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2:40 AM Tue, Oct. 23rd

Original plan on Crossing still in place

Developers will fund half of interchange project, mayor says

KINGMAN - The future of the Kingman Crossing traffic interchange remains open as city officials wait to see who buys the 640 acres of state-owned land immediately south of city-owned land.

While certain aspects of the proposed interchange exist only informally in discussions, proposed options concerning funding have drawn a handful of skeptics.

From the beginning, local developers who proposed Kingman Crossing as a closer-to-the-city Interstate 40 interchange than the original Rattlesnake Wash project planned to go in halves with the city.

This is still the plan, according to the mayor and city manager, and it is a plan that both say will address citizens' concerns: gridlock on Stockton Hill Road and alternative shopping venues.

Mayor Les Byram said the city's 168-acre plot is worth between $20 million and $28 million. If sold, this profit would pay for the city's shares of the Crossing and Rattlesnake Wash interchanges, he said.

But, as brought up by the city watchdog group Residents Against Irresponsible Development at its latest meeting, several issues with the city's land seem overly optimistic.

Skepticism

For one, Vanderbilt Farms LLC closed a deal in January for approximately 200 acres on the north side of the proposed Crossing interchange at $60,000 an acre, or $12 million, from local developer Bill Nugent, which is much less an acre than the city believes it can get for its land.

Second, Vanderbilt's land is zoned regional commercial, making the land potentially revenue-generating. The city's land, on the other side, is currently zoned to allow only parks and open space.

Third, the city land, even if rezoned for commercial use, which is the plan, currently has a huge hole in the middle that would need filling to make it marketable to sell. RAID has speculated that filling the pit could cost the city as much as $5 million.

The hole, which Beecher said is being used as a drainage channel, "probably won't be filled, but since we won't know the ultimate use of the land or its final layout for a few years, it's hard to tell what it will look like," he wrote in an e-mail.

Fourth, the city government is still indebted to a consulting firm and brokerage firm for 14 percent of the gross sales price earned from a transaction. In December 2005, the city entered into an agreement with Stone & Youngberg LLC under then Mayor Monica Gates.

The agreement states that S&Y will provide up-front consultation and project design work in exchange for 9 percent of sales revenue for the land. The other 5 percent would be paid to Municipal Real Estate Services, L.P., which is providing brokerage services to the city for the project. If the city receives $20 million for its land, it would owe the two firms $2.8 million. If it receives $28 million, it would owe $3.92 million.

Given the hole in ground, the zoning differences and the 14 percent debt, RAID has questioned the ability for the city to see any financial gain from the sale of the land. RAID President Mike Bihuniak questioned why the city would expect between $8 million and $16 million more for 32 fewer acres than what Nugent received, and his land doesn't have a big hole in it.

Even if the city made $28 million for its land, nearly $4 million would go toward the consulting and brokerage firms, leaving just more than $24 million.

The city's 50 percent portion of the Crossing and 30 percent share of Rattlesnake Wash would total approximately $24.5 million, according to figures from this year's Capital Improvements Plan report, which lays out the costs for each project.

If revenue from the city land paid for both interchanges, the city wouldn't have to ask the residents in an election to approve bonds for one or both of the projects, Bihuniak said. But $24 million is already less than the combined costs of the projects, and that doesn't account for the costs of finding fill dirt and plugging the hole in the ground.

"For all of this money we're supposed to have left over, we may end up in debt," Bihuniak said at RAID's Feb. 28 meeting.

When asked about the hole in the ground, the debt to S&Y and the real estate broker, and the difference between price and acreage from Nugent's land, the mayor reiterated that two separate consultants gave the $20 million to $28 million estimates for the city land's value.

Byram then added, "I don't think anybody can tell you because we have a changing economy." By the time the land is ready to sell and the project is under way, the economy may be booming, he said, driving up the price of the land. Also, the potential value of the developed land after the interchange is built will likely attract higher bids.

Whatever the reality, "it has got to be a good, positive financial thing for the city of Kingman or it's not going to happen," he said, reiterating several times that nothing is in writing and that Council is not in a hurry to put anything on paper.

Funding it

Beecher stated in a interview in February that Vestar Development Co., the development partner with Vanderbilt, would front the costs of the interchange. The city would later pay back its 50 percent or less depending on whether or not the buyer of the state land wants in on the interchange project, Beecher explained. That payback would occur "way down the road," he said.

Preceding this comment, Beecher said during the interview that "[Vestar is] willing to upfront all the costs to put in an interchange. They need that interchange to make their project successful. And so that's not going to put the city out anything."

Vestar has not confirmed whether or not it would front the costs of the interchange. When asked about Beecher's statement, Vestar and Vanderbilt spokesman Stuart Goodman provided this reply via e-mail: "Given the significant amount of infrastructure improvements required by the site, this is a complicated project that requires additional analysis by Vestar before any formal discussions with the Kingman management team and elected officials can realistically occur.

In an e-mail last week, Beecher said that depending on the concerns of City Council members, the city doesn't have to go into an agreement with Vestar and Vanderbilt.

Beecher said the city has the freedom to choose another firm to lead the development of the city land if development is the course Council chooses.

Council concerns

Concerns the Council might have would likely be based on the city working with Conley Wolfswinkel, the advisor, manager and father to Brandon and Ashton Wolfswinkel, owners of Vanderbilt. Conley Wolfswinkel was convicted of fraud and owes taxpayers nearly $2 billion for bilking investors during the infamous savings and loan scandal of the early 1990s. Another concern would be Vestar's previous development agreements with communities who provide a portion of the sales tax revenue as an incentive to bring in big-box-retail stores to their cities. One incentive package in Santee, Calif., reached 75 percent of total sales taxes received from the mall.

The Miner is awaiting replies to a request for comment by Council members. RAID members have expressed their concern, as has one Council member.

Both Beecher and Byram have pointed out that the city is not required to do business with either Vestar or Vanderbilt, and it is keeping its options open until the state land sells, which is expected at an auction before June 30, the end of the fiscal year.

City officials have reiterated that they have not made any final decisions, and apart from few meetings with Vestar, all discussions have been preliminary.