The Museum Square development

The mammoth Museum Square development would get additional parking spaces under a plan currently being developed.

The developer behind Museum Square continues to work with local gallery owners to address concerns over the project’s impact on parking downtown.

Developer ARC Scottsdale Holdings and the City of Scottsdale recently agreed in principle to have the city pay for an extra level of underground public parking with 151-168 spots in the garage planned beneath the hotel at Museum Square.

That deal initially appeased gallery owners, but they became concerned when they learned the length of time the developer has to build the hotel and parking, gallery owner Bob Pejman said.

Under the agreement, the developer must begin construction on the public parking project within 10 years of signing or risk losing the land.

That 10-year timeline led to concerns that the developer would build the four residential buildings pitched for the development first and hold off on the hotel indefinitely, meaning the new public parking promised by the city and developer would also be delayed, Pejman said.

However, at a recent meeting between the two parties, gallery owner French Thompson suggested a pragmatic interim solution until the hotel is built and the developer appears on board with the plan.

Thompson suggested that the developer turn the land northwest of the intersection of Marshall Way and Second Street – the eventual hotel site – into a temporary parking lot until construction on the hotel begins.

Jason Rose, spokesman for the developer, called it an “elegant solution.”

The idea makes sense, according to Thompson, because the developer already plans to clear the future hotel site to stage construction for the apartment building on the east side of Marshall Way that is also part of the larger Museum Square development.

Once the apartment building is built, the future hotel site would then easily convert to temporary parking, Thompson said.

According to Thompson, the developer plans to build the apartment first and then start construction on the hotel immediately following.

When the hotel will actually go up is unclear, though.

Rose, the developer’s spokesman, confirmed that the hotel cannot be built without the parking and called the 10-year stipulation “the Great Recession one” – or a safeguard put in place in the event of an economic downturn.

The site has a history of projects going belly up during economic crises.

A previous plan to develop residential buildings on the city-owned land now slated for Museum Square cratered in the 2000s due to the recession and collapsed housing market.

“In the event the hotel does not get built, as happened with many a decade ago the parking discussed would not be necessary,” Rose told the Progress. “Is that anticipated? No. But it is there in the event of a severe economic downturn to prevent bad circumstances for the city, project and area.”

The 10-year timeline includes protections for the city, too.”

If the developer does not build the hotel within 10 years, the city can retake possession of the North Parcel – the site of the hotel – for just $10, according to the proposed amendment to the purchase agreement.

“And the 12 year (stipulation) actually is to protect and help the city meaning if the developer does not perform, (the city) can get the property back like a foreclosure,” Rose said in an email. “And consider this would occur AFTER it had already received the proceeds from the sale.”

The developer already owns the land for the apartment building and is in the process for purchasing the rest of the land for the development from the city for the hotel and condominiums.

The new temporary parking proposal would deal with gallery owners’ concerns that initial phases of Museum Square would eat away at public parking until the hotel – and its underground parking garage – is built, Pejman said.

The more permanent solution, the proposed underground public parking at the hotel, still needs approval from the City Council.

That parking deal is included in a planned fourth amendment to the land sale deal between the city and developer that was scheduled to go before the City Council on Sept. 24 before being delayed at the request of city staff.

“Staff asked for the amendment to be pulled so the purchase and sale agreement amendment can be brought forth in tandem with the development agreement, and the zoning case,” Assistant City Manager Brent Stockwell said.

The Museum Square zoning case is scheduled to go before City Council on Oct. 15.

According to a proposed amendment, the parking spaces paid for by the city would be valued at $45,000 per stall, and the city would pay for the spots by knocking $7,177,500 off the original $27.75 million sale price for the Museum Square land. 

That price would then be adjusted post-construction to reflect the actual number of spaces built.

The agreement included also included a $1 million price cut on the land if the developer can successfully terminate deed restrictions standing in the way of the development.

Stockwell said the city is still working on terms of the amendment before it goes to Council and that it is considering comments made by Pejman and others about how the city will pay the developer for the future underground parking spaces.

Pejman suggested the city put the $7 million payment in escrow until the spots are built instead of paying the developer upfront.

“I can say that we are planning on amending the language in the agreement, and also continuing to negotiate the terms in the development agreement,” Stockwell said.