IIt has been a point of pride for generations in downtown Mesa – a Chevy dealership that drove thousands of beaming customers off in their new dream cars.
But, as with almost all of the historic stores that used to lined Main Street, Brown & Brown Chevrolet eventually drove off on its own, leaving a nearly 10 acre scar in the heart of town.
With the help of taxpayers, the old car park could be resurrected this summer in the form of a development called Mesa Arts District Lofts.
The city council approved a development agreement on March 1 with Minneapolis-based Opus Group to build approximately 334 high-quality rental units and up to 25,000 square feet of commercial space on the Brown & Brown property, which is just east of the Mesa Arts Center.
A key element of the deal is a Government Property Lease Excise Tax (GPLET) agreement that allows Opus to avoid most property taxes on the project for eight years.
Under a GPLET, a local government can take ownership of a project and lease it back to the developer. Because the government is exempt from property tax, these taxes are largely reduced during the term of the lease.
State law requires a city to hire an outside analyst before accepting such a deal to determine whether it is in the best interests of taxpayers.
Mesa hired a Phoenix consulting firm called Applied Economics to do the job.
“The Mesa Arts District Lofts meet the requirements for a GPLET because the development increases the value of the property by more than 100 percent and the benefits for states and municipalities would exceed the value for the main tenant (Opus) during the term of the Agreement, ”reads a report from Applied Economics.
The report states in detail:
• • The project is expected to generate $ 8.8 million in revenue for local and state governments between 2022 and 2030. This would significantly exceed the $ 5.1 million tax breaks offered under the GPLET.
• • Mesa is expected to generate $ 1.5 million in direct revenue from the project over the same period, more than making up for the $ 465,000 it would lose in property taxes.
• • The commercial portions of the project could bring Mesa $ 63.9 million in various economic benefits by 2030, creating 95 jobs in retail and restaurant operations.
Considering the deal could have a negative impact on school revenues, the developer has agreed to pay just over $ 200,000 to Mesa Public Schools, Maricopa Community Colleges, and the East Valley Institute of Technology. This sum corresponds to what the districts would have received in property taxes if the location had remained empty for the next eight years.
Mesa’s deal with Opus requires the company:
• • Build a standard market rental property with an area of 389,000 square meters in 334 residential units, including townhouses with residential work, units with one to three bedrooms and studio apartments.
• • Provide a 6,200-square-foot clubhouse with a pool, spa, fitness center, and other amenities.
• • At the north end of the two buildings on Main Street, build 25,000 square feet of commercial space on the first floor.
With the project, provide central thoroughfares with public access from north to south and east to west as well as a pedestrian zone with an area of 300 square meters at the north end. Permanent easements will protect these public areas in the long term.
Within five years of completion, there is potential for Phase 2, where buildings will be added to the parking lots originally designated as parking lots on the east and west sides of the development.
The amount of commercial space in the project was a matter of concern to city council members during their study session on Feb.25.
Of the initial 25,000 square feet of commercial space, Opus has the option of converting 12,000 square feet into residential property if it can’t be rented in a timely manner.
“We just don’t want this area to remain free,” urban planner Jennifer Guevara told the city council.
When Councilor Kevin Thompson asked how the city would know that Opus is marketing the property in good faith, Guevara said it was in the company’s best interests to do so since commercial leases are more lucrative than residential property.
Vice Mayor Jen Duff, who represents downtown, asked city officials whether Opus was required to provide housing for workers as part of the project.
Jeff McVay, Mesa’s downtown transformation manager, said that’s not part of the deal. He said the staff believe the thoroughfares and space will be enough as a public benefit.
“I appreciate this, but it doesn’t help those in need of housing for workers,” said Duff. “Whatever we could do to push in that direction would be very helpful.”
Mesa has worked with a variety of nonprofits for the past decade to create several low-income housing complexes along or near the light rail corridor using a federal tax credit program. This includes a full renovation of the historic Escobedo Apartments on University Drive, senior units and artist workspaces on First Avenue, and an apartment complex built by A New Leaf on West Main Street.
Mesa has also used GPLET credits to attract other downtown apartments. A notable recent example is the approval of Eco Mesa in Robson and Pepper Place last summer.
Mayor John Giles praised the Opus project during the February 25 meeting.
“I feel for the developer,” said Giles. “It’s difficult to develop a project that is literally outside the window of the entire city council and on such a strategic lot that we all have so much affection for.”
He added, “We have been talking about this project for years. I am very proud of what we see here today. Is it perfect no – but it’s pretty good. “