Tempe Developments

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The city of Tempe has seen a burst of large developments. Tempe Mayor Mark Mitchell will discuss Tempe’s large-project building boom, including the massive office building being constructed for State Farm Insurance.

Ted Simons: Planning and real estate developments are on the increase in Tempe with a number of ambitious commercial projects ready to get started. Tempe Mayor Mark Mitchell is here. Let's start with a biggie, the development along Town Lake. This is huge.

Mark Mitchell: This is huge. This is the largest Class A office building ever built at one time in the state's history, right now in downtown Tempe on the Rio Salado. It's going to go north of stadium between Rural and about halfway down close to the residential Bridge View units on Tempe Town Lakes.

Ted Simons: Those are parking lots right now?

Mark Mitchell: They are.

Ted Simons: Do they go all the way to the last residential tower?

Mark Mitchell: There will be one more residential unit built between State Farm and Bridge View. We have one more residential use called the Loft, and a Class A $600 million project.

Ted Simons: Office only? Retail? Residential?

Mark Mitchell: There will be some retail to help serve the campus. I believe there's 40,000 square feet of retail.

Ted Simons: At the State Farm development?

Mark Mitchell: Yes.

Ted Simons: But you said there would be another residential tower next to those two along the waterfront?

Mark Mitchell: The City Council approved and they will hopefully be starting soon.

Ted Simons: Isn't there another commercial office real estate deal going right there at the corner when you get off the Mill Avenue bridge?

Mark Mitchell: There is. It was the first project on the lake. We are hopefully soon going to break ground on a tower on the Hayden Free Lake side. It's going to be 10 stories, just going mirror the original plan.

Ted Simons: Just basically another tower to go with the --

Mark Mitchell: Yes.

Ted Simons: Okay. Has ground been broken on the State Farm development thing?

Mark Mitchell: Very, very soon, this month.

Ted Simons: What kind of timetable are we looking at?

Mark Mitchell: No phasing in, everything at once.

Ted Simons: 2015? That quickly?

Mark Mitchell: Yes.

Ted Simons: Are you ready for this?

Mark Mitchell: We're ready for it. We're working with our partners at ASU and we are very well planned out for the infrastructure needs of our community. I think we're ready to go.

Ted Simons: How many employees?

Mark Mitchell: They are saying 8,000, we'll see what happens.

Ted Simons: As far as the original plan for that stretch, was it something similar to this? When did State Farm all of a sudden become a player here? This seems relatively recent.

Mark Mitchell: It is relatively recent. But the development in and around Tempe is not by accident. For many, many years the council and past councils have worked diligently to have the infrastructure to house projects like we're going to see for State Farm and other projects like the Grand. We will see Go Daddy coming to a 150,000 square foot building. They are coming into Arizona. This is a work in progress. We have prepared ourselves very, very well to handle the infrastructure needs for the projects to come to our city.

Ted Simons: Were incentives involved to entice these corporations?

Mark Mitchell: No. The only incentive is to continue to invest to attract companies. We have a great quality of life and companies look for that. We have a great art scene and public amenities for our residents, as well as employees that come here. The attraction is our central location, right next to the University, the downtown area, great neighborhoods. I know you just had Superintendent Huppenthal on. The high school district has the highest number of Flynn scholars of any high school in the state.

Ted Simons: If this were happening five years ago, would they be more responsible for maintenance of the lake than they would be now?

Mark Mitchell: It's -- no. The original intent was to cover the cost of the lake. So each landowner is assessed a lake assessment, the district that we have.

Ted Simons: Yes.

Mark Mitchell: Right now State Farm will pay into that lake assessment when they are built. 100% of construction costs divvied up among the shareholders on the lake. It's a good thing to have that paying the costs of the lake.

Ted Simons: I know the city is looking at maybe a revised plan to make it more affordable for development there. Give us an understanding on that. First of all, are you looking at that? And secondly, is that a wise idea?

Mark Mitchell: We're looking at an undeveloped property. 20% of the lake assessments with interest. The City of Tempe is fiscally responsible. So we reduced and refinanced our construction debt. Our rate is only 3.64%. We had to go to the facilities district. We have been charging them 5%. We are trying to be a market in line with this to encourage more development. The State Farm project is going to be a catalyst for more development to happen.

Ted Simons: Critics are saying that significant developers are getting breaks regarding the cost of the lake. You say --

Mark Mitchell: No, it's just the opposite. If we're paying 3.64 interest on the construction debt, working with the landowners, that's all we're doing, being in line with the market.

Ted Simons: Does it mean higher taxes? More involvement with Tempe residents here?

Mark Mitchell: It's not going to increase taxes or deplete funds going to neighborhood parks or other capital improvement projects.

Ted Simons: One last thing about the lake. Original projections were the lake would be built out by now and development would account for maybe 60% of the cost of the lake. I think it's like 20%. What happened?

Mark Mitchell: The economy. It's the free market. We're working with the free market. We have development on the north and south shore. We approved the Loft, which is a residential use and we have State Farm. Now we have more interest in seeing the economy turn back around.

Ted Simons: And we're looking at the -- at a division of the State Farm development, a projection of what it's going look like. Everything from the condos all the way over, that's massive. That really is a massive project.

Mark Mitchell: It really is massive. It's very good-looking architecture with Davis Architects. We will still have the view corridors, which I think is important.

Ted Simons: It's basically not side by side.

Mark Mitchell: Correct.

Ted Simons: Let's get to Mill and University, and this is the idea of USA Basketball -- build a bunch of basketball courts there? What's going on there?

Mark Mitchell: For many, many years we've been looking for a hotel conference center. Out of this came discussions for an entertainment venue. By no means is this a done deal. We have to work out the agreements with the State and Arizona State University. We are partnering with them. The hotel aspects with the meeting space, but also the opportunity to have USA place as well.

Ted Simons: With this being an ASU project, how much input does it city have? What are your concerns and how much impact do those concerns have on the project?

Mark Mitchell: Our concern is we need meeting space to go after those many conferences, if you will, to complement the stuff the University is providing from the Bioscience Institute and the W.P. Carey School. They need a space to use for conferences and meeting space. It's a tremendous opportunity for tourism. Centrally located, proximity to Sky Harbor, it only makes sense to have the space.

Ted Simons: It sounds like the plan is happening as you think it should happen.

Mark Mitchell: Yes.

Ted Simons: There is an arena there?

Mark Mitchell: There could be potential for an arena there.

Ted Simons: 5,000 seats?

Mark Mitchell: That's what's being reported.

Ted Simons: Office space, retail?

Mark Mitchell: There will be residential there as well. We're talking about where the chili's is and a bunch of parking. Where Tower Records used to be.

Ted Simons: When could this break ground?

Mark Mitchell: Hopefully we'll see, hopefully within a year. That all depends on the agreements the City Council approves, as well as working with ASU.

Ted Simons: Not to get too deep in the weeds here because it's an ASU project does the city get much in the way of tax revenue here? Do they have to reimburse the project in any way?

Mark Mitchell: It depends on how the deal is structured. It will be performed based, in other words, no city tax dollars. Whatever revenues are produced will go back into the project to help with the project. I think it's very, very important we understand what tourism means to the state of Arizona. We attempt to go after those tours to really get that marketing exposure for Tempe.

Ted Simons: But there will be infrastructure costs.

Mark Mitchell: There will be, and the project development should pay for itself, that's going to happen.

Ted Simons: Sounds like you are very busy down there. It'll be going to see how this all shakes out.

Mark Mitchell: It's exciting.

Ted Simons: Thanks for joining us.

Mark Mitchell: Thank you very much.

Mark Mitchell:Mayor, Tempe;

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