Tag Archives: development

FutureShock

State Leaders Prepare The Copper State For Explosive Growth

An official letter from the state’s Lawn and Pool Use Enforcement Division says you must choose between taking out your green lawn or draining your swimming pool. You can’t have both, as the state has been severely restricting outdoor water use ever since the population of Central and Southern Arizona swelled to 10 million people around 2040.

You opt to keep the pool because urban sprawl and the heat-island effect have caused Arizona to break yet another record — the number of summer days when the temperature fails to drop below 100 degrees.

But time in the pool is getting rarer. Your daily commute from Pinal County to Phoenix is a grinding two hours. You’d like to work closer to home, but job centers and transportation routes haven’t reached your relatively new subdivision.

Welcome to the Sun Corridor, circa 2050.

With foresight, unified planning and a significant investment in the state’s infrastructure, the above scenario need not play out.

Without it, according to the author of a recent report on Arizona’s future, a part of the state risks becoming, not the next Los Angeles, but its bland sister — the San Fernando Valley.

“You’ll essentially get existing urban development patterns spread all over the place in a seamless, homogenous, urban fabric of chain stores, fast food restaurants and red stucco houses,” says Grady Gammage Jr., a principle author of “Megapolitan — Arizona’s Sun Corridor,” published by Arizona State University’s Morrison Institute for Public Policy.

The report predicts that land stretching from the middle of Yavapai County to western Cochise County to the Mexican border will someday merge into one integrated super metropolitan area — a “megapolitan” dubbed the Sun Corridor.

That doesn’t mean there will be uninterrupted development between Prescott and Tucson — there is too much Indian and federal land in the way. Instead, the corridor’s economies and commuting patterns will merge.

Imagine a series of overlapping circles emanating from Pima, Pinal and Maricopa counties. According to a measurement developed by scholars at the Metropolitan Institute at Virginia Tech, if at least 15 percent of workers from one area commute to another, those commuting patterns have merged.

Already, Pinal County sends 40 percent of its workers into other regions, most likely north to Maricopa County.

“That means Maricopa and Pinal are already merged,” Gammage says.

Some time between 2010 and 2020, Pinal is expected to send more than 15 percent of its workers south to Pima County, Gammage adds, creating an economic bridge between Phoenix and Tucson.

The U.S. Census designates these areas with cross-region commuting patterns as “combined statistical areas,” something the “Megapolitan” report says may happen by the 2020 decennial census.

The Sun Corridor will be one of 10 megapolitan areas in the United States. By 2030, it could be home to 10 million people and 4.5 million jobs, making it a potential hotbed of wealth and productivity. According to the report, the nation’s office market and high-tech clusters are in megapolitans.

However, as the Morrison Institute report asks, will Arizona be able to harness the staggering potential of such an area?

That would require a whole new level of dialogue and cooperation between the five councils of government, six counties, 57 municipalities and 300 other governmental units spanning the 30,000-square-mile area that would make up the Sun Corridor.

And the state is just at the beginning of that process, Gammage says, adding, “We’re behind the curve.”

Shannon Scutari, on the other hand, believes she sees progress every day.

As Gov. Janet Napolitano’s policy advisor for growth and infrastructure, Scutari is on the front lines of important growth initiatives, including the long-term planning exercise developed by the Urban Land Institute, AZ One – A Reality Check for Arizona, held last spring at the Phoenix Convention Center.

Statistics from the Morrison Institute

AZ One assembled more than 300 people from Maricopa and Pinal counties and guided them through alternative growth scenarios with the purpose of generating discussion and consensus.

“They’re talking to each other, there’s no doubt about it,” Scutari says of the disparate public and civic leaders she encounters in her job. “Some of them are actually even listening to each other.”

Scutari adds that the governor hopes to see the AZ One exercise duplicated in the Tucson and Flagstaff areas.

While her office is trying to bring several growth issues into sharp relief, Scutari says a pressing challenge is the state’s need to invest in transportation infrastructure.

That is why the Arizona Department of Transportation has begun a $7 million statewide study and is working with cities, tribal governments, land-use planners, regional transportation organizations and others to assess the state’s infrastructure.

One important feature of the Statewide Transportation Planning Framework, Scutari says, will be to connect land-use decisions with transportation infrastructure, some


thing that has never been done. The study already has outlined some of the most critical transportation needs.

Right now, the governor is backing an initiative campaign to put on the November ballot a one-cent increase in the state’s sales tax. The increase would raise $42 billion over 30 years to pay for transportation infrastructure.

The money is needed as Arizona’s roads and freeways are “only going to get worse in the next 25 years,” warns Tim James, director of research and consulting for ASU’s L. William Seidman Research Institute.

James headed a team that spent a year studying the state’s infrastructure and its ability to handle growth. The resulting report did not endorse the Napolitano-backed initiative, but it did say that without changes in funding mechanisms, the state cannot keep up with growth.

“There will be longer commutes, there will be more time spent in traffic, you’ll be traveling at lower speeds,” James says. “It’s going to be more congestion and less safe journeys. The road system is going to become unacceptably poor.”

The report, commissioned by the Arizona Investment Council, formerly known as the Arizona Utility Investors Association, concluded that accommodating growth is going to be “very, very costly” — probably $417 billion to $532 billion in the next 25 years.

In that time period:

  • Electricity demand will increase by about 85 percent, yet the state faces a funding gap in paying for new plants.
  • Just providing telecommunications services to the state’s current unserved population would cost up to $2 billion. Creating a state-of-the-art fiber network that would guarantee high quality telecommunications would cost about 10 times that.
  • Water delivery and treatment systems built decades ago will need to be replaced.

While it is impossible to predict exactly what the Sun Corridor will look like in 2040, planners do know generally where growth will occur.

Eric Anderson, transportation director for the Maricopa Association of Governments, says projections show most growth in Maricopa County will be in the West Valley as developable land in the east diminishes. Pinal County, where it meets the southeast corner of Maricopa County southeast of Queen Creek and the 275-acre state land parcel dubbed Superstition Vistas, will see a lot of growth as well. Finally, Anderson says, areas around Casa Grande and Maricopa will continue to expand.

According to MAG’s latest figures, there are about 1.8 million housing units already approved or entitled in various master-planned communities in Maricopa and Pinal counties.

Jay Hicks, co-chairman of the AZ One steering committee and a vice president at EDAW Inc., an architecture and environment consulting company, says people still can shape the character of future development, even in the face of all that entitled land.

Some parcels may need to be re-entitled as time passes and communities become more cognizant of the way land uses affect pollution levels and energy consumption.

Additionally, 40 to 50 percent of all commercial properties will need to be redeveloped in the next 15 to 20 years, Hick says.

Facing the challenges that come with growth seems daunting, but Scutari says there is “a sense ofoptimism” among the state’s stakeholders.

As Gammage put it: “There is an opportunity here, if we can seize it and get ahead of it, we can do something really special.”

Two new spring training stadiums

Two New Spring Training Stadiums Set To Debut In The West Valley

With football, hockey, baseball and possibly USA Basketball joining the mix, the West Valley is becoming an active sports mecca for the rest of the Valley. Recent additions to this bustling hub of game activity are new Cactus League training facilities in Glendale and Goodyear that will come online for the 2009 spring training season.

This year, the Cactus League set a record when 1.3 million fans (60 percent from out of state) attended spring training games. The Cactus League’s contribution to the state’s economy is more than $200 million a year.
“Spring training is a big draw and a great experience,” says J.P. de la Montaigne, Cactus League president. “We call it our Super Bowl every year.”

Glendale’s new facility will be the spring training complex for the Los Angeles Dodgers and Chicago White Sox. The state-of-the-art baseball stadium will have seating for 13,000, four major league practice fields, eight minor league practice fields, two practice infields and 118,000 square feet of major and minor league clubhouses for the two teams. Down the road, the 151-acre site will also have residential, restaurant and retail development, a four-star hotel and an 18-hole golf course developed by Rightpath Limited Development Group.

The Arizona Sports & Tourism Authority is funding two-thirds of the complex, and the city of Glendale is contributing one-third of the $90 million project, which is under construction on 111th Avenue west of the Loop 101 between Camelback Road and Glendale Avenue. Stadium construction started in November 2007 and will be finished in time for the 2009 spring training season.

Tom Harrison, construction executive for Mortenson Sports, a division of Mortenson Construction which is building the complex, says planning the facility took longer than anticipated, so they added a night shift in August to keep construction on schedule.

“This is an exciting project and we have the right team to get it accomplished on time,” Harrison says. “I’ve been involved in five other spring training facilities in the Valley, but this is truly the most unique. The Glendale facility will be more than just a place to watch the game.”

Harrison says the Glendale stadium will have a 1,400-foot-long lake as part of the facility. The lake will have an aesthetic function as well as serve as the irrigation source for the lush landscaping that will create a park-like setting at the stadium.

“This is not going to be a standard practice area,” Harrison says. “It’s going to be an aesthetically pleasing setting with benches so fans can enjoy their surroundings.”

Based on a 2006 economic impact study conducted by Economic Research Associates for the city of Glendale, the economic impact of moving the Dodgers and White Sox to Glendale could be as much as $19 million per year for the region.

“The new spring training facility fits well in our sports and entertainment district,” says Jennifer Liewer, senior marketing and communications manager for the city of Glendale. “The Dodgers and White Sox want to make this something that will last and be part of the community, so we know that when they get to Glendale it will become their home as well.”

The Cleveland Indians and Cincinnati Reds will play at the Goodyear Ballpark, which will be located on a 3-acre parcel south of Yuma Road and east of Estrella Parkway. The ballpark will open in March 2009 for spring training for the Indians. The Cincinnati Reds will move their spring training operations to Arizona in 2010.

HOK Sport of Kansas City designed the baseball complex, which will have 8,000 lower-bowl fixed seats, 500 premium seats, 1,400 berm seats, six luxury suites, 3,000 parking spaces, and a state-of-the-art scoreboard and public address system. It will also have two group event areas: an outfield pavilion and bar with berm seating for 400 and a third-floor party deck behind home plate that will hold 150 people. Barton Marlow, a national construction services company out of Michigan, is building the ballpark complex.

The Goodyear Recreational Sports Complex, which will house the Cleveland Indians’ clubhouse/player development facility and two practice fields, is under construction on a 52-acre site east of Estrella Parkway about a half-mile south of the Goodyear Ballpark. It will be completed this month, at which time the Indians will begin using it. The Indians will use the clubhouse and two practice fields year-round. Besides the clubhouse, the Goodyear Recreational Sports Complex has six full-baseball practice fields, two half-baseball practice fields, a 36,000 square foot agility field, six covered practice batting cages and tunnels, three open practice minor league batting tunnels, six pitching mounds for the major league and six for minor league, an observation tower for the major league fields and a scoreboard.

Goodyear citizens approved a bond election in 2004 for $10 million to help build the recreational sports fields, so the city will be able to use the four minor league fields 10 months of the year. Regis Reed, Goodyear’s senior project manager, says the city plans to use the fields for city events, youth programsand high school tournaments since the fields are lighted to high school standards.

Ticket prices at the Goodyear Ballpark will be comparable to other Cactus League facilities, which are $8 for a lawn seat and up to $27 for a club or premium seat.

Nathan Torres, stadium manager for the Goodyear Recreational Sports Complex, says that based on a 2007 Cactus League survey, the economic impact of the Cleveland Indians moving to Arizona in 2009 will be more than $23 million. That number will grow to more than $47 million when the Cincinnati Reds are introduced in 2010.

ForeclosureFallout

As More People Lose Their Homes, Banks Are Left Holding The Keys

Acquiring real estate through foreclosures is not exactly the type of transaction banks relish. That’s especially true in a down market that is overloaded with raw land and homes — and a paucity of potential buyers.

Estimates of the amount and value of acquired real estate through foreclosures are difficult, if not impossible, to come by, an industry insider says. A lot of the banks don’t want to talk about it.

“It’s ugly for everyone involved and you can’t even get the Federal Reserve to talk about it,” the insider says.

Anthony B. Sanders, professor of finance and real estate at Arizona State University’s W. P. Carey School of Business, sums up the somewhat dismal situation: “Banks are not in the business of being portfolio managers, either vacant land or housing.

“The way they’re trying to get rid of properties is that most banks are doing packaging. They sell packages of defaulted properties to investors around the United States,” he continues. “They started with national lenders, but there was very little interest in that. Then they went to regional packaging. That didn’t work either. Let’s face it, nobody really wants a Detroit-area loan or housing package.”

What’s happening is that hedge funds and equity funds are looking for very specific types of properties. Raw land value is highly dependent on where the land is.

“That’s why they don’t want to buy large portfolios,” Sanders says. “Because on the urban fringe, when you get way out west or southeast of Phoenix, some of that land they cannot literally give away. The reason is there is no foreseeable development going on in those areas.

“They’re looking for anything related to water rights or mineral rights — anything with natural resource implications still has a positive value,” Sanders says.

Until housing makes a comeback, banks are not finding a lot of interest in 40-acre tracts of desert that someday could be converted into a housing development, Sanders says. Some banks have defaulted single-family homes, often in remote areas.

“During the boom, and until fairly recently, a lot of starter homes were built in areas near Queen Creek, where land prices were fairly inexpensive for the Phoenix market,” Sanders says. “That market has really gotten beaten up pretty hard.”

National and regional bidders for those packages are few and far between.

“It brings back the old adage of location, location, location,” Sanders says. “If you’re planning properties located on major golf courses, or some properties in Scottsdale, there’s interest in that. In the classic subprime neighborhoods, which tend to be lower income, there’s not a lot of interest.”

In the meantime, banks are running around trying to peddle their packages. It’s more feasible to sell packages instead of marketing individual properties, because bank real estate portfolios are overflowing.

“Packages provide a good indication of which areas of Phoenix are likely to keep dropping like a rock,” Sanders says. “It’s those areas where there isn’t any interest in bank packages, which means the market doesn’t think they’re near the bottom. In some areas of Phoenix, the bottom may be a little ways away.”

With packaging of perhaps as many as 200 properties at a time, come discounts.

“The nasty part is that some of these properties are being offered at a big discount and they still can’t get rid of them,” Sanders says.

Even so, there continues to be interest in Ahwatukee, Scottsdale and Paradise Valley, which Sanders says means the housing market is showing some signs of life. But he adds this ominous observation.

“This is very reminiscent of the RTC (Resolution Trust Corporation) fiasco after the savings-and-loan debacle. It’s just like when the RTC was putting together packages. That’s the tipoff. Anytime you see packaging, that should make the hairs stand up on the back of your neck.”

At the Arizona Department of Financial Institutions, which regulates state-chartered banks and none of the large national ones, Tom Wood, division manager for banks, also recalls the S&L collapse.

“We had a lot of raw land in the 1980s,” he says. “Thank goodness we don’t have much of that now.”

Most of the real estate banks are trying to get rid of consists of single-family homes, Wood says.

“Very rarely do we see raw land,” he says. “Some banks don’t want to own it because it takes longer to get rid of. If they foreclose on raw land, they probably sell it at a sheriff’s sale.”

Wood expects a continued uptick in bank acquisitions of real estate, but sees very little of that among state-chartered banks. He suggests that some larger banks might be bundling foreclosed properties and attempting to dispose of their holdings through auctions or developers.

Depending on which economist you talk to, a substantial housing turnaround won’t happen until 2010. Some say 2009; and yet, as Sanders says, there are signs of life in 2008.

“For certain areas, recovery is there,” Sanders says, “but if I’m sitting in Buckeye, Avondale, Queen Creek and parts of Gilbert, I wouldn’t look for a speedy return.”