Arizona State University is breaking ground on a project it hopes will provide hundreds of millions of dollarsto renovate and improve Sun Devil Stadium and other athletic facilities.
A new luxury apartment complex, office building and hotel will be the first projects to go up in Arizona State University's athletic district in theTempe Novus Innovation Corridor, which extends from ASU's Tempe campus to the shores of Tempe Town Lake.
Heavy-duty building machinery came out in recent weeks,signaling a move from theoretical to actualfor the special athleticdistrict launched in 2015.
The 350-acre Novus Corridoris expected to generate as much as $500 millionfor ASU athletics over the next two decades, ASUsaid. By law, the money must be used only to construct or improve athletic facilities.
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The new developmentsarescheduled to open late next year or in 2020.
“This will be real now. It will be coming up out of the ground. People will see it,” ASU Chief Financial OfficerMorgan Olsen said.
Between these projects and others still in the works, more than 10 million square feetof apartments, offices, hotels, shops and restaurants areplanned for the Novus Corridor.
First wave of development
- A six-story luxury apartment complex with 262 rental homes is being developed by Aspen Heights Partners at Packard Drive and the newNovus Place road. It will also have 27,000 square feet of space forretail and restaurants.
- A 162,000-square-foot upscale office building developed by Ryan Cos. will go up onUniversity Drive and Rural Road.
- An eight-story hotel with 260 rooms will be builtacross from the stadiums at Sixth Street and Veterans Way. The hotel chain and developer haven't been named yet.
State Farm's new 2.1 million-square-foot headquarters in the Marina Heights development is part of the Novus Corridor, on the western end fronting the lake. But thedevelopment, home to 8,000 employees now, isn't part of the athletic district.
ASU's Sun Devil Stadium, near themiddle of the corridor,is near the finish of its$307millionrenovation. It is also part of the Novus Corridor, but not part of the special district that will help fund its overhaul.
National real estate analysts call Novusone of the biggest and most well-planned public/private projectsunderway in the United States.
"It will be a major economic driver for Tempe, there’s no question,"said Charley Freericks, senior vice president ofCatellus Development Corp., ASU's privatepartner onNovus."We’re going totake land that is currently, and was basically for generations, fallow, and create an amazing economic engine for Tempe and the surrounding region."
How the district makes money
The district capitalizes on one of ASU’s major assets: Its land.
In 2010, the Arizona Legislature and former Gov. Jan Brewer passed a law authorizing all three state universities to create university athleticfacilities districts, as long as their county boards of supervisors approve.
The universities then can allow private developers to sign a 99-year lease and build on school land within the designated district.In exchange, the companies pay rent for the ground.
University land is exempt from property taxes under the Arizona Constitution, but companies that build within the district will be charged assessments that will be paid to ASU. That money will then be used for building or maintaining athletic facilities.
Although all three state universities have the option to create a district, only ASU has so far. TheUniversity of Arizona and Northern Arizona University have no plans underway to do so.
When the law was passed — during the recession — it was unlikelyASU could have gotten state fundsto buildor improve a stadium, ASU’s Chief Financial Officer Morgan Olsen said. The district provided “an avenue for self-help,” he said.
“We realized that the land was an asset the university has that wasn’t really being well used,” Olsen said.
Olsen estimated the district could bring in more than a half-billion dollars over20 years if it’s successful, though the amount of revenue will depend on what’s built.
Not everyone is a fan
Not everyone is a fan of the special district, or how it affects taxes.
The Arizona Tax Research Association, a tax watchdog group based in Phoenix, wrote in a special report last year that the district may be legal, but it’s not good policy.
The district gives ASU “a certain amount of public relations cover” as it begins to use its land for non-public, nonuniversity-related activities, ATRA wrote.
The ATRA paper criticizes ASU’s Marina Heights area and its deal with State Farm and says state lawmakers should monitor how universities are using their land for non-university purposes.
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The district could negatively affecttax revenue because businesses would locate inside these property tax-free areas owned by the university instead of on land that would generate normal property taxes that fund government services, ATRA argued when the law was being debated in 2010.
The group also warned the district could set a precedent, and cities and counties would want to follow suit with similar arrangements.
ATRA opposed the law that created the district as it moved through the Legislature. But Sean McCarthy, ATRA’s senior research analyst, said the final version did havevaluable oversight and control mechanisms, like involvement from the county board of supervisors.
During debates over the law at the Legislature, McCarthy said, ATRA warned thatthe district wouldn’t be as monumental as people were promising — and it so far hasn't. The district likely wouldn’t be able to generate as much revenue as promised, and the money wouldn’t come while the district was still dirt, he said.
“We would say that this is a good example of something that was promised to be a lot bigger deal that it ended up being,” he said.
But others said there are benefits beyond just revenue to such a program.
Tom Murphy, a senior fellow with the Washington, D.C.-based Urban Land Institute and former mayor of Pittsburgh, saiduniversities are becoming the biggest employers in many big cities, and programs that help themgrow by collecting fees instead of municipalities collecting taxes are becoming common.
"These big schools are bringing in thousands of people to an area," he said. "They are huge economic drivers, and that has to count for a lot in the tax discussion."
New urban hub
Plans call for the Novus Corridorto become another urban Valley hub, with offices for almost 35,000jobs, nearly 4,000 homes, shops, bars and restaurants, including a food hall.
A pedestrian-friendly streetwill go through Novus' core,and apedestrian bridge over University Drive will connect the area to new ASU technology buildings.Thebridge, dubbed the “High Line,” willinclude shops and connect to ASU's light rail station.
It will take several years for the massive Novus Corridor, spanningfrom Rural Road and University Drive toRio Salado Parkway and eastalongTempe Town Lake, to be completed.
"ASU is changing the story of how universities liveand grow together," the Urban Land Institute's Murphy said.
Development plans for the Novus Corridor have changed since it was launched three years ago. The updated plan includes:
- 3.9 million-square-feet of office space.
- 3,645 apartments.
- 700 hotels rooms.
- 300,000 square feet of retail and restaurants, including a food hall similar to the Dairy Blockin Denver.
Tempe Mayor Mark Mitchell said the Novus district is a great example of how Tempe and the university have partnered to create economic benefits for both the city and school.
“It’s really focused on not only a smart university, but a smart city as well,” he said.
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