By Larry Kush | Apr. 20, 2020
NOTE: The SCOTT 2020 executive committee will be providing information over the next few weeks on some of the challenges created by the COVID-19 crisis, giving residents context and understanding as they look at what the city faces ahead.
As Scottsdale City Government braces for expected economic hardships due to the coronavirus lockdown, other expected major sources of income have ground to a halt.
Notably, two major planned mixed-use projects, Caesars Hotel and Marquee office building, have been put on indefinite hold by the developers.
The 266-room, 11-story Caesars Hotel on Highland Avenue on land owned by Scottsdale Fashion Square was told by their primary construction lender to hold off starting construction for at least another 90 days. During which time, the developer plans to rebid the project to see if the COVID-19 crisis has resulted in lower construction costs.
The controversial 271,000-square-foot Marquee office building on Scottsdale Road is on indefinite hold as the developer, Stockdale Capital, waits for a better reading on how long the lockdown is going to last and what to expect for office space needs in 2021 and beyond.
Museum Square is a $300 million, approved 4.5-acre mixed-use project on Goldwater Boulevard next to the Scottsdale Artist School. It consists of 369 rental and for-sale residential units and a 190-room hotel to be built by the McDonald Development out of Vancouver Canada. The Hilton Hotel, which has been under construction for some months, is still on schedule to open in this fall. Sources stated that after the hotel is completed, the 92-unit residential rental building should start construction this fall.
It is difficult to predict exactly how much income the city will lose due to these delays, but most of it will be temporary as these hard-won projects eventually will be built.
City cash flow will be the biggest problem as permit fees of several million dollars will be deferred, to say nothing of the value of thousands of delayed construction jobs and millions of dollars of deferred rental, bed taxes and income taxes that will be pushed back a year or more.
Also, the city was expecting $26 million in income from the sale of the Goldwater, city-owned Goldwater land to McDonald Development. It had been scheduled to close escrow last week and that did not take place. The city manager’s office said the developer had requested and received a 30-day extension on the closing. Museum Square is also slated to add 338 public parking spaces to the arts district.
Projects that were already under construction when the pandemic hit most will likely continue moving forward. Fortunately, construction was identified by Gov. Doug Ducey as an essential industry [Executive Order 2020-12 3.c]. Also, lenders rarely will stop funding a project that is under way as it would be extremely costly.
Hopefully, once the economy starts to return the city government will pull out all stops to help developers fast track their construction activities. The sooner they get builders moving the sooner cash will start flowing again into the city’s coffers.
Larry Kush is a Scottsdale planning commissioner and member of the SCOTT 2020 executive committee.