After 10 long years, the contentious sales tax sharing agreement between the Town of Oro Valley and Vestar has come to an end.
History of the deal
For those who are new to Oro Valley or those who need a refresher, back in 2004, the Town of Oro Valley entered into a controversial Economic Development Agreement (EDA) with Vestar. The EDA involved the Town receiving 55% of the sales tax revenues from the proposed Oro Valley Marketplace and Vestar receiving 45% of the revenues for the first 10 years of operations or until Vestar had collected $23.2 million dollars, whichever came first.
It was controversial because many Oro Valley residents did not feel that Vestar needed a tax incentive to build a mall on a major arterial road. Vestar also promised that they would provide “an extraordinary shopping experience” with “signature shops” and “unique stores.” However, many citizens did not trust Vestar because their development history revealed that they were in the business of building Anywhere USA malls with Wal-Mart as the anchor store.
Two citizens’ groups were formed
As a result, two citizen groups were formed to try to stop this deal. Those groups were SOVOG (Stop Oro Valley Outrageous Giveaways) and Oro Valley 1st. Although both groups received a lot of traction with the citizens and in the press, unfortunately, they were no match against Vestar’s well-funded and relentless media blitz (including multiple full-color postcards and even a DVD that was sent to every home in Oro Valley) extolling the “virtues” of the wonderful mall that they were going to build for us in exchange for giving them nearly half of our sales tax revenue.
Although SOVOG was successful in taking this to a vote of the citizens via a referendum in March 2006, sadly 58% of the voters approved it and 42% voted against. Vestar’s big money and media blitz won with a 16% margin. The movie theater was most likely what sealed the deal as Oro Valley residents (especially in Rancho Vistoso) previously had to drive a long distance to the nearest movie theater at Foothills Mall.
The predictions of SOVOG and OV 1st came true
Then, just as the two citizens’ groups predicted, Vestar delivered a sea of discount chain stores with Wal-Mart as the anchor. The Wal-Mart anchor was announced by Vestar in early 2007. The mall opened in October 2008. It’s now ten years later, and we never got the signature shops, the unique stores, or the extraordinary shopping experience that Vestar promised.
Ten years later - Projections vs. Actuals
A Public Records Request has revealed that the actual sales tax revenues over the 10-year period of the agreement were less than anticipated. Below is a chart showing the
projected sales tax revenues vs. the
actual sales tax revenues that were collected from OV Marketplace.
The sales tax revenue projections were provided by Vestar. The sales tax sharing began when OVM opened in October 2008 and ended in December 2018.
Fiscal Year Projected Actuals
2008-09 $1,484,000 $863,640
2009-10 $1,573,040 $1,386,493
2010-11 $1,667,422 $1,575,200
2011-12 $1,767,468 $1,620,162
2012-13 $1,873,516 $1,700,771
2013-14 $1,929,721 $1,706,007
2014-15 $1,987,613 $1,732,324
2015-16 $2,047,241 $1,601,257
2016-17 $2,108,659 $1,645,238
2017-18 $2,171,918 $1,696,601
2018 thru Dec. $1,118,538
* $842,257
10 Year Total $19,729,136 $16,369,950
* Vestar projected sales tax revenues of $2,237,076 for the entire FY July 1, 2018 through June 30, 2019. However, since the sales tax sharing ended in December 2018 (six months into the fiscal year) I cut their projection in half to cover one-half of the fiscal year. ($2,237,076 divided by 2 = $1,118,538)
Their biggest miscalculation was in the first year when the projections were off by $620,000. Over the 10-year period, Vestar’s sales tax projections were off by an average of $300,000 per year.
The 45-55 split
The town received 55% of the sales tax revenues for a total of $8,994,795.
Vestar received 45% of the sales tax revenues for a total of $7,375,154 which is less than one-third of the $23.2 million dollars that Vestar was anticipating.
Empty storefronts
In July 2017, I counted 22 empty storefronts at Oro Valley Marketplace.
Two years later, in May 2019, I counted 23 empty storefronts. According to the OVM website, in July 2019, there were 22 opened businesses including 9 retail stores, 5 restaurants, 6 services, 1 jiu jitsu, and the movie theater.
A brilliant collection of Anywhere USA stores
Their website claims that,
“Oro Valley Marketplace has amassed a brilliant collection of boutiques, national anchors, unique eateries, and traditional restaurants.”
Below are the 9 retail stores. I admit to shopping at World Market because they carry many unique items. I also shop at Ulta because they carry some of the higher quality items that I prefer. Nevertheless, the question remains...
Do you see “a brilliant collection of boutiques” in this list?
Best Buy - Big Lots - DSW Shoe Warehouse - GNC Vitamins - Petco
Tuesday Morning - Ulta - Walmart - World Market
Below are the 5 restaurants. Do you see any unique eateries in this list? I see a collection of chain restaurants and one locally-owned Mexican restaurant. A Mexican restaurant in the Southwest can hardly be called “unique.”
In-N-Out Burger - Olive Garden - Red Lobster
San Carlos Grill - The Keg Steakhouse
What does the future hold?
At the November 15, 2016 Planning and Zoning Study Session, Nancy McClure, First Vice President of CBRE, made the following comment about OV Marketplace.
“I'm sure some of you know that that property went out to the open market to be sold as an investment. They had no buyers. Vestar would love to sell it but a lot of the buyers called me because they want to find out what’s going on, how are they doing, why hasn’t it sold. Part of the problem with this project is that they’re not doing great numbers in there, they’re not selling enough. The movie theater does 30% less than the national average for movie theaters. Dick’s Sporting Goods numbers are really bad. [Dick’s has since closed.] The more of that story that gets out, it’s going to be really difficult to fill those spaces.”
According to the CBRE website, Ms. McClure “specializes in representing local and national retailers in their expansion pursuits across the Tucson area” and “to work with property owners to enhance value through leasing to quality tenants and to position centers for sale in the investment arena.”
Today’s Lesson
Oro Valley Marketplace was a grossly oversold enterprise from the beginning. Additionally, no matter how well-intentioned, government usually cannot create, even through incentives, successful private sector projects. If a project requires government help in order to be successful, then the project will likely not meet expectations because it was not, in and of itself, sufficiently able to stand on its own.
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Diane Peters has lived in Oro Valley since 2003, moving here to escape the humidity of the East Coast. She’s been involved in OV politics and development issues since 2006. In 2014, she organized a citizens group, Citizen Advocates of the Oro Valley General Plan, who over a 9-month period, successfully negotiated a controversial 200-acre development project. In her past life, she worked in medical research at various University Hospitals in New England. Her interests include reading, writing, nature photography, travel, art galleries, museums, and politics.
