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Opinion

Henninger: Being open to change may be path to future prosperity

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It is not business as usual for the City of Scottsdale, and won’t be for a long time to come.

Two of the city’s largest revenue sources — tourism and retail sales taxes — are in a deep hole, and it may take years for businesses in those sectors to dig their way out. Some never will.

As August ends, the City Council returns to work and the campaigns for mayor and council hit a fever pitch, what should we expect as city residents?

Here’s one idea, and it’s not a lot to ask. We need our leaders — and those who want to be our leaders come January — to acknowledge the challenges and move forward with open minds. They need to be open to change.

The city’s dynamic and fiscal conditions are upside down from where they were when the year started. When we recover — who knows when — from the COVID pandemic, we will not suddenly return to conditions that existed before the virus invaded our lives. The city’s revenue sources, our lifestyles and our schools all will be substantially changed, perhaps permanently.

The city’s revenue lifeblood — tourism — has been hammered. Hotels and resorts are now running at 30% occupancy levels and insiders’ best guess is that may improve to 50 percent over the next couple years. Fifty percent. Couple of years. That’s hard to swallow.

Bookings by groups, critical to this industry, may never return to the levels the industry has relied on for so long.

And then comes news that Scottsdale Fashion Square, the sales tax bedrock of the city’s core, is facing serious financial challenges. Macerich, its owner, is working to make good on $6 million in deferred loans for the mall, which was the victim of terrible timing.

First it spent $200 million in a luxury makeover that made it one of the premier malls in America. Then COVID shut down shoppers’ traffic and looting and rioting on May 30 caused millions of dollars in damages.

There’s every reason to believe the mall, which generates 70% of the sales taxes downtown, will eventually recover. But still in doubt is the future of in-store retail sales overall due to changes in shopping trends fueled by technology and the increase in online retailing. The COVID disruption accelerates those trends.

Over 40% of Scottsdale’s revenues comes from sales taxes, which is why property taxes have remained low. The city’s fiscal dynamics have fundamentally changed, and that should change the way our leaders look ahead.

Now is the time to refocus on priorities. The previous hot buttons of height, density, transit, parking and even the failed Desert Discovery Center — all still being used in campaign platforms — should be put in the rear-view mirror and put to rest. It does no good to dwell on the past.

The evolution of downtown is vital. What does that look like? We need leaders to talk about how they are going to recruit private-sector investment downtown. We’ve heard enough already on what they want to prevent from happening. It should be about what they want to start; not what they want to stop.

What other parts of the city could be centers of employment, education and healthy growth that fits the character and high standards we expect in Scottsdale? Who’s talking about that now? Who’s leading that vision?

The council’s approval last week to invest in Axon’s plans to expand its headquarters in the city was encouraging. It means quality jobs and a source of significant tax revenue for the future. The fact that the council voted 7-0 is even more impressive.

That positive collaboration and willingness to invest in the city’s economic infrastructure is critical now and into January when new council members take over.

We need to know how our leaders plan to move the city forward in conditions that will be more challenging than ever. Potential investors in the city should be embraced and encouraged to present ideas that can be vetted in public view and approved when appropriate.

We like to say Scottsdale is open for business. We better make sure we mean it.

Editor’s Note: Don Henninger is a Scottsdale resident, executive director of SCOTT, and serves on the board of Independent Newsmedia.