Scottsdale Industrial Development Authority positions itself for marketplace resurgence

The Scottsdale Industrial Development Authority met March 8 at 7033 E. Greenway Parkway. (photo by Melissa Fittro)

The Scottsdale Industrial Development Authority continues to bolster its standing in the Valley of the Sun as the development group eyes a bigger piece of the municipal underwriting business.

Since the New Year, the IDA has created a three-year business plan and tapped a former member to serve as interim executive director, members say are first steps toward attracting new projects and ultimately provide funds to community groups.

At a March 8 meeting, the Authority approved acquisition of liability insurance for officers and directors — a safeguard absent from the authority for several years — presented a draft memorandum of understanding, and a new website separate from the city site.

Additionally, the Authority deferred three items to a later meeting: discussion and possible action of the 2017 business plan; discussion and possible action regarding the investment policy of the Authority; and discussion and possible action regarding options for legal counsel for the Authority for potential bond issues.

The Scottsdale IDA’s main function, which was empowered by the Arizona Corporation Commission and state statute in 1984, is to issue tax exempt and taxable bonds for certain types of private developments for the purpose of attracting new economic activity to the community.

It is made-up of a seven-member volunteer team, but the current board has one vacancy.

In January, longtime IDA member Jay Berens resigned in order to fulfill the interim executive director position, after a potential candidate fell-through. Mr. Berens says the transition was to continue the momentum the authority was building.

Due mostly to the economy, says Scottsdale IDA officials, the group has been pretty inactive in past years. Also, the IDA historically has only issued bonds for projects in the city of Scottsdale but is now looking to expand its scope.

The more bonds issued through the Scottsdale IDA, the more money that returns to the city, contends board officials, with no risk to the municipality or the board.

Negotiated annual fees charged to the applicants belong to the IDA, and that money is gifted back into the Scottsdale community.

Recently, the Scottsdale IDA grant program issued a $25,000 grant to the Scottsdale Gateway Alliance for their rebranding effort, and matched an additional $25,000 to the group’s fundraising efforts.

Understanding

Mr. Berens presented a draft document he coined a “memorandum of understanding,” aimed to further define the types of transactions the group is pursuing for Scottsdale City Council.

While the Scottsdale IDA doesn’t need the city council’s approval for the projects they accept — the local governing board does approve the IDA’s proceedings.

In the next two weeks, Scottsdale IDA members have meetings set up with the mayor and members of city council to discuss their new direction and receive feedback, before publicly presenting their business plan at a city council meeting.

“I would like to hand them something in writing, ‘this is what we’re going after,’” explained Mr. Berens of the memo. “So they know where we’re at with what kinds of deals we’re going after. It just puts some boundaries, territory, around what we’re going to go after.”

The document breaks down two “gates” for the target projects: connection to Scottsdale and qualified projects.

Gate 1 explains the project should have some connection to the city, whether that is through the project, the borrower, the lender or other.

Gate 2 defines qualified projects as those that are qualified 501(c)3 and small-issue bonds, such as hospitals and health care facilities, senior living facilities, charter and private schools and manufacturers.

Mr. Berens’ says the two gates could be a happy medium between working exclusively inside of Scottsdale and accepting any project.

“I think there’s a big risk that there’s not enough deals in Scottsdale to make this thing a viable business, on one side, and on the other side, I don’t think the city council is going to be supportive, as Gary said, of stuff completely outside of Scottsdale,” he said.

The memo states in the last 10 years the community grants given by the Scottsdale IDA exceeded $600,000. The Scottsdale IDA’s longtime client is HonorHealth; the financing began years ago when the hospital was named Scottsdale Memorial Hospital.

“SIDA is working closely with the Scottsdale Economic Development office to develop a 2017-18 business retention and expansion grant program to assist Scottsdale businesses,” the memo states.

Examples Mr. Berens provided was a Queen Creek charter school, which had no affiliation to Scottsdale.

“We passed on an opportunity — I was excited to get an opportunity to look at,” said Mr. Berens. “We passed on it because we didn’t think we would get support from the council on that.”

In years past, city council has been wary of projects the IDA approves that are not within Scottsdale and is cautious of projects carrying the city’s brand.

One Scottsdale entity has reached out to the Scottsdale IDA for further discussion is the Desert Discovery Center, says Mr. Berens.

“The feeling that I get, based on our conversation with Jim and with councilwoman Milhaven is that we better explore the Scottsdale opportunities before we go outside of the Scottsdale boarders,” said Scottsdale IDA Director Shannon Scutari.

“That could then extend the nexus into something else outside of just within the city of Scottsdale. We don’t really know what the potential at this point is. We have Jay to help us figure that out. But SkySong, some of the Scottsdale businesses, really the nexus thing to me the reason people are so focused on it politically is because Scottsdale projects have not necessarily been pursued or discovered in a way that we should probably spend more effort on that.”

All bases covered

Anthony Scali and Kyle Hudelson of NFP, a Scottsdale-based insurance brokerage and consultant, presented the IDA with a proposal for liability insurance that will cover the IDA directors.

The authority passed unanimously the policy with a few minor changes.

“Essentially right now the Scottsdale IDA is going naked,” said Mr. Berens at the March 8 meeting. “We don’t have any directors’ and officers’ liability insurance.”

Previously, the Scottsdale IDA was covered until the city of Scottsdale’s insurance policy, although it is unclear when that coverage ended said Mr. Drummond.

In order to be on the city’s policy now, the city council would have to approve the action.

Mr. Scali, senior vice president of property and casualty insurance, advised the authority they need some sort of protection.

“You never want to go bare when you’re non-profit,” he explained.

“Generally, when you have a non-profit association and you have directors or officers making decisions, if they’re making decisions that cause some type of loss or financial hardship or difficulty, then that’s where a directors’ and officers’ policy comes into play.”

The Scottsdale IDA is paying $2,565 as their annual premium, and would receive up to $1 million in coverage. The deductible is $2,500 per claim.

“I’ve got to tell you, I just went straight to the back page to look at the premium,” said Scottsdale IDA Secretary Marc Blonstein. “For that premium that gives me a lot of peace of mind, because you know, everyone’s going to act in good faith, but if you do something that steps on somebody’s toes out there I’d rather just have that back-stop.”

Exclusions in the proposal include: employment practices liability, privacy and network security, bankruptcy and personal injury.

Northeast Valley News Services Editor Melissa Fittro can be e-mailed at mfittro@newszap.com or can be followed on Twitter at twitter.com/melissafittro.

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