Council OK to be asked on land flip

Letcher, developer signed deal before seeking formal approval
2011-03-22T00:00:00Z 2014-07-02T14:41:40Z Council OK to be asked on land flipRob O'Dell Arizona Daily Star Arizona Daily Star
March 22, 2011 12:00 am  • 

The City Council was poised to vote today on a controversial land deal for a west-side developer - except City Manager Mike Letcher quietly signed the deal in late January.

The council was to have voted on extending an agreement with the Gadsden Co., giving the developer more time to buy a 1.5 acre city-owned property for $250,000 and immediately sell it for $1.43 million.

Letcher said in October that he would bring any change to Gadsden's agreement back before the council for approval. However, in late January he signed an extension drafted by Gadsden extending the deal until May.

He was unavailable for comment last week, but his assistant, Sean McBride, said that, despite Letcher's earlier commitment, he went ahead with the agreement because in early 2010 the council gave the manager's office the authority to make necessary updates.

McBride said the manager's office signed the deal in January because it's "in the best interest" of taxpayers and the city to move forward.

So now, today the council will be asked to sign an agreement further binding the city to a deal between Gadsden and Chicago-based Senior Housing Group LLC, which will use federal tax credits to build a 143-unit affordable-housing project on land south of West Congress Street, just west of the Santa Cruz River. The 1.5 acres is part of 14 acres Gadsden had a deal to buy from the city.

City Attorney Mike Rankin said entering into the agreement - called a joinder - with both parties gives the city more assurance that the project will be built because it calls for Senior Housing Group to take over Gadsden's responsibilities if Gadsden can't make good on its requirements.

Even if the city doesn't sign on, Rankin said it wouldn't scuttle the agreement allowing Gadsden to flip the property. Rankin said the new version of the deal requires Gadsden to pay $250,000 for the land, to put up a $250,000 performance bond once the deal closes, and to complete the relocation of a reclaimed-water line and utility work there.

The water line and the utility work could total $500,000, Rankin said, and the deal calls for that $500,000 to be held back in an post-closing escrow account and not released until Gadsden starts building the improvements on site.

If Gadsden does not make good on its portion of the agreement, all of its rights regarding the project will be transferred to the Senior Housing Group, and the remaining three phases of Gadsden's development deal will be nullified, Rankin said.

Gadsden partners Jerry Dixon and Adam Weinstein said they have upheld their obligations. Weinstein said they "are absolutely on track for a successful closing."

The two said they have plans for mixed-use development of office and retail space and housing along West Congress Street in the next phase of the project.

Part of Gadsden's master agreement for the 14-acre entire site is to put $3 million toward the cost of building the modern-streetcar tracks. Dixon and Weinstein said they will pay for the streetcar after the four phases of the project are complete, which might not be until 2015.

The modern streetcar is expected to be operational by late 2013, so Gadsden would actually pay the city for the streetcar after it's up and running. The city does not yet have commitments for the full $196 million cost of construction.

City officials said they can accept payment after the streetcar is built, but said they will require some type of security or bond to make sure it's paid. City spokesman Michael Graham said the payment is due sooner than Gadsden contends.

Council members Regina Romero and Karin Uhlich and Mayor Bob Walkup have already said they strongly support the Gadsden deal. Councilwoman Shirley Scott joined that group in the past week, saying she received a letter from Gadsden's attorney, Larry Hecker, that details the $1.5 million Gadsden said it put into the project. "I think that speaks well for this group," Scott said, adding Gadsden is not asking for any special treatment.

But Councilman Steve Kozachik said the agreement is another example of a bad development agreement written by the city, using an expletive to describe it. The city isn't standing up for its rights, he said.

"These guys have been working city staff. I'm tired of it. Enough is enough," Kozachik said.

No more development deals like Gadsden's should be allowed, he said, adding that Gadsden should be forced out if it doesn't comply with the new terms. He said all the money from the flip needs to be put back into the west side.

He'll be happy when "every penny from this project goes back into the project and not into their pockets," Kozachik said. "They should get nothing from this flip."

Contact reporter Rob O'Dell at 573-4346 or rodell@azstarnet.com

Copyright 2014 Arizona Daily Star. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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