Kyrene sees $100M benefit in land lease The Chandler Arizonan

Kyrene sees $100M benefit in land lease

November 4th, 2020 Chandler Arizona Staff
Kyrene sees $100M benefit in land lease
City News
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By PAUL MARYNIAK
Arizonan Executive Editor

Kyrene school officials say the district could yield as much as $100 million over the next 75 years from leasing a 28-acre parcel of land along the I-10 between Chandler Boulevard and Ray Road in Ahwatukee.

The Governing Board on Oct. 27 voted unanimously to begin lease negotiations with ViaWest Group, a Phoenix commercial real estate investment group. Board President Michael Myrick abstained because he is in the commercial real estate investment business.

“I’ve been hoping to get this done for the largest part of my tenure,” said John King, who is leaving the board after eight years.

The district has been studying what to do with the land off and on for years since voters gave it the go ahead in 2013 to sell or lease it. In 2018, the district then began working with a broker to sell it.

But General Council Jordan Ellel said that after careful study, it became clear that leasing the land would be more advantageous for the district because it provided a steady revenue stream for multiple years and Kyrene would get the land back at the end of the lease period.

The lease also may allow the district to use the rent for operations instead of capital expenditures such as improvements to campuses.

State law generally requires school districts to use proceeds from a land sale for capital expenditures. Tempe Union deposited $23 million into its capital fund from the sale of land it owned in Ahwatukee several years ago.

Ellel said he is talking with the state Attorney General’s office to determine if there is more flexibility with a lease.

“One thing that the board has really strived for and will continue to look for is the most advantageous situation giving the greatest flexibility for the use of those funds and maximizing the opportunity,” he said.

According to the letter of intent approved by the board, whoever leases the land would pay nothing in the first year, $240,000 the second and $800,000 in the third year for the next three years.

After three years at $800,000 the rent would be increased every five years by 12.5 percent if the tenant pays no property taxes or by 7.5 percent if the tenant pays taxes. The land would then be subject to a reappraisal in the 23rd year of the lease.

The letter of intent indicates that a business park with three industrial buildings will be built on the parcel, similar to a development that ViaWest has on the Chandler side of I-10 parallel to the parcel.

Myrick noted that the fact the district would get the land back after the lease period means future school boards can determine whether to “sell or develop the land, depending on the district’s needs at that time.”

Ellel noted that this is the last piece of undeveloped land owned by the district so that flexibility providing by getting the parcel back in the future could be particularly advantageous.

He also said he hopes to present a lease to the board for its approval before the end of the year, meaning the lease would be in place when a newly constituted board takes over in January.

Two years ago, former Kyrene board member Russ Robb, a real estate expert himself, told the board that leasing made more sense because of the steady revenue stream it provided.

He acknowledged that any sale or lease had advantages and disadvantages to both.

“There are lots of complexities in a ground lease,” Robb said. “It’s slightly riskier than a sale because you are relying on someone to make a payment year after year after year … but it could be very advantageous as opposed to a sale.”

When asked at that meeting about the impact of adverse neighborhood reaction to whatever ends up being built on the parcel, Robb told the board, “I think your motivation is likely to be less philanthropic. I think you probably need the revenue more than positive publicity.”

The land was originally purchased by the district in the 1990s as a possible site for a school. Instead, Kyrene del Milenio in Ahwatukee was built in 2000.

In an unrelated action last week, the board also unanimously approved spending $100,000 to basically rent seven school bus drivers through the end of the current semester because the district has been unable to find qualified drivers to man all its routes.

The contract with a company called First Student was approved under a state law exemption from the required bidding process in the case of emergencies.

Although there was no discussion of the action, an administration memo to the board said, “Transportation was unable to find bus drivers through employment measures, therefore we sought the immediate assistance from a third-party company to provide drivers temporarily to not disrupt transportation services provided for students.

“With middle school students returning on October 13th, there was not adequate time to competitively solicit services with the State of Arizona procurement guidelines, therefore Governing Board approval of this emergency procurement request will allow the district to temporarily obtain seven bus drivers from First Student Inc.

“The district currently has 16 bus routes unfilled vacancies due to driver resignations for COVID-19 related reasons.  First Student Inc is the only vendor who had temporary bus drivers readily available with fingerprint clearance cards who could begin working when middle schools re-opened,” the memo added.

  Finding enough bus drivers has been a problem for many school districts across the state and has been worsened by the pandemic, which prompted many drivers to quit.

A bus driver in Gilbert Public Schools recently died of COVID-19, but that district has not given any details on whether he contracted the virus on the job.

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