which required more than a year’s worth of engineering and design work, to develop the project.
Gorman’s Gracie’s Village project is the redevelopment of a 60-year-old Tempe building, where Grace Community Church still operates a thrift store. The project includes 50 affordable apartments above the thrift store, a Wi-Fi lounge, roof deck, playground area and energy-efficient appliances.
In downtown Mesa, the group helped fund Encore on First, a five-story, 81-unit urban building developed to provide transit-oriented living for seniors. The new housing project includes a fitness room, reflection pool, lounge with a large covered balcony, storage lockers and barbecue area.
Expansion
A record number of riders boarding light rail last year is helping with the transportation line’s expansion, according to its operator, Valley Metro.
Construction is under way to expand the rail line farther into central Mesa and to northwest Phoenix along Interstate 17. A plan for light rail extending to south Scottsdale is drawing more supporters.
The collaborative could also expand.
“It’s exceeded our expectations,” said Brice. “We originally planned to spend $10 million on transportation-oriented projects in five years. We beat our own goal.”
To help spur development along the growing light rail line, the collaborative is working on growing its fund to $50 million from other nonprofits and foundations.
“Raza and LISC really stepped up when no one else would,” Raza’s Espinoza said Friday from a conference in Northern California, where he is trying to raise more money.
“Affordable housing and health care wasn’t necessarily considered an economic-development tool before, but in the Valley we have shown they can be,” he said.
St. Luke’s Health Initiatives is also a member and big supporter of the collaborative, Scutari said.
Raza recently received a $6 million grant from the JPMorgan Chase Foundation to invest Valley-wide to help lowincome families and communities in south Phoenix, Tempe and Mesa.
Espinoza said the success of the collaborative has put Raza on the radar of more big foundations and other community redevelopment funders.
“The collaborative shows what can happen when groups and governments work together,” he said. “Affordable housing and other special-use housing used to be the leper in the development game. But in the Valley, we are proving its an important part of the community’s fabric.”