By Jim Derouin
In our prior articles we have presented fundamental data about Scottsdale’s finances, so we know how the city’s revenues are generated. But what we often don’t know is what areas of the city generate the most business-related income for the city.
About 70 percent of the revenues for Scottsdale’s operating budget comes from local sales taxes and state sales and income taxes. This explains why only 10 percent of Scottsdale’s operating budget comes from property taxes. Scottsdale does an excellent job of raising revenue from sources other than property taxes.
The state keeps track of sales tax revenue by business category and we know that there are more than 18,000 businesses in Scottsdale that sell products and services.
For fiscal year 2019/20, retail sales were projected to account for approximately 26 percent of local sales tax revenue, followed by rental revenue at 15 percent, automobile sales at 14 percent, restaurants at 10 percent, construction at 9 percent, food at 7 percent and the remaining categories together amounting to about 19 percent.
Because data is not kept by area, the question is where in the city do these business categories operate.
The city has about 185 square miles; of this, 25 percent is dedicated to the McDowell Sonoran Preserve (at a cost of about $1 billion). Although there are a number of resorts north of the Central Arizona Project Canal, little of the sales tax generating activity takes place there. That means other parts of the city must generate enough economic activity and tax revenue to maintain services throughout the entire city while keeping property taxes low.
A lot of economic activity is spread through the area south of the canal. This includes among others, the McDowell Road Corridor and the Cure Corridor along Shea Boulevard.
But there are two mega-areas of economic importance: downtown and the Scottsdale Airpark.
Downtown: Small area, huge impact
Downtown Scottsdale is commonly confused with the Old Town District of Downtown Scottsdale. Old Town is one of 10 districts in “downtown.” Downtown runs from Scottsdale Fashion Square on Chaparral Road on the north to Earl Drive on the south; and from 68th Street on the west to Miller Road on the east. The applicable character area plan identifies the 10 districts (as shown on the district map). Downtown consists of about 2 square miles (or about 1,200 acres of the total 118,000 acres in the city.) Old Town consists of about 4 to 5 acres.
We know generally what businesses exist downtown, but tax data is not kept by area. Based on presentations to the City Council for 2015, Fashion Square was responsible for 70 percent of gross revenues downtown while the Fifth Avenue and Old Town areas contributed 5 percent and 6 percent, respectively.
(Just to note: The recently withdrawn Southbridge Two development along Fifth Avenue was projected to produce $290 million in gross revenues annually – a five to six fold increase over the 2015 estimate for the Fifth Avenue district and a little less than half of what Fashion Square produced in 2015; in other words, it would have been a major generator of gross revenue downtown.)
The Airpark: Big contributor
Approximately 180,000 people work in Scottsdale; of those, 30,000 also live here. More than 10,000 jobs are in the healthcare industry (Honor Health, Mayo and CVS Health among others). Other major employers include Yelp, GoDaddy, Nationwide Insurance, the Scottsdale School District, General Dynamics, Vanguard and the city itself.
The Scottsdale Airport and Scottsdale Airpark account for 4,000 jobs. In 2014, the airport generated some $690 million in economic activity.
There are just under 500 aircraft based at the airport. Visitors for such events as the Waste Management Phoenix Open, Cactus League baseball and the Fiesta Bowl generated between $50 and $60 million in gross revenue in 2019. The Airpark is considered to extend to the Scottsdale Quarter and the area that includes the Scottsdale Promenade at Scottsdale Road and Frank Lloyd Wright Boulevard.
The Bell Road Corridor
The State Land Department owns multiple parcels of valuable land near the Loop 101 freeway that is within the city limits and already zoned by the city. Much of it is used for event parking associated with the Phoenix Open and the Barrett-Jackson auto show as well as serving as the current event site for the Celebration of Fine Art.
Many commercial interests have shown a desire to build along this corridor, but they have wanted to own the land rather than lease it from the state. The Bell Road Study Area includes WestWorld, other land owned by the city and state and land involving additional recreational attractions and several resorts and hotels.
In 2018, there were about 19,000 acres of vacant land in Scottsdale (of a total of 118,000 in the city) of which 14,000 were zoned for residential use. The remaining 5,000 acres were zoned for commercial, employment, mixed use and other purposes, such as recreation and open space. The areas within the Bell Road Corridor owned by the state along the Loop 101 freeway can be expected to eventually be auctioned for commercial use, which will significantly increase the economic benefit to the city from these lands.
Where to from here?
Scottsdale is mostly built out. Most vacant land is zoned for residential purposes. To keep the city’s property taxes low, commercial land needs to be used in a way that generates sales tax revenue and general economic activity.
The downtown needs to become a year-round economic engine rather than merely a seasonal attraction. It needs to become a place to live and work for 12 months out of the year. Whereas Old Town needs to be protected, it is a very small piece of one of the most important economic contributors to the city’s finances and cannot be used as an excuse to let the downtown deteriorate and underperform.
And maximum use needs to be made of the remaining few vacant acres zoned for commercial use within the city’s boundaries.