…the Rest of the Story
When the Apache Drive-In closed in 2013, it signified the end of an era spanning more than forty years of outdoor movies in Globe. Like so many drive-ins across the country, the economics of an entertainment venue dating back to the ‘50s when land was cheap and the big screen was king had changed.
Land is now king.
Today, all that remains of the drive in is a 40-foot screen, rows of speaker poles stripped of their speakers and an abandoned concession stand.
Despite the shuttered appearance of a drive-in which has lived out its useful life, the land below has been jockeying for position to take on a whole new life as a master-planned development, bringing growth to the area and much needed housing.
But achieving that reality won’t be easy.
The land has recently been placed into escrow by a developer who has submitted plans for Globe’s first large scale mixed-use development in decades. And already there are those who have lined up in opposition and those who are lobbying for its’ success.
In a county where only four percent of the land is available for development, the fifty-eight acres surrounding and including the drive-in has remained one of the most eligible properties in the county for the right suitor. Bobby Hollis, whose family has owned the property since his father first opened a drive-in there in the ‘60s, says over the years there have been a number of suitors interested in his land.
The latest was FedX which planned to build a new distribution center, but when that deal fell apart, the Redbridge Development Partners out of California stepped in and made a deal recently, placing nine of the 58 acres in escrow with a one year option on the balance of the four parcels.
The plan, which calls for a mixed-use development involving residential, commercial, light industrial and open space, dovetails with the long range planning the city has done as part of the 2010 Northeast Area Plan and the 2014 General Plan; both endorse the idea of adding a layer of zoning on top of the commercial C2 zoning to allow for residential development.
Objections from area residents
Although Globe’s Planning and Zoning Board voted 5 – 0 in May to recommend Redbridges’ application, things got more heated during a city hall meeting the following month when council was scheduled to vote on the matter. Several area residents spoke up at that time during the call to the public with concerns about the zoning application and the planned uses for the property. One was Carl Williams who sits on the P&Z board and owns Dream Manor Inn, a premier lodging and event center located just up the road from the proposed development.
Williams says he voted yes to approve the PAD zoning request but later had concerns after talking the issues over with his wife. He believes the proposed apartment complex and town homes are too much housing in “one little area.” He worries that the 58,000-square-feet of retail space will take away from businesses in downtown Globe and that those who have rental units in the area will suffer when the new housing units come on line.
Other neighboring residents, like the Gibsons and Holders who live on the edge of the planned development, voiced concerns about views and safety issues regarding ingress and egress to the site, and strongly objected to the location of the gas station/convenience store on the north end. Williams’ wife, Rebecca, spoke last and warned that the PAD zoning would allow the developer “carte blanche to put in whatever they want, including a chemical plant or “even a cemetery.”
When the city hall meeting was reported in the local paper, the story included the comments by local citizens without providing the rest of the story, so as Paul Harvey famously said many times – this is the rest of the story.
Carte Blanche and other fallacies:
The suggestion that PAD zoning provides carte blanche to a developer is simply not true, according to Brent Billingsley, Globe’s city manager.
The zoning process, he says, requires the developer to document permitted land uses when submitting a PAD application for P&Z approval. While a PAD does allow a developer the flexibility to shift their planned use of the property in order to take advantage of market demands, Billingsley says, it must fall within the confines of the application and in no way constitutes a carte blanche approval to put in anything they choose. Unlike building on the C2 zoning which is in currently in place, the PAD zoning requires additional oversight by planning and zoning which must approve site plans for each structure.
“He (Hollis) could come in right now, with the C2 zoning on that land, and put up a building 36-foot high without asking for any approvals,” Billingsly says.
So what about a chemical plant?
Again, not in the permitted uses. A chemical plant would have to be located in an industrial zone, and as former Mayor Fernando Shipley points out, there are only two industrial sites: out at the asbestos factory or behind the sewer plant.
“So it would either be located on a toxic site or smell like one,” he joked.
Or a cemetery?
“I don’t know of too many developers who will take an expensive piece of land and put a cemetery on it,” Shipley says. “We couldn’t even afford to maintain the little cemetery we have now.”
As for safety issues, Chris Collopy, Building Inspector for the city of Globe, and Bill Beal, Managing Director for Redbridge, point out that any and all safety issues concerning ingress and egress to a development are strictly regulated by ADOT, which dictates the design and ensures the appropriate investment is made to provide safe traffic conditions.
The issue of the sewer line extension was also brought up by Williams who said he was glad Hollis had gotten the city to extend the sewer line since he had been asking eight years for one.
That may be true, but while he was asking, Hollis was putting money on the deal.
The Sewer Line Extension
As far back as 2008, Hollis engaged in both informal and formal discussions with city officials, developers and local business owners – during which he explored his options regarding the fifty eight acres. One thing was clear: the city sewer line needed to be extended to the property to make any development possible.
Hollis moved forward with an engineering study, paying Hansen Engineering $53 thousand to design the extension with a 10-inch line and get the plans through the ADEQ approval process.
He says he was planning on putting in an RV park when he was approached by SunCap,
who was representing “ a large company looking to locate a distribution center in Globe and bring in 40 new jobs to the area.” They wouldn’t say who at the time.
Hollis went to Shipley, who was city mayor at that time, and suggested that it might be in their mutual interest to find a way to pay for the construction of a sewer extension since it would be used to drive future development not only for his property, but the northeast corridor.
The city included language in the Northeast Area plan which spelled out not only their desire to extend the sewer but outlined several ways it might be financed, including general obligation bonds and grant monies. Unfortunately that’s where the planning stalled due to several factors, not the least being a sluggish economy.
The climate of possibilities changed in 2014 after the economy picked up, a new council was sworn in and grant monies became available through the Arizona Commerce Authority.
Karalee Cox, with the Southern Gila County Economic Development, had been asked to look into grant funding for the sewer extension. By that time, the mystery company had been identified as Fed X and they had put the land into escrow.
The timing couldn’t have been more perfect to go after grant monies from the Arizona Commerce Authority which, according to Cox, had come under fire recently for not loaning enough money to rural communities and was looking for a good project.
With the engineering studies already done and vetted by ADEQ, and a deal in place to bring jobs to the area, the $400,000 grant was approved based on a 10-percent match. The city didn’t have the funds, so Billingsly says he called Hollis and asked if he would be willing to put up the $40,000 and hand over the engineering study to the city to help secure the needed grant funding. Hollis agreed, and construction on the sewer extension began in January of this year and was completed by March.
“We absolutely would not have gotten that grant had Bobby not had the Fed X deal in escrow,” Cox says, adding that because rural economic development grants are tied to job creation, the project was a perfect fit for the ACA.
One Deal Falls Apart: Another Takes Shape
Unfortunately, before the sewer could be completed, the deal fell out of escrow and as Cox says, “It became very important to do something with that investment. We were all very interested – the City, IDA, ACA, Bobby, everyone- in getting another plan in place to meet the needs of all parties.”
According to her, the advice that the city received at that time from ACA and others was to make the property as shovel-ready as possible. That included, she says, a recommendation for PAD zoning to help market the property, she says. She is quick to point out the city didn’t commission or pay for the PAD. That too was Hollis, who hired land planner Dana Burkhard out of Phoenix to design something that could maximize the land and serve as a long term benefit to the community.
Burkhard says housing was one of the first things discussed. They also included a storage facility, retail space and an assisted living facility on the plan. It was Hollis and Burkhard who initially envisioned the three-story apartment complex which would accommodate approximately 25 units per acre: “a standard measurement when designing that type of housing,” says Burkhard.
When Redbridge came on board and took over the process, they made few changes to the plan asking Burkhard to mainly refine what was there and create more connectivity between the housing units and the retail to encourage traffic flow. In order to accomplish this, the retail was moved closer to the high density residential and used open space to facilitate interaction between the mixed uses.
While a portion of the property is in a floodplain, Burkhard says they were able to turn the challenge into an opportunity. The area has been designed as a large green space which meets city code and also helps to tie the property together and enhance the overall mixed-use development. Additional drainage requirements concerning run off, which are required by law to meet certain flows, are also designed into the plan using catch basins as open space.
If fully developed Redbridge, estimates that the property will provide housing for 750 to 1000 people. Construction on the apartments is projected to cost twenty million, and if the entire plan is built out as proposed, it is estimated there will be over $100 million invested in construction costs.
Funding the project: The use of Private Public Partnerships
According to developer, Bill Beal, funding for this project will be done through a mix of private public partnerships and conventional funding. P3s, are a new-but-growing mechanism for funding municipal projects that might not otherwise be possible. A study done by the National Association of Counties shows how P3s are being used by rural counties to build roads, create workforce training, build industrial parks, create job growth, diversify their industrial base and even create a healthcare initiative tied to the preservation of forest lands.
In today’s economy, it’s fair to say that municipalities including county, city and state governments are finding they can’t do it all; and raising taxes is no longer the go-to option. The addition of private investment for the public good has seen a growing roster of success stories. The report done by the NAco in June of last year polled 480 counties and showcased 35 case histories of rural counties using a variety of methods, including private public partnerships to fund projects which served local needs.
“Collaboration is the key to county economic development initiatives. County economic development initiatives capitalize on the networks of public, nonprofit and private partners necessary for successful local development,” the NAco study reported.
Here in Southern Gila County, there is general agreement that affordable workforce housing is critical.
The master-planned development, proposed by Beal and the Redbridge partners will use both P3 funding and conventional forms of financing. According to Beal, the workforce housing and possible senior housing or hotel/conference center are both P3 structures. The retail, other residential, fast food and gas station will have conventional financing.
Redbridge plans to work with the Gila County Industrial Authority to issue non-profit (501-c3) tax exempt municipal bonds to fund construction of the workforce housing which fits within P3 parameters. Beal says he has two non-profits interested in the project.
The bonds, which will place the non-profit as borrower of record, will then be issued to fund the construction costs, lending costs, interest reserve payments and convert long term permanent financing when it is turned over to the non-profit.
There are no risks to the taxpayers in the event of a default, explains Beal, since the P3 property is privately owned by a qualified non-profit. In the event of a default, the bank takes the property back through judicial foreclosure as in most other commercial real estate situations. The benefits to the P3 model is that the community gets a facility that it needs with no new or additional taxes to stake holders. The facility is paid for either through cash flow to service the debt payments until completed or through a lease arrangement, structured to coincide with the financing terms.
The bonding process will go before the Gila County Board of Supervisors who will vote to approve the issuance through the IDA. Once the bonds are issued, they will be sold to investors who bear both the risk and reward.
As for what the IDA gets out of the deal, they receive a small transaction fee and percentage for issuing the bonds. According to one commercial lender I spoke with, this is one of the main purpose of a county IDA; to issue bonds and fund projects which improve the health of the county and its’ residents. Accordingly, they are not designed with the intent of making profit, but rather along the lines of a community-model which generates funds through the projects they do so they can remain sustainable and keep doing more projects.
Beal, who has used public private partnership to fund two new schools for the Higley School District, says cash flow is critical to these types of projects and as such he is careful about the projects he takes on to ensure the feasibility of each.
And he is confident about the need for workforce housing in Globe.
The housing report which is driving that optimism is a $12,000 workforce housing study commissioned by Beal and paid for by the IDA and County Supervisor John Marcanti. It was completed in June of 2014 by Griffin Consulting out of Mesa and offers a comprehensive set of data on housing and employment in the area, including demographics, comparisons, market rates, commuting stats and employment numbers.
According to the study, over 700 individuals currently commute for work from neighboring communities such as Mesa, Apache Junction, Queen Creek and Safford; and another 200 currently in the area are looking for housing.
While commuting costs vary, the report uses IRS figures for a worker making $25-per- hour and commuting back and forth from Mesa, and points out nearly 2.5 hours of every day goes to commuting costs.
Capturing just a portion of those workers who are now driving out of the area to find housing means more than simply raising the tax base, according to Cox, who says the real long term benefit comes from the disposable incomes of a workforce living in the community and contributing to everything from local grocery stores to schools and businesses.
Still, there are those in the community who don’t believe more housing is necessarily the answer – especially high density housing. Williams and others point to a current flux of vacancies and say the real issue is jobs not housing.
Realtor Debbie Cox with Service First Realty (no relation to Karalea Cox) has managed the largest property management firm for over a decade and disagrees with those who say it’s about jobs.
“If we bring in jobs right now there is nowhere to place them,” says Cox. “San Carlos just brought in three docs who were potential hires for the new hospita,l and they did not accept positions because of housing.”
She goes on to point out mine personnel she has worked with who have to live here because of response times. But, she adds, because of limited housing options here, these people often end up renting a one-bedroom apartment in Globe, and a house for their family in the Valley.
“Right now, you can get a three bedroom home in Queen Valley built in the early 2000s for $850 a month,” says Cox. “Here, that same house will cost you between $900 – $1400, and it will be an older home, possibly with just window air conditioning units (which cost the tenant money), most likely more maintenance costs and often street parking.”
There have been few new residential building permits with the exception of two apartment projects undertaken in 2007 and 2009 which added approximately 140 units to the housing inventory. These units, however, are either income or age-restricted and as such do not serve market rate customers. The Griffin Report points out that both are 100% leased with a waiting list and both say they field calls from those looking for housing in the area who are not aware the properties have age or income restrictions.
The issue of adding another hotel in town was a point of contention in the presentation by Redbridge during the PAD zoning request. Local hotel owner, Jess Patel, says bookings are down and no one is doing well. He is adamant the area does not need another hotel.
Beal pointed out that a hotel is only one idea for the development; the other one is senior housing, and the company will undertake additional market studies before deciding what is feasible.
“We don’t want to get out ahead of the market,” he says.
Yet, according to Debbie Cox, the right kind of hotel might be a good idea.
“We have no hotels in the area which offer kitchenettes for travelers and temporary workers who are here for short term contracts,” she says.
Cox is talking about the large temporary workforce who live here, including traveling nurses, wildland fire crews, mine personnel, and support services. If you think the regular people who are settling in here for a job have problems finding housing, just take a look at what short term, temporary workers face, she suggests.
“I’ve got eight firefighters in one of my larger rentals sharing one house. I have a traveling nurse whose agency is paying over $2000 dollars a month for her room at a hotel,” says Cox, and adds, ”and you gotta remember hotels don’t discount their rates for extended stay. Plus they don’t have cooking facilities so they have to eat their meals out.”
Investing in Growth
Beal, who has been coming to Globe for the last four years looking at investment opportunities and doing his research on the area, believes Globe is in a good position to grow.
He was first brought out to Globe by Fred Barcon with the Gila County IDA to look at a racetrack project at the fairgrounds in 2011. Although that project never materialized, he began looking at properties with Barcon to put in a high-density housing unit and had made dozens of trips back and forth over the last four years looking for the right investment opportunity before moving forward on the Hollis property.
“Growth is coming to the area,” he says. He points to the expansion of both the regional hospital which is investing nearly $70 million dollars to upgrade and expand services and a new hospital being built by the San Carlos Apache Tribe which is nearing completion and looking to hire over 300 people when full operational.
He also has talked with those at Resolution Copper who indicate the new mine will add 3700 jobs to the area, and FreeportMcMoRan which is said to be investing nearly $600 million dollars in the local smelter to meet new EPA standards.
“I understand from the people I’ve talked to that the mines are market-driven and economics are always in flux,” he says.
So while he, like others, have heard that Freeport may be winding down mining operations, he believes they are in a good position long term. Their investment in the local smelter secures its’ future as one of only three smelters in the U.S. with capacity to grow.
“I’ve been told people are leaving Globe,” says Beal, “but I’ve done enough research to believe that people don’t come to Globe because there is no place to live. When there is enough housing…people will stay. “