The Phoenix, Arizona Downtown Con: Instant Gratification

 

PHOENIX (By Jon Garrido, Arizona News) October 16, 2006 — The phone lines at the downtown Phoenix Hyatt Regency are all lit up as reservations are being made from callers from all over the United States and beyond as news spreads across the globe — the Cronkite School is coming to downtown Phoenix.

 

Instead of families planning on visiting Baltimore's HarborPlace, Faneuil Hall Marketplace, Disneyworld, the San Antonio River Walk, Pike Place Market in Seattle, or the San Francisco Cable Car Tour, everyone is now adjusting travel schedules booking visits to downtown Phoenix to visit the Cronkite school.

 

Not just visitors planning summer vacations but even more jubilant, the Arizona Convention Bureau is biting at the bit planning market campaigns to further the draw of the Cronkite Center to tourists from all over the world. If lines are too long to get in to the Cronkite school, visitors will have access to visit the medical school and watch fourth year students scrub up for surgery.

 

Developing downtown Phoenix into a college campus with medical school and supporting hospital is not the way to build a vacation destination to advance Phoenix into the realm of world class cities.

 

No one questions building a medical school and supporting hospital campus is needed in the Phoenix area but building such a complex on the most valuable land in Arizona and consequently, diminishing available land to build a downtown that will attract visitors from all over the world to visit a destination center in downtown Phoenix is certainly questionable.

 

A medical campus should be built where land is readily available, affordable and most importantly, where land use will not diminish opportunity for destination uses of downtown Phoenix land.

 

In fact, one does not need to visit other cities to see quality development success. A drive to the corner of 24th Street and Camelback will be a visit to a first class showcase development. Hard to imagine but all done without public subsidies.

 

24th Street and Camelback is high end superb development — the kind of development that should be driving downtown Phoenix development. These are very different market areas demographically but imagine what downtown Phoenix would look like if it was similar to 24th Street and Camelback.

 

Put another way, the number of supporters to further develop 24th Street and Camelback as a college campus including medical school and hospital can be counted on the fingers of one hand.

 

If the Camelback corridor came together to fight Trump on height, think how this power community group would react to what the City of Phoenix is now planning and doing in downtown Phoenix utilizing all available downtown land for a college and medical campus.

 

Cook County Hospital in downtown Chicago is a prime example of not being a destination center for Chicago. It is the ever winding river with numerous bridges that has made downtown Chicago famous particularly during Christmas with the use of twinkling lights everywhere.

 

Those involved in marketing Chicago never mention Cook County Hospital as an attraction yet Phoenix seems determined to build its own Cook County Hospital on land that should be earmarked for greatness rather a surgery room.

Instant gratification is no answer to downtown Phoenix development that in the end will bring demise to what was a golden opportunity to make Phoenix one of America's premier cities. Instant gratification makes for headlines and great sound bites but the only way to develop downtown is to look long term at quality destination projects that add synergy to additional development thereby increasing property and sales tax revenue.

Questionable downtown develop is not new to Phoenix. It began with the property on the north side of the Phoenix Civic Center which is a block owned by the Catholic Diocese of Phoenix.

To develop this key parcel, Bishop O'Brien gave the assignment to the once prima donna of the Diocese: Monsieur Dale Fushek whose only development experience was limited to developing a youth movement. The Diocesan parcel abutting the civic center on the north side would have had any savvy developer drooling at the possibly of maximizing the site with a high density multi use convention hotel, class A office space and retail structure.  Even high rise condominiums would have worked in the tower. Directly behind Saint Mary's Cathedral is where Saint Mary's High School once was located and had it been restored to historical architectural significance, the restored school could have provided class A office space to chancery staff.

Parking for the renovated Saint Mary's school diocesan center could have been accommodated underneath the tower structure to the east along with providing underground parking for tower users.

The tower could have easily duplicated the amount of space built as the Arizona Center with location being more premium for its location directly across a small collector street from the Phoenix Convention Center, a premium ideal site for a convention hotel complex.

The ideal scenario would have been to execute a unsubordinated land lease to develop the underground parking garage and tower above accommodating the convention hotel and office space. By leasing the church land, the Diocese of Phoenix without risk would have receive in excess of $20,000,000 annually indexed by the CPI which could have been used by the Diocese to cover increasing operating costs and increased charitable services. A golden opportunity lost because of the lack of foresight and development experience of Monsignor Dale Fushek, a parish priest now waiting for his faith to be decided in court on charges of molesting youth in his care.

Similar to Fushek is Phil Gordon, former photography shop operator, now making decisions on downtown development as indicative of having development done by persons with no development expertise.

Similar to the loss of development opportunity by the church is to use a prime piece of property in close proximity to the convention center for restoring a handful of low density buildings to accommodate 24 students to attend a medical school.

The crux of the problem is public officials without development experience are responsible for Phoenix downtown development.

If anyone thinks city staff will provide balance then you do not know how a city functions.

No one on staff is going to go against the grain and voice another direction because no one bites the hand that feeds them.

This of course assumes city staff has private sector development expertise. No Phoenix staff person has this depth of expertise. No one has "risk" experience for all are to quick to use "public" money that has no risk.

Then comes parking. Every structure will have to deal with parking. Remember it was lack of parking that killed the Mercado.

As beautiful as the Mercado complex is that was planned for primarily restaurant and tourist retail, the complex was planned and developed without regard for parking. On the same day the Mercado gave birth to restaurants and other tourist type retail, the Mercado died. There was no parking for visitors.

Parking is critical and Phoenix does not have a good record in this area.

Most regional malls are placed in suburbs not only because this is where consumers live but also because of the cost of land makes numbers work in developing regional shopping centers that require a sea of at grade parking surrounding each center avoiding the cost of constructing a parking structure. Down or above grade the numbers are nearly the same, $15,000 per parking space.

Who then is going to pay for a parking structure to accommodate the Phoenix medical school and hospital's parking needs? Again, the public developer will turn to the public to finance this cost. Translation: Taxpayers will pay this cost.

Taxpayer subsidies are bad enough but the real villain is utilizing land use for public structures diminishes land available for destination type land uses.

All private development professionals strive to maximize development opportunities by placing the highest and best use for each property. It is highest and best use that drives development at 24th Street and Camelback. It is the market place that determines highest and best use also known as laissez-faire that the free market is best left to its own devices, and that it will dispense with inefficiencies in a more deliberate and quick manner than the Phoenix mayor and city council ever could. Particularly because Phil Gordon and the city council members are clueless and lack development experience.

Adam Smith argued the invisible hand of the market would guide people to act in the public interest by following their own self-interest that drives by market demand as evidenced by increased tourism found in major cities. Simply put even for a clueless mayor and council — build it and they will come. This premise attracts millions of persons to Las Vegas each year as does the San Antonio River Walk.

For a city, the traditional litmus test — does the proposed use contribute to critical mass to spur additional development with the ultimate test: will the development significantly add to property and sales tax revenue for the city. The Las Vegas hotels and casinos do this. The San Antonio River Walk does this.

The ASU downtown Phoenix campus along with the medical school and forthcoming hospital will not do this. The ASU downtown Phoenix campus is a disaster in the making.

The market drives 24th Street and Camelback; consequently, there is no need for public subsidy. Which begs the question why is public subsidy always a requirement for developers in the downtown Phoenix area? It is only because developers know the City of Phoenix is an easy touch on downtown development.

It appears public subsidy in downtown Phoenix is the equity contribution of the Phoenix mayor and city council who have no risk development experience other than maybe not winning in the next election. Yet, if no one questions, then all public subsidies freely flow.

It is when private developers know public subsidies are readily available, developers approach the mayor and council for free hands outs for projects that could never get off the ground supposedly unless they receive "gap" financing to make the numbers work. The more public money that is available, the greater need for subsidy that is requested.

The payoff for city officials without development experience, the public recognition of spearheading less than highest and best use development to win elections.

Gov. Janet Napolitano said, "What we are doing here is not just creating a medical school, we're creating a biomedical campus for the 21st century."

An appropriate downtown use?

Sounds like Phil Gordon, Dale Fushek and now Janet Napolitano with no development experience that instantly become experts on downtown development.

Then there is the Pied Piper of Hamelin or rather of ASU. 

Building a school campus on the most valuable land in Arizona does not contribute to the convention and sports event focus working as a magnet for downtown activities. A downtown campus will do nothing to attract major conventions and tourists.

A development overlay should be approved by the City of Phoenix to insure only development that adds to the convention and tourist focus should be approved with a jaundice view of all other development. If developments do not sustain convention, tourist, and first class office, they should not be built.

The ASU Phoenix downtown campus is short sighted or rather — work in progress of instant gratification.  Downtown Phoenix should be for spenders not students. Students do not support affluent spending. The ideal city is a combination of New York City, Chicago and Miami. Work, home and play in one area: downtown. Retail did not work at Arizona Center for it was ahead of its time without affluent consumers. It is doubtful it is going to work for ASU. It will end up looking like retail near the Newman Center in Tempe — dismal. Schools can not pay rents required by first class office or retail space. Thus, school space can never be justified in a central business district where highest and best use is an absolute requirement.

And if any one thinks the Phoenix downtown ASU campus will revitalize the downtown Phoenix core area with major income producing properties need only drive to the ASU main campus in Tempe.

I was there last month and I failed to see a Nordstrom. I did not even see a Gap. In fact the only retail I saw was very small four store fronts on the north side of the Newman Center.

Nordstrom and the Gap are market driven. Where there is demand with shoppers having high disposable dollars, these stores that cater to the affluent will be built.

Students have few disposable dollars compared to first class office building workers and affluent home owners.

To further magnify the type of retail supported by students, drive the ASU Tempe campus east to Scottsdale Road/Rural Road then south to Apache Blvd. This area looks like Iraq. Not a pretty site and as for retail, how does anyone justify students without high disposable incomes needed to generate economic multipliers? Student incomes will not generate leverage supporting the types of retail development found at 24th Street and Camelback.

And without this type of retail, the illusion of high rise luxury condominiums in downtown Phoenix will be limited.

When I was the executive director of economic development for the City of El Paso, I joined the prestigious Urban Land Institute, bought the entire ULI development library, read every publication, attended numerous development workshops and conferences and most importantly, toured nearly all major cities to see first hand how downtowns were successfully developed. (These type experiences were not new for I began doing this when I was the economic development coordinator for the City of Tucson and continued when I was the v.p. for planning and development for once the largest real estate development company in Arizona). The most classic being the transformation of the Trinity River into San Antonio's River Walk. This is a prime example of revitalizing a down town and Indianapolis Circle Centre Mall creatively and ingenuity placing a regional mall above the central business district along with adjacent sports facilities. The most noted being Baltimore's HarborPlace and Faneuil Hall Marketplace in Boston. My favorite is Chicago's downtown area especially with a flood of Christmas lights twinkling above the river making downtown spectacular.  Even San Diego is noted for revitalization of its downtown area with the historic Gaslamp Quarter.

The point being made in each of these examples is tourist cities all have a destination downtown. This is what is lacking in concept for downtown Phoenix. A university campus with medical and a journalism school does not even come close.

The recently approved Streetscape is not a destination. It will provide for those that work in the downtown area and to the few that live in downtown. It is not a River Walk. It is not a Faneuil Hall or Baltimore Harbor Place. No one working and living in Scottsdale will ever drive to downtown Phoenix to shop at Streetscape. Neither will anyone living in Superior or Globe drive to downtown Phoenix to shop at Streetscape. This should illustrate Streetscape is not a destination and the premise made in this writing: a destination is absolutely required to take Phoenix into the realm of great cities.

Someone much wiser than I said “they are not making any more” and to utilize some of the most valuable land in Arizona for a few two story buildings to house 24 students is even dumber than utilizing the block north of the civic center for a low density two story building to house the Diocese of Phoenix.

This prime piece of real estate in downtown Phoenix now occupies a two story low density building with no architectural significance.

This in itself illustrates the City of Phoenix who in essence believes in instant gratification. By utilizing the most valuable land in Arizona achieves nothing to increase the critical mass needed to revitalize downtown Phoenix.

This madness has got to come to a halt. Soon all downtown Phoenix will be one huge campus. It is time to quit following the Piped Piper and send him far away.

Maybe in the short term, the downtown area will go from empty blighted parcels but eventually, downtown Phoenix instead of high rise office and a destination project that would have attracted housing and then retail is not going to happen.

Why not use the medical school to anchor a medical campus near Mayo? Everyone concerned with development should take a look at Cook County Medical Center in Chicago and ask themselves is this the best use of prime Phoenix downtown land? If anyone has difficulty with this, ask yourself if any medical hospital campus located at the corner of 24^th street and Camelback is an appropriate land use?

I for one think downtown Phoenix should surpass 24^th Street and Camelback with a imaginative destination center if we want Phoenix to become a premier city.

The City of Phoenix is in desperate need of leadership that understands development. Instant gratification for the sake of a campaign slogan is not the long term answer.  Following the Piped Piper is not the answer.

2007 will bring about an opportunity for change of leadership in Phoenix. Arizona News with this writing now begins to bring attention for the need of change.