An answer to Brodesky’s hit piece on Tucson City government and the Gadsden Company: Part 1

by David Safier

Josh Brodesky's Thursday column in the Star about Tucson government was poorly written ("Sounds like the work of a 3rd rate blogger," someone told me), nasty and inaccurate. I don't want to waste time going through the column bit by bit. Rather, I want to focus on what Brodesky calls a "land-flip deal" which, so say Brodesky and Rob O'Dell in their countless hit pieces, made over a million dollars for Gadsden Co. and took the city to the cleaners.

I had a long phone conversation with Jerry Dixon, Gadsden Company's Chairman, to learn about the public-private partnership deal from his viewpoint, a story he has told to the Star but has not been reported accurately. According to Dixon, the company's earnings related to the deal over the three year period will be approximately $250,000, and that doesn't take into account the expenses of day-to-day overhead involved in running a business. Not being a businessperson, I can't say if those earnings are on the high or low side for this kind of deal, but I do know, it's far less than the obscene $1.2 million profit implied by Brodesky and O'Dell.

Before I go into the details, a bit of background and explanation.

First, it may seem I'm out of my league, a retired high school English teacher writing about city development matters. In fact, I earned a Masters of Urban Studies from Portland State University, whose Urban Planning department is considered one of the finest in the country. As a Portland resident, I was able to watch at close range the city's transition from a second rate town, well off the country's radar, into a major city with an excellent national reputation, based in large part on city planning which resulted in an ever-expanding light rail system, a rejuvenated downtown and the rebirth of residential areas which had been sliding downhill for decades. So I feel reasonably qualified to discuss matters of urban planning, growth and development.

Second, the main purpose of this post is to air a side of the story the Star has refused to present with anything approaching journalistic objectivity. I'll try to represent what Jerry Dixon said as accurately as possible. However, I haven't checked his assertions with others. If he is misrepresenting things, I'm sure he and BfA will get plenty of feedback. My sense is, his version is far closer to the truth than the hit pieces penned by Brodesky and O'Dell.

That said, on to the details.

In Brodesky's telling, the city

[sold] a piece of land on the west side for $250,000 so that Gadsden could turn around and sell it for $1.43 million that same day

Doing the math, Brodesky is implying Gadsden turned a $1,180,000 profit for a day's work in what he calls a "land flip."

Here is the more complete story, according to Dixon.

Three years ago, Gadsden bid on a parcel of undeveloped property on the west end of downtown and was, according to Dixon, "selected by the city to develop the property, be the master planner, put the vision together, design the streets, and help them achieve the streetcar to the west side."

The specific part of the deal Brodesky writes about involves the sale by Gadsden of one portion of the land to the Senior Housing Group out of Chicago to build senior housing west of the freeway. The sale was for $1,430,000, as Brodesky wrote, but the story doesn't end there.

"Our deal with the Senior Housing Group was that it had to be a fully improved piece of property," Dixon told me. That included streets, sidewalks, curbs, gutters, gas, electricity, water, sewage and drainage into the Santa Cruz River.

"Now here's the cost," he continued. "Held in escrow from the $1,430,000 purchase prices is $610,988 to do the infrastructure. . . . Then at the last minute, we had to relocate a 36" diameter high pressure reclaimed water line from the site. That cost our company over one half million dollars."

"Over the next four to six months, when we complete the infrastructure improvements," Dixon said, "our company will receive 25% of [the escrow amount]: $152,747."

When the work is done and the sale is finalized, Dixon said, "The only money we can count on earning is about $250,000." But he said that entire sum cannot be figured as profit, because it doesn't take into account the company overhead related to the project over its three year time span.

Whether Dixon's numbers are entirely accurate or open to dispute, my impression is, the reality of Gadsden's profits are miles away from the simple subtraction Brodesky used to imply a "land flip" profit of over a million dollars for a day's work.

Though I don't profess to any deep knowledge about the world of business, it's pretty obvious to me, if the city wants businesses to invest in downtown, it needs to make it look like a profitable endeavor. The city can't develop downtown without making it attractive to business. In the world of public-private partnerships, the ideal is, both sides benefit. For business, that means increasing profitability. For the city government, that means creating a better, more attractive, more livable Tucson.

If developers, restaurateurs and store owners are going to invest money and energy in downtown Tucson, the city has to put its funds at risk to create an environment where private enterprises are willing to put their money at risk as well.

Toward the end of our talk, Dixon said he thinks Tucson's downtown has reached a profitability tipping point, where things are going to continue to get better and the area is going to continue growing. He pointed to the 12 new restaurants and the relocation to the downtown area by Tucson Electric and Providence Service Corporation, among others. When businesses make a major investment to move their enterprises downtown, that means they see a long term future in the area. When their employees come to work, they also become consumers who want to find places nearby to eat and shop. The businesses opening to meet the increased demand attract still more people. Growth creates a ripple effect, spurring more growth. As residential spaces are built in the area, the ripple effects will multiply.

Jerry Dixon had lots to say about the Star's bad mouthing of downtown, and he also has interesting insights into the value streetcar lines will add to the city. I'll write about those and other related issues in another post today or tomorrow.