KINGMAN - The city may be more flexible on giving tax dollars to a developer than the mayor and Council initially indicated.
In early March, the developer at Kingman Crossing mentioned 60 percent for an indefinite period of time as an example of the portion of sales taxes Kingman could give the company for construction costs at the proposed shopping mall site off I-40.
But the mayor and many on City Council have said several times throughout the past four months that the city could not afford to give sales taxes to a developer.
Without a primary property tax carrying some of the burden of providing basic city services, such as road repairs and public safety, sales taxes are often called the lifeblood of Kingman.
But because the city anticipates the developer of the north 205 acres of the Kingman Crossing commercial district and I-40 interchange to propose a cost-sharing agreement with Kingman, city staff has been moving forward on the preliminary requirements for putting such an incentive agreement in place.
These incentive agreements - or cost-sharing agreements - allow municipalities to give a portion of sales taxes for construction that cities wouldn't be able to do as quickly as a developer would. They are fairly common in Arizona, but they also have received mixed reviews not only from individual cities and outspoken activist groups who've opposed the "giveaways," but also from the state legislators, many of whom tried to outlaw the agreements statewide.
Instead, to avoid city-to-city competition, lawmakers succeeded in banning them in Maricopa and Pinal counties during the latest legislative session.
According to City Finance Director Coral Loyd and several e-mails released by the city last week, before the Council meeting June 18, staff had been progressing on paving the way for a sales tax incentive agreement. She said the city expects Vestar Development Co., the developer of the proposed Kingman Crossing project, to approach the city with an agreement in the future. She said several steps were taken to prepare for that.
Cost-sharing deals profitable
Vestar has entered into cost-sharing agreements involving sales taxes with several cities throughout Arizona. All have been deemed profitable for the municipalities, although some community residents have strenuously objected to them.
In preparation for Vestar's proposal to the city, several items were put on the agenda for Council's review last week.
One was a proposed ordinance that would have allowed Kingman to enter into such agreements by adopting the state requirements. Loyd said this proposal was not specific to Vestar, and that Kingman has been approached in the past by developers about an incentive agreement.
"Knowing that we're growing and knowing that we will be approached, we wanted to plan for that and get out ahead of that," she said.
The other agenda item was a proposal from staff to hire an outside consulting firm to conduct an independent, third party impact study to see if sharing sales taxes with Vestar would be beneficial to the city.
Arizona Revised Statutes require this outside consultation, and to avoid skewed results, the laws prohibit the developer from paying for the third party firm to investigate the effects an agreement would have on the city budget and the community.
Vestar helped influence process
But according to several e-mails turned over by the city last week, Vestar did have some influence in the process, both with recommending firms to conduct the studies and with providing information to be used in the studies.
Vestar Project Manager Ryan Desmond wrote an e-mail April 2 to Kingman Economic Development Director Jeff Weir, stating, "To follow up on your question about who has provided the independent 3rd party reviews for our agreements with other municipalities, Pat Flynn (Queen Creek, Gilbert) and Elliott Pollack (Coolidge, Maricopa) have provided that service recently."
The latter company, Elliott Pollock & Company, has worked with Vestar on at least two projects in the past. One is cited in the e-mail, another is listed as a client on the company's Web site. Many of the company's clients were noted in the staff report given to Council last week, but Vestar was not on that list.
Loyd said she was unaware that Vestar and Pollock & Company had worked together in the past.
Pollock & Company was picked to do the study, and Council members were given the company's proposal on June 18 at the regular bi-weekly meeting, although Loyd said that nothing is in stone so far - no checks have been issued and no contracts signed.
Weir had begun discussions with the firm about a month after Desmond's e-mail. Jill Welch, an economist for Pollack & Company, wrote Weir on May 18 explaining what details the firm will need to begin the study.
Details included total square footage of the site, the commercial type, construction costs, lease rates, sales per square foot, etc.
"The development company, Vestar, is in the process of developing the information," Weir wrote the same day. "I anticipate needing the study to be completed by the end of June."
Loyd, who has taken over some of Weir's job duties as his department is officially phased out as of July 1, said he meant the proposal needed to be done by the end of June.
"We wanted to have a proposal back to us with time to review it and prepare the paperwork for the June 18 Council meeting. So, no, we were not trying to get a study or report completed by the end of May, just a proposal for the purpose of planning ahead," she wrote in an e-mail Friday.
The proposal was completed May 18, the same day as these e-mail exchanges, according to the date on the proposal given to Council.
Another e-mail indicates that Weir was preparing a payment for the proposal, not the report. He writes to the administrative assistant on May 23, "I will recommend that the City Manager or Finance Director authorize a purchase order for this proposal."
Weir forwarded inquiries about the agreements to Loyd and the city manager.
Loyd said the city asked for a proposal, "not a report. For the record, there was not a purchase order given for the proposal or a report. The City has not paid ANYTHING or ordered a study, consultation, anything along those lines, at all."
In light of the recent "new direction" by Council to be open and transparent about all government activities, all progress has been put on hold, according Loyd, until Council gives the go-ahead.
Deering wants to have a choice
Councilman Kerry Deering will be making sure of that. Upon hearing the news indicating that Weir had asked Vestar for references, about the city picking the reference, and that Vestar and the selection, Pollock & Company, had worked together in the past, Deering responded: "If I'd found that out I would have been raising hell, you know that."
Deering preferred having more than one choice, and actually having a choice. He said that having a company without any ties to Vestar is a "no-brainer."
"I don't think the city staff needs to direct us on who to use," he said.
The only way he'll consent to hiring Pollock & Company for the $4,500 impact study, he said, is if there aren't many companies that conduct these types of studies.
"What I want to know is how many other firms are out there. Are there only two? It's not even questioning their integrity," he said of Pollock & Company. "I just never want it to come back, but without not even having done it there's already suspicion." He said he'd prefer having 10 companies that Council, not city staff, can choose from.
"I don't want someone making the decision for me, like on that instance telling me who to use. I want 10 companies ... I want to know objectively and I want to have things to back up what they tell us."
Loyd said that Pollack and Company "has an excellent reputation," and she said if the company were chosen by Council to conduct the study, "I believe they would perform at a professional level."