City backs off $3M condo deal – for now

Downtown Scottsdale business owner Scott Jarson said the city “put the cart before the horse” when it proposed buying a $2.25-million condo unit to pave the way for the proposed Museum Square development, which has not yet been approved by City Council.

Hours before a Scottsdale City Council meeting on July 2, city staff pulled a controversial item from consideration that would have seen the city shell out close to $3 million to pave the way for the proposed Museum Square project.

A Progress report June 30 on the proposed deal triggered a wave of public backlash on social media, with many residents urging council members to vote no on the purchase.

The Council was set to consider purchasing a ground-level commercial unit at the Gateway at Main Street Plaza condominium complex for $2.25 million. The unit — which would also need $700,000 in renovations, according to the city — would house offices for Scottsdale’s Museum of the West displaced by the future Museum Square development.

As a condition of the purchase, the condo’s home owners association agreed to vacate a deed restriction limiting building heights in the area to 60 feet, paving the way for Museum Square, which includes a 150-foot hotel on land the developer is in the process of purchasing from the city.

The deed restriction covers 405,000 square feet of city-owned land, and it is unclear how much of the 180,000 square feet the city agreed to sell is included within that area.

The city officially sent out notice of the removal on July 2 at 1:40 p.m — just over three hours before the scheduled Council meeting.

It is unclear exactly why city staff decided to remove the proposal from consideration or if it will come back before the Council.

City Manager Jim Thompson told the City Council that “at this point in time we do not have a date certain or even if we will bring it back to Council for consideration in this form that was before you this evening.”

Assistant City Manager Brent Stockwell said the item was removed “due to new information discovered that requires additional investigation and negotiation.”

The City did not elaborate on the nature of that information, which may have to do with the fact that the land deal between City of Scottsdale and Museum Square developer ARC Scottsdale Holdings has not been completed.

“I’m sorry, but I can’t provide any additional details,” Assistant City Manager Brent Stockwell said.

When asked when the city became aware of this new information, Stockwell only said “in between when it was put on the agenda and taken off the agenda.”

The proposed purchase generated a high volume of comments from residents made via social media and sent directly to the city and council members.

A number of residents asked why public money was being used to remove a height restriction when the termination benefited a private development — Museum Square.

Resident Cindy Hill wrote on Facebook that “This all about the developer getting a zoning change to allow (150-foot) buildings that we the taxpayers must foot the bill to build. (Millions of dollars) to get a zoning deed restriction changed disguised as office space.”

According to the City of Scottsdale, the appraised value of the condominium was $1.45 million, putting the price the height restriction termination at approximately $800,000.

Stockwell said that the condo seller’s asking price from the outset of negotiations was a firm $2.25 million.

The condo’s owner, Madeleine Ferris, owns a number of units throughout the complex through a number of different LLCs. Ferris’ Arruth Associates built Main Street Plaza well over a decade ago.

Scott Jarson, who owns property in downtown Scottsdale, told the City Council he thought the condo deal was premature and showed a city bias in favor of a development that the City Council had yet to approve.

“A purchase like that is a $3-million wager that the city intends to approve the Museum Square application well in advance of further public comment or open meetings,” Jarson said. 

Jarson argued the city could be left with a condo it doesn’t need if the City Council does not approve Museum Square and that the $3 million could be better spent on infrastructure, public safety and downtown parking.

At least one council member expressed opposition to the purchase before the July 2 meeting.

On June 30, Councilwoman Solange Whitehead voiced her opposition to the proposal on Facebook, stating she thought it didn’t make financial sense and that public money should not be spent on tourism venues.

“This is a bad deal for Scottsdale and I will vote (no). I have many reasons for opposing the proposal,” Whitehead wrote.

Whitehead was also opposed to the city’s funding mechanism for the purchase, which would have included borrowing money from Capital Improvement Funds to pay for the condo.

“The CIP is a public safety account, not a savings account,” Whitehead wrote. “These funds are for maintaining bridges and other infrastructure to keep Scottsdale safe. I oppose ‘borrowing’ from this account.”

According to City documents, the city would have used CIP funds to pay for the purchase up front and then reimbursed itself with proceeds from the eventual $28-million sale of city land to ARC Scottsdale Holdings.