Lease-onomics-Part III-TP Is Valuable Asset
This is the third and final blog of a three part series that presents the economics related to the Tortolita Preserve (TP) Lease. Part I-Tourism Pays For Preservation covered the origins of the TP Lease and how the lease rent is funded. Part II-True Conc[f]essions covered the Dove Mountain Master Developer Agreements (Developer Agreements) and how they play into the TP Lease and certain Developer Reimbursements. Part III is a wrap-up with conclusions and recommendations.
The Town of Marana (Marana) held a Study Session on 10/8/19 and one of the agenda items was the proposed reconfiguration and rezoning of the Tortolita Preserve by the Arizona State Land Department (ASLD). During this discussion, Marana stated; (1) Cottonwood Properties, Inc. (Developer) paid the TP Lease rent in the early years of the TP Lease and (2) the Ritz Carlton Hotel generated enough money to cover the TP Lease rent and reimbursements to Cottonwood Properties, Inc for infrastructure construction. This perked our interest.
Accordingly, over the last few months, the Tortolita Alliance (TA) Core Team has been researching and analyzing TP Lease and Developer Agreement documents and finances. To ensure accuracy, we have made Public Records Requests (PRRs) with Marana and met with Marana Finance Director, Town Attorneys and Deputy Town Manager.
We have heard rumblings from some Town leaders that the Tortolita Preserve (TP) and its associated 99-Year Lease is too expensive. Ironically, some of these rumblings occurred at the same time we heard about the scheme to reconfigure and re-zone TP and surrounding lands. Lease-onomics shows that it is simply not true.
Lease-onomics Part I & Part II Recap
Here is what we gleaned so far:
TP Lease rent is funded by Hotel Sales Tax Revenues via the Bed Tax Fund
TP Lease rent is not being funded by Marana residents
Dove Mountain Developer Agreement Concessions are substantial and burden Marana finances, residents and taxpayers
Although TP Lease rent payments from 2000-2010 were appropriately borne by the Developer, they are being reimbursed as a Qualified Expense and borne by taxpayers
Asset Perspective
TP is one of Marana's most valuable assets. This beautiful 2,400 preserve provides open space, wildlife habitat, watershed protection and compatible recreational use for all Marana residents and visitors. The outdoor recreation afforded by TP during the coronavirus pandemic has been invaluable.
To put this asset into perspective, let's look at a recent proposal by the Mayor of Tucson to plant 1 million trees over the next decade to combat the effects of climate change. In 2004, the USDA Forest Service and other organizations prepared a report entitled Desert Southwest Community Tree Guide-Benefits, Costs and Strategic Planting. This study determined the average annual cost to maintain a public tree is $18.5/tree/year. For Tucson's proposed tree planting program that equates to $18.5 million/year! Yikes!
Marana does not need a tree planting program because we already have 2,400 acres of beautiful trees, shrubs and cactus to combat climate change and it only cost $574,992/year in FY19.
Economic Perspective
Let's compare TP to other Marana key financial facts:
FY19 Total Marana Expenses was $73.2 million. FY19 TP Lease rent was $574,992 or just 0.8% of Total Marana Expenses.
FY19 Total Marana Assets (less accumulated depreciation) was $427.3 million. In 2014, TP was appraised at $17.53 million. This is only 4% of Total Marana Assets.
Marana Municipal Complex (including the Police Building) cost a total of approximately $53 million. This is 3 times TP appraised value.
FY19 Total Marana Debt was $106 million with an Annual Interest Payment of $3,818,312. The TP Lease rent was $574,992, which is only 15% of the Annual Interest Payment.
Conclusion
TP is a valuable asset for Marana!
Recommendations
Marana should continue to utilize the Bed Tax Fund to fund the TP Lease, other TP expenses and potential purchase of TP.
Marana should negotiate the termination of the concession provisions of the Key Developer Agreement and divert the $16.2 million reimbursement savings to fund TP Lease, TP expenses and potential purchase of TP.
Marana should continue to work with the Arizona State Land Department (ASLD) to purchase TP using funds described in 1 & 2. ASLD should be working with Marana and TA to make this happen!