Scottsdale Industrial Development Authority pursues statewide emergence

A view of the Scottsdale Industrial Development Authority at a Jan. 11 meeting. (photo by Melissa Fittro)

The Scottsdale Industrial Development Authority is developing its 2017 business plan — one that includes an expanded course of action — in order to attract new projects and ultimately provide funds to community groups.

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.

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

The only problem is, the Scottsdale IDA has been nearly invisible in recent years.

With a new spur of life on the board, the seven-member volunteer group is looking to grow its business by presenting a three-year approach beginning in 2017.

The three year outline the Scottsdale IDA discussed at two January meetings held at Scottsdale Airport, 15000 N. Airport Drive, included a continued dedication and commitment to projects within Scottsdale, while also expanding into other areas of the state. Other goals included creating a new website and having an office presence including a phone number and business cards.

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.

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.

It has $900,000 in assets, said Scottsdale IDA President David Gulino.

In bloom

Since its 1984 inception, the board has worked almost exclusively within the city of Scottsdale, but Mr. Gulino is looking to expand the boundaries in which they operate.

The IDA of Scottsdale was established to promote industry and develop trade, to stimulate and encourage production, in addition to assisting in the expansion and development of all kinds of businesses and industries.

The authority places an emphasis on projects that create new permanent jobs and have the potential of adding sales tax to the city of Scottsdale.

Projects in the healthcare field are also emphasized. The Scottsdale IDA’s long-time client is HonorHealth; the financing began years ago when the hospital was named Scottsdale Memorial Hospital.

Beyond that, the board was been virtually inactive, according to the Scottsdale IDA’s outside legal counsel, Gary Drummond.

Mr. Drummond has been the outside legal counsel for the board since its inception.


The Scottsdale IDA has been hosting its meetings at the Scottsdale Airport, 15000 N. Airport Drive, recently. (photo by Melissa Fittro)

“Each application given preliminary approval by the IDA is subject to a final approval by the IDA,” says the city of Scottsdale’s website. “In addition, any final approval granted by the IDA is subject to the approval of the Scottsdale City Council.”

The council doesn’t approve the projects the IDA accepts, it approves the authority’s proceedings, contends Mr. Gulino.

Members of the board fear that if the IDA approves a project the city council rejects, the repercussions could be critical.

Expanding into other Arizona municipalities is a crucial move in order to utilize the IDA to its full potential, says Mr. Gulino.

“Nothing has ever gone to a vote for a project inside the city, in the 30-something years existence of the IDA,” said Mr. Drummond at a Jan. 11 meeting. “It’s all been on consent agenda.”

“I think it’s just the ones outside the city, where I think you have to get a good read now, before you get an application, otherwise you’ll never get an application again if you fostered through this board and you don’t get city council approval.”

The application process includes a $3,000 fee along with additional meetings and reviews, before it is approved by the IDA and the city council.

“They think there’s an opportunity to do more, and this particular board believes the way to accomplish that is to come up with a business plan and be a bigger player in the bigger market,” said Mr. Drummond in a Jan. 17 phone interview.

Prior to presenting their business plan at a public city council meeting, Scottsdale IDA members are hoping to meet with council members to seek their comments and feedback on the plan.

“Historically, the Scottsdale IDA has not issued bonds outside its city limits, but they think there is an opportunity to do that,” said Mr. Drummond. “They want to work with the city council to help them understand that legally that’s permissible and get the council’s support to market itself.”

Mr. Drummond said the board’s decision to jump start itself has to do with new members being installed in 2014 and 2016.

“The authority hasn’t been active in the past five years in issuing bonds, partly because of a pretty crummy economy,” he explained. “The authority needs to re-look at things and itself. Part of the business plan is to seek some sort of approval to start approving projects, to start doing projects outside of the city and within the city.”

Mr. Gulino has been on the Industrial Development Authority for two years, and been the president for six months. He has previously served on the Planning Commission and the building review board.

He says the business plan includes increasing efficiency and price with the application process; verify rate structures are competitive within the Phoenix metro area; and to develop and increase the IDA’s business activities and target markets.

“We could do a bond issuance for a project in Flagstaff or north Phoenix, and let’s say that bond issuance gave us $50,000 a year in fees, well that $50,000 in fees would go back into our bank account,” said Mr. Gulino in a Jan. 16 phone interview. “We could turn to our grant program and give that away.”

Next, the Scottsdale IDA will be coming up with its financial policies in an attempt to identify some low-risk investments, said Mr. Gulino.

A loose connection

During a Feb. 11 Scottsdale IDA meeting, the group discussed the challenge in gaining momentum from the city council in past projects.

Mr. Drummond contends he has previously talked with the council about the authority’s role in issuing bonds, but council members don’t want liability, he said.

“I’ve explained that the city has no liability, I mean it’s statutory,” he said. “The full faith and credit of the city is not what is collateral.”

Mr. Drummond says the authority has never had a bond issue that’s gone into default, let alone gotten sued.

David Smith

Councilman David Smith says for those reasons, he is weary of approving Scottsdale IDA projects.

“I think to the extent that they’re trading and issuing on Scottsdale’s brand, then we the city council, need to be pretty careful as to what carries our brand,” Mr. Smith said in a Jan. 19 phone interview.

Mr. Smith, formally the city treasurer before being elected to city council, said he has not had much experience working with the Scottsdale IDA in either capacity.

“I am concerned whether any of this debt could come back to the city and its taxpayers,” he explained. “I’m reassured by others that is not the case.”

The councilman expressed his concern that in the eyes of the borrower it may look like the city is fronting this money, because the IDA bares the Scottsdale name.

“In the private world of finance there’s countless instances where third parties are held for the debit obligations for others because they’re co-signed,” he said.

“Obviously Scottsdale has a AAA bond rating and so that carries an implied credit strength with any lender, and when you say brand, that’s what we have to carefully protect.”

Jim Lane

Scottsdale Mayor Jim Lane says he is in support of the authority expanding outside of Scottsdale, but believes approval of IDA projects needs serious consideration.

“It’s a strange idea and it’s proven through history that it works very well,” said Mayor Lane in a Jan. 19 phone interview.

“We do have the ability to do that same process. They are looking to expand and look to see if the council and myself are at least of mind to consider. There are some benefits because of the fees that are paid to utilize that.”

The workings of the city council and IDA balance through a “loose connection,” Mayor Lane said.

“They bring money in,” he explained. “It is a matter of a loose connection between us, and economic development processes are part of that. They have always been good applicants of those funds. It has been in the past, and it will always be a consideration in the future.”

Mayor Lane contends that a difference in opinion in the past resulted from a proposed international project with a country that brought a great deal of turmoil, he said. His concern, he said, is that the IDA isn’t investing in a realm that could create a negative effect on the community or how Scottsdale is viewed.

“We’re not looking at investing in a realm of unacceptable — in terms of overall community effect or how we’re viewed in the world — in something that wouldn’t be helping people somewhere.”

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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