Tempe Town lake lagging

Financial hurdles already have stalled projects for years

By Elvia Diaz

The Arizona Republic

In a week, throngs of people will descend on Tempe Town Lake for a day of canoeing, free excursion cruisers food and music.

But those 'wishing to live or shop or spend the. night in a hotel overlooking the 224-acre lake, the city's crown jewel development, will have to wait a few years.

Although Tempe is all set to officially open the lake to the public at an all-day festival Nov. 6, major developments along the 2-mile-long waterway are facing financial hurdles that have already put construction off for years.

Developers of the lake's centerpiece project, the 29-story Peabody hotel, are scrambling to secure most of the $220 million needed to break ground.

A group of residents want to halt transforming the historic Hayden Flour Mills, a project known as Hayden Ferry South, into modem condominiums and other developments.

There is still no money approved for a 258-room Marriott hotel on, the southern shore of the lake.

Arizona State University is barely beginning to court developers for a 25-acre site of townhomes and office space. development that voward of $1 billion in sell. The most glaring example the Pea- body, Hotel, feature that after four is, still without Tempe officials downplay the obstacles. "People shouldn't be surprised about delays," Councilman Joseph Lewis said.

Mayor Neil Giuliano said the city anticipated a slow start, one reason why it stockpiled about $10 10 million in contingency funds for the project.

"We always knew there will be obstacles to overcome," said Giuliano, who has made the lake and its business attractions a cornerstone of his administration.

"I'm confident development on the, lake will happen," said the mayor, who is seeking a third term. 'It's just a matter of time."

Critics contend the city is kneedeep in an investment that threatens to become a boondoggle.

The project has already cost more than $150 million, of which Tempe has footed about $88 million. The rest comes from Maricopa County, state and funds.

In addition, Tempe has to shoulder costs. that top $3 million this year. Once the retail shops, restaurants and other developments are in place,, city revenues generated by Town Lake would cover those 'costs.

Critics such as Art Jacobs say the project shortchanges the public: Tax dollars get pumped into Town Lake at the expense of other city services; and any tax revenues Town Lake produces go no further than the upkeep of Town Lake itself

"It's one. of the city's biggest deceptions," said Jacobs, a longtime City Hall observer. "We won't see that money going to road improvements, water or anything else not related to the lake."

The future of the lake and surrounding development has sparked such heated dissension in some quarters that Tempe resident Charles Goodson said it's compelled him to run for mayor.

"The lake is an eyesore. There is nothing beautiful about it," said Goodson, who is collecting the 'required 771 signatures to put his name on the March 2000 ballot.

Goodson says part of his campaign would be to allow voters a say in how Town Lake is run.

issuance of $40 million in bonds to build the lake, thus -avoiding a public vote and the raising of taxes.

Tempe's substantial investment, so far makes it critical to secure private development, but Goodson isn't that hopeful.

"Guess who is, going to get stuck with the bill (if development fails)?" he said. "We are.,,

Giuliano dismisses the suggestion that private construction projects will never come. But the mayor admits that it hasn't been easy with any of the four major components of Town Lake:

Tempe's Peabody Hotel Developer Marty Betz has tried to secure financing to build Arizona's largest hotel, without success.

Betz's chances of financing the hotel evaporated last year when the primary lender, Nomura, closed its real estate loan division.

Tempe revised its contract with Betz, requiring him to pay the city $300,000 if hotel construction doesn't start by January, a scenario that many say is all but a foregone conclusion.

This week, Betz avoided being slapped with a notice of default by Tempe a breach. of contract would have severely hurt his chances of securing a $170 million loan from Wells Fargo Bank to augment the $50 million he and his partners would put up to build the Peabody, he said.

Most council members Voted Thursday against imposing $4,000 a day fines on Betz and against issuing the notice of default.

Betz now has until Jan. 26 to secure the money. If he fails again, the city could issue a notice of default, giving him until the end of April before the deal is officially declared dead.

Hayden Ferry North

The less-controversial, 17-acre project also is far from becoming reality because owners have yet to secure the $40 million needed to construct the 258-room hotel.

Ross Robb, one" of the waster developers, said the money will come, but it's, taking longer than expected.

'The project also features residential, retail and office space.

"We're very optimistic about this project," Robb said. "But these are very complex developments. It takes time."

Hayden Ferry South

Plans to triple the size of the center has. mobilized residents against it, saying, the development threatens to 'destroy a portion of Tempe Butte.

The proposed expansion of the shopping, office and entertainment complex around the former Hayden Flour lour Mill -, converting the white silos into condos, for instance - Is prompting calls to preserve the mill by designating it a historic structure.

Developer MCW Holdings originally had until Dec. 18 to pursue a building permit for the approved 312,000-square-foot project. It now wants to expand the development to nearly I million square feet and has asked for an extension.

City Attorney Brad Woodford found a loophole in a revised state zoning law, giving MCW until September of, nextyear to seek a building permit for. the original plan. That way, the company could put in plans for the larger development and, if it is rejected, have plenty of time to submit the original, less-ambitious plan.

Meanwhile, Giuliano is asking city staff members to come up with suggestions for Hayden Ferry South.

The mayor wants to limit it the height. of the buildings to five mill. stories or half the height of the mill.

The Historic Preservation Commission is also recommending he City Council designate the mill,

historic. Such a designation would delay construction of the luxurious townhomes and other entertainment features for the site, Robb said,

ASU's role

Perhaps the least worry about a Speedup development around Town Lake is ASU

University officials hope to start approaching developers for the 25-acre site on the southern bank of the lake later this year.

Although the university doesn't have firm dates to lease its properties, Steve Miller, assistant vice president for institutional advancement, said he hopes to finalize contracts sometime next year. concepts for the include space, Miller said. "We're making progress," he said. "It's being slow, because we're dealing with complex projects."

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Elvia Diaz can be reached at (602)444-7937 or at elvia.diaz@pni.com