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PHX Establishes Strategic EDV Fund

Phoenix has had some notable success with adaptive reuse, such as The Newton, a mixed-use gem that rose on the site of the iconic, but long-shuttered Beef Eaters restaurant. Adaptive reuse has been hampered by aging infrastructure, which makes redevelopment cost prohibitive in many cases. It is hoped that Phoenix’s new Strategic Economic Development Fund will ease the infrastructure burden and spur new infill and adaptive reuse projects downtown. Photo credit: The Arizona Republic

By Luci Scott for Arizona Builder’s Exchange

The Phoenix City Council took a big step toward boosting private development when it created a Strategic Economic Development Fund.

The 8-1 vote on Feb. 10 to set up the fund will advance Phoenix’s competitive position in the regional, national and global economy, said Christine Mackay, the city’s director of community and economic development.

The fund will require no new taxes and current revenue will be reallocated and earmarked for the fund, which will be subject to annual city council appropriation.

The source of the funding will be 50 percent of eligible General Fund sales tax revenues from construction, utilities, telecommunications and commercial rentals.

Categories to be included would be new construction, existing but never-occupied buildings, and existing facilities that had been vacant at least six months prior to the current fiscal year.

After the meeting, Mackay said Phoenix has a number of buildings that are vacant and will stay vacant because they’re lacking adequate infrastructure. For example, a building may need to be upgraded to larger water pipes. The city would do the upgrade, and once a new tenant moves in, 50 percent of the sales tax would go to the fund.

Once-vacant structures would house new jobs

“This gives the city a focused revenue account to fund public infrastructure,” she said, adding that jobs would be created in the once-vacant structure.

“Those are jobs that help us grow (out of economic slumps); instead of cutting, we should be growing. This will create a new revenue source for the city.

The existing vacancies are great land sites or buildings that are not generating profits because the outmoded infrastructure is too costly to upgrade by a potential purchaser, she said.

She told the council that revenue sharing would remain in effect for up to five years on a project and that specialty taxes generated by a profit would not be contributed to the fund.

The main focus of funding would be to support one-time expenditures, and that projects would only be eligible to contribute to the fund if the city has had “meaningful and direct involvement” in attracting and/or developing the project.

The process would be subject to review, confirmation and action by the city’s finance and budget and research departments.

City council would set priorities

City council would annually decide the priorities for expenditures from the fund, and the priorities recommended by the community and economic development staff are public infrastructure improvements, land planning and development, job-training programs, job-creation programs, entrepreneurial and early-stage programs, marketing opportunities and future economic-development staff.

Before the vote, Councilman Sal DiCiccio said, “I like the idea of getting away from tax incentives. This money will be used for such things as capital improvements, job training and marketing.”

Council member Michael Nowakowski said, “There is a lot of property downtown that hasn’t been used for years because of problems with infrastructure such as plumbing and utilities.”

Mayor Greg Stanton noted that the council’s decision to create the fund is a conscious choice and that it would mean less funding for other things, but that economic development work prompts the arrival of high-wage jobs and manufacturing.

“There’s a range of economic development projects worth investing in … and it’s not going to happen by osmosis or by accident,” Stanton said.

Councilman Bill Gates said the financing plan is within the law and is a way for Phoenix to get “its fair share, and this is absolutely the way to do it.”