Does development pay for itself was the question of the hour at last week’s Scottsdale City Council meeting.
A discussion on whether or not all of downtown should be called Old Town quickly turned into a debate about the sustainability of development in all of Scottsdale.
Councilwomen Linda Milhaven and Tammy Caputi claimed development does pay for itself in the form of property and sales taxes as well as impact fees that developers are required to pay when building new projects.
Scottsdale Planning, Economic Development and Tourism Director Randy Grant noted developers are required to upgrade infrastructure if they propose projects the current infrastructure can’t sustain.
And Caputi said Scottsdale needs more housing to attract the commercial properties that fill the city coffers with sales and property taxes.
Mayor David Ortega saw things from another angle.
“I do want to bring out the point that when it comes to impact fees and you actually look at the checkbook and the checkbook indicates for water alone, we have spent or laid out $36.1 million in infrastructure and the development community and the develop impact fees have only contributed $17 million (over a five-year period),” he said.
“That’s less than 50 percent. We are fronting those costs,” Ortega continued.
“The other part of the checkbook for wastewater and those numbers we’ve put out $36 million and again the development is lagging: they’ve paid only $10.9 million. What that means is … the developers are lagging in paying their fair share.”
Councilwoman Solange Whitehead pointed out there are no impact fees to pay for extra police officers, libraries or parks.
Those are often paid for in property taxes but Whitehead noted the Arizona Legislature has reduced commercial property tax rates several times over the last several years, making it difficult for cities to justify new growth.
“We need a partnership at the Legislature because the Legislature is making it very difficult for city councils to develop strong partnerships with developers and get it paid for,” she said, adding:
“I think that would bring people together instead of this for and against development (argument) that we’re seeing right now (in the community).”
Caputi finally put the question point blank to Grant of whether development pays for itself.
His response essentially amounted to, it’s complicated.
“That’s always a great question,” Grant said. “In order to fully answer that we have to get down quite a bit into the weeds … It’s not just a comparison of the primary impacts of that particular investment.
“It’s the secondary and tertiary impacts of people living there, supporting area businesses and generating sales tax dollars and so forth. And a secondary product of that is, if your neighbor invests $100,000 in their house, your house value goes up. If they let their house go into decline, your house value goes down. There’s always an interest in how do you attract that reinvestment that’s going to raise all the ships.”
Vice Mayor Betty Janik finally came to Grant’s aid.
“I’ve read quite a bit on does economic development pay for itself,” she said. “You can go and check all the literature and you can get six experts say it does and six equal expert people that say it doesn’t.
“One of the comments that Randy (Grant) brought up was do you include the value of the homes going up when you talk about does development pay for itself. That is a very controversial topic so I don’t think that it’s reasonable to expect our staff to be able to answer that question because there are a whole lot of variables.”
In the end, council members did agree on two things.
First, development should pay for itself and if it’s not, calculations need to change to make sure it does, and second, the council agreed to continue calling all of the downtown area Old Town.