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Live blog transcript: Pima County Real Estate Research Council

The Star's Tony Davis is blogging live at the second quater meeting of the Pima County Real Estate Research Council. The event is billed as "a candid conversation between Donald Diamond and Chuck Huckelberry." The meeting and live blog are from 8 to 10 a.m. Thursday. The meeting is at the Tucson Association of Realtors, 2445 North Tucson Blvd.

  • Pima County Administrator Chuck Huckelberry and real estate developer Donald Diamond used to have some knock-down dragout debates during the real estate boom and land conservation wars back in the early to middle 2000s. Diamond once took a shot at Huckelberry's Sonoran Desert Conservation Plan, issuing a "call to arms" urging others in the real estate community to fight it (although he later became more supportive). Huckelberry in turn accused Diamond of opposing the plan because it was something nobody could control, and "Don Diamond doesn't like things he can't control."
  • Today, as the two prepare for another "candid conversation," before a Pima County Real Estate Research Council, the question arises as to what they'll argue about now, with the real estate market still barely out of the doldrums and the conservation plan a reality. Rosemont? Diamond has never spoken publicly for or against it, so it will be interesting to see if that comes up, in light of Huckelberry's avowed opposition, There will be some opening remarks by council officials before the debate starts, About 100 people are here, with a handful of empty seats sprinkled through the audience.
  • Huckelberry introduces himself as, "I'm Chuck Huckelberry, still Pima County Administrator." Diamond counters, "I'm Don Diamond, and I wish he wasn't."
  • Jim Marian, longtime local real estate broker, is now at the dais. He's with Chapman Lindsey Commercial Real Estate. He's now turning the session over to Paul Craft, a past council chair. Head of the council's data committee and will announce a major change in the council's research. Marian labels him "today's referee" between the two speakers, who love to poke at one another. Of course, there have been rumors from time to time that Huckelberry would someday retire from the county and go to work for Diamond, but that was never more than a rumor.
  • Craft points to a slide showing statistics showing that Wells Fargo is #1 or #2 in various kinds of real estate originations, nationally, Another slide shows where Wells Fargo has real estate officies sprinkled from coast to coast, numbering about 35 or so, total. Another slide shows Wells Fargo's commercial real estate portfolio, and another slide, showing Wells #1, and he says, "What makes us number 1 is that people trust us. . . I appreciate that and I appreciate the ability to sponsor this today. Thanks." Applause.
  • Craft now shows the council's quarterly snapshot. On the industrial comment, he highlights a $100,000 square foot, fourth quarter lease that defaulted in the first quarter that makes the sector look "funky," Craft says, but adds that it was a "phony" lease. He says the council has hired someone to help the council conduct an annual study -- Lucinda Smedley, who has been in the community in real estate development and research for a number of years. She's also been heavily involved in the board, "and you marry that with her skill set," and it was an easy decision, Craft says.
  • Now, Diamond and Huckelberry walk to the podium. Craft says the council decided that anyone in Tucson who understands our market knows these people, meaning no introductions are necessary. "Nothing needs to be said." He says questions have already been submitted. Huck is on the left of Craft, Diamond on the right. Craft is going to read questions, one of the speakers will have five minutes to respond, and the other will have three minutes to respond to the first.
  • Diamond says we will start with Chuck explaining Pima County, then "I will go to the city," which I will take because he doesn't trust Chuck talking about the city. "I feel like an audience like this is that one thing that is derelict because we haven't done a good job in Phoenix. We're getting hurt by that. If you were more active and helped us in Phoenix, we would be monumental." Let's start with Chuck, "when he makes a mistake, I'll inject myself."
  • Huckelberry says, "Everybody knows Donald and his reputation, particularly with regard to high-end residential, but what people forget is that the county is tied to real estate endeavors, our revenues are tied to the tax base. We know well what everyone has been through in the last 4, 5, 6 years. Seventy to eighty percent of the county's money is tied to the tax base." The counties have an arcane tax structure .... "Our real estate tax base has contracted 17 to 18 percent," from $9 billion in 2010 to $7.5 billion today, he said, although it's starting to go back up. The primary base, that is. Now, the secondary tax base, more realistic, has contracted from $10 billion to $7.5 billion since 2010. "That's remarkable, the tax base only contracted one other period in the last 40 years," he said, from 1986-91. That crisis -- during it, the tax base contracted 1 percent, during the savings and loan crisis.
  • But I think we're coming out of it, Huckelberry said. "We need to change the dynamics in our community, to attract and import something like primary, export based jobs. If you get those everything else follows. Service jobs follow primary based jobs, the retail follows that. We're concentrating on one thing, one thing only, rebuilding the tax base to what it has been." To get that done, we need to attract export-based jobs to Pima County,.
  • "We've been through a recession 25 times greater than what we went through in the savings and loan crisis. Those of you who are still standing are to be congratulated."
  • Diamond, "We call it shovel-ready. Chuck been telling us we have to get our roads and things shovel ready, so at least we can compete. Some of us are laying out the money to do that,. Then, you have TREO and other firms trying to bring them in. We have some questions about what Chuck thinks we should be doing and what you think you should be doing." Huckelberry says "Donald has hit the point. We used to think that growth was inevitable, all we had to do was sit around and watch the sun rise and people would come to Arizona. Now we have to worry about being competitive and competition is the key." We need tax structure, work force and other factors to be competitive, we can no longer rely on our good looks and climate, he said. "This economy is global and we have to be globally competiive.":
  • Craft asks, what could we do to help the area grow? Diamond: The fact is this organization has a lot of members and we really represent the real estate. We are unfunded and looked down on by Phoenix. The state Commerce Commission comes to us; we're getting secondary looks at some of these things. An example is Route I-11. Phoenix is saying, they have backup from other states, that I-11 is going to start in Phoenix and be a road just there to Vegas. I-11 was supposed to start here, terribly important. So Chuck has been working with us on some land to have I-11 and I-19 connect at the border. Phoenix is against us. We're way behind,. Gov. Brewer mailed me a list of appointments and we get very very few, he said. That's just one example. On ADOT, which is key with Chuck, which is where we get money from roads, and it's been swept up. We get no money.
  • Huck says, "I think Donald's right." I used to equate it to big brother, big sister, now it's the middle child syndrome. We're second largest area. We need to make our voices heard much more often, a little frequently, a little louder." The I-11 a good example, it started as a discussion between Phoenix and Las Vegas. What they forget is that the start of the trade corridor originates in Mexico. We've got them now thinking now, with Mexico the largest growing middle class, their GDP growing four and times faster than ours, we need to figure out how to connect to the economic prosperity with Mexico. We have to get people to think that this is a state growing from border to border, and not the state of Maricopa.
  • Huck is asked what we should do about two prime real estate tracts: Rillito Racetrack and the county courthouse, On Rillito, it was subject of 1984-85 referendum keeping it in horse racing for 20 years. We're now at the end of horse racing, and there will be a ballot measure to convert it to a full-scale soccer park. We need to have it to attract kids from California as opposed to having them drive to Phoenix for soccer. The courthouse -- I wish the downtown was growing with primary employment, it's not. We're going to convert first floor into art museum, with the other floors for administrative purposes, low-impact because it's a historic structure.
  • Diamond wants to know why we lost with Raytheon, re the middle missile facility to Huntsville, Alabama. Huck says we were never in the running, because Raytheon operatues under waivers from the US government. You need to have safety buffers around them, which here cross two major highways. It's not a good idea to have your major capacity based on a waiver from the Air Force. Donald a little guilty here, pointing to Diamond's past effort to put homes there, Raytheon said all those people will live here will be a little upset when their garage doors go up and down. Now, we need to give them every opportunity to expand, which we're doing with relocation of Hughes Access Roadway and purchase of 500 acres, which we'll turn over to the private sector. Diamond to me: Tony take advantage of this. it wasn't the garage doors who did it. It was their senators versus ours. We didn't have anyone on the select committee--they did. They won in Washington, D.C. It was a little political, and we're not in the game.
  • Diamond is asked what regulation we could best get rid of. I would say that environmentally we have to be very concerned and not destroy it. We have to be conscious of that. I believe we are pretty balanced here. Now that we got rid of the pygmy owl. Chuck and I argue all the time, he makes up new regulations all the time. I don't have much to complain about now. I think we've come a long way. It's the roads and infrastructure they're in bad shape. I can't say that's what coming out of Board of Supervisors is hurting us. I think they've levelled the playing field but I don't admit it to them. Huck: It's how we make ourselves more competitive, if that means we need to modify our codes or do more with infrastructure we need to do it. Very often we tie our own hands because we adopt codes tied to slowly changing economic environment. We're now in a dynamic economic environment and we need to change for that.
  • The question is now what can the community do best to attract Tesla. Huck says we've made a very strong pitch, all we know now is that we're still in the running. It's encouraging, it says we have a product that somebody is interested in. We have a location, a climate and environment, the question is do we have a trained work force, that is ready to move up so the average wage ticks up. He points out that average wage will be $60. Locally, we're prepared to do anything we can to be attractive to that type. That company meets our primary export base employment qualification. The question is does the state compete, does it compete with Texas, does it have the incentives. The question will be can we compete at the state level. We have property tax incentives we put on, lowering their tax rate by two-thirds, 75 percent. Diamond, shockingly, congratulates the county, this is the second time in six months we've stayed in the deal. One element I'm involved in is the government in Washington, D.C., unfortunately it's very political. I'm working on that, Sen. McCain has had meetings with Tesla, he is a friend of a gentleman there, it has to do with politics. State has already to some of the reductions. But you know Texas is unbelievable in what they offer.
  • Diamond is asked if he thinks the county taxes are a problem. I don't know that, he says, if I did I wouldn't answer it would tend to incriminate me. He says he admires the homebuilders, it's very reasonable on the homes. You have a big guy like me, the land is pretty expensive, the land costs are up there. When it comes to satisfying the county, they require a lot of things here, infrastructure. The next thing is you're taxed to get into the game.All of these things add up. But I think the homebuilders themselves do a marvelous job of keeping costs down. Chuck: Taxes are only high if you're in high-end residential real estate. Taxes are a hot topic, you'll get to read about them all next week, as we adopt our tentative budget. What county did is lower property taxes during the recression, they decreased by almost $50 million over last 4 years. They peaked in 2010, we drove them down because we're living off something called the fund balance, the rainy day fund, we thought the dollars would be better invested in the community. We didn't curtail services or lay off people like some of those things other local stressed governments have now. Now, we are probably recommending tax increases next year to the board, and they have an alternative, we can cut services. If we have to keep services, we will need a tax increase.
  • Huck is asked what we can do to attract a bigger share of jobs in the state. He says Donald has hit nail on the head, we have to be more Phoenix-centric, getting more members on boards and commission. The agency providing incentives for job creation has only 2 of 20 governing members from Pima County. If you look at data, data tells you that Phoenix is getting a disproportionate share jobs. There's discrminating and there's passive discrimination. . . the problem is we don't get equal consideration with other parts of the state. There's a preference for rural Arizona and Phoenix and we're lost in that." Diamond: He handled that well.
  • Question: How is the county working with the University of Arizona? Huck: On Tuesday, we had an agreement with the medical center, teaching hospital. He says the UA is the key to growing export-based employment. We used to think let's go steal somebody else's employees and get them to relocate to Arizona. That strategy no longer works. You have to grow your own. Get startups, such as Ventana Medical and other bio-startups. Accelerate Diagnostics, they will outgrow their space in 2016., One of keys in allowing them to move they bring in a startup behind them. That is the university's role. They are the seed of entrepreneurial development, creating new high-tech firms is our future.
  • Diamond: What Chuck says is true except we're late. At least we admit it, ASU is well ahead of us. Our company is working on a pretty big deal right now, but the fact is we're in a very competitive marked. I have to take my hat off to ASU and Phoenix. We're behind the curve.
  • Question: What could we do to get more women in more leadership roles in our industry? A: Don't tell my wife the answer. It seems that what we're hiring now is no different. But first of all it's college. I have a daughter graduating hopefully in a couple of days. I see the percentage; I look at hospital, they're hiring, see the female presence at the university. I listen to my wife and daughters and I don't think it's unequal. They're winning. Huck: About half my management staff is women and someday we'll have a woman county administrator and city manager.
  • Huck is asked about the fractured city-county relationship: It's not as good as it should be. It's inexcusable, it shouldn't happen. We need to double up our efforts to make sure it doesn't happen. That's something you can do in our audience, redouble our efforts on that. I can't stress it enough. It's not as good as it should be. If it were better we would be more competitive.Diamond agrees, I think city is trying to turn it around, they have turned around Downtown. But they didn't recognize they need the infrastructure to connect the city with Pima County in getting shovel ready all over the case. They're doing it now, but it's a late bloomer and anything you can do would be appreciated. The city has a more difficult job. They have unions, the fire department, the police department, they have to overcome a period of 40 to 50 years. Chuck is all over the place talking to people like us, asking us what could we do. The city is not that way. Rothschild goes all over the place, to every meeting. That's fine and dandy. I haven't met the city manager. I think that they're internally confined to what they're listening to, where I find even though I differ with the county, it's always accessible there. In the city it's very very difficult to get things done. They're trying to overcome it but they have to get with it and have to improve.
  • Huck is asked about the bond referendum for 2015. There's bond advisory committee members here who will be meeting for 3 hours tomorrow to take more pummeling. What's encouraging they've been meeting since 2007, they often have as many as 200 people in their audience. The poor bond advisory committee has to take $1.2 billion of community to winnow it to $600 million. They're winners and losers. They get my recommendations. Sometimes they throw it into the trash can. That's a good thing, dissent and argument is an important part of the process. Everyone always worries about our debt. It's managed well. It's only a 15-year debt. The only tax rate that's going down is our debt service rate. That's a good thing.
  • Diamond calls bond committee the most democratic thing I've seen in Pima County, although I lose sometimes. They spend an inordinate amount of time and ask a lot of questions. I think that's pretty fair.
  • They're asked about D-M's future. Diamond: I think it changed last month with Russia. I'm a political junkie. I understand from fairly good sources due to what's happened with the Ukraine, Armed Services has changed is taking a strong position on the A10. It's salvaged and saved us for a few years. They're important in what's going on here. I don't want to say we're safe. I'm very concerned about what's happening in Ukraine and Russia, but here we're alright down here. I think we have a good private sector group that meets with D-M and in Washington and because what happens internationally I think we're going to be allright. Huck agrees,. When we talk about protecting our major employers after Raytheon, D-M is number 2 on our list. We need to do everything we can to support Davis-Monthan which has been here since 1927, christened by Charles Lindbergh. It has assets that no one else has in this country, called flying space and training space at the Goldwater Range.
  • Can the county play a role in UA's expansion into downtown? Huck: Yes, that building called Roy Place. It used to be called the old Walgreens. Has a lot of character and style. In 1950s they decided to modify it. We renovated that building, leased it to the university where we have social and behavioral sciences. I think it's one of these things we need to get together with the city, figure out to provide the structural space. We have the students downtown and we've got World of Beer. Two major accomplishments.
  • Diamond asks Huck about the mine. Huck: I think one of the misconceptions, there is a political side of Rosemont and there's the technical side. On tech side, the county always told Rosemont what we felt was needed in regard to mitigation, in an area relatively unique and different, different from Sierritas. They have mitigation requirements from at least a local government perspective that I now think is being realized. It is now actually a requirement. My guess there is a long time integrating federal policy, state law, local government sectors. I believe Rosemone one of their key permits will require significant more mitigation. If they willing to meet those requirements, my guess is that the federal government will look positively on it. Without it, it will take a long time to get it. Our board politically remains opposed to Rosemont. Our staff is we'r enot the permitting agency. Don't get to say yes or no. What we do get to say is what we'd like to see. Whether it happens now or five years from now I don't know. Rosemont's mitigation requirements closer and closer to what we said in 2007.
  • A round of applause. It's over. No fighting. Would have been unheard of a decade ago.
  • Diamond, interviewed afterward, agreed with Huckelberry on the mine, in that he believes it will require more mitigaion. "Huckelbery will get what he wants.": But he says he expects the mine will happen, given the large amount of money it has attracted -- $520 million. He was referring to the hostile takeover bid that Hudbay Minerals Inc. has made for the mine's landowner-parent company -- Augusta Resource. Diamond, now 86, hasn't taken a position on the mine but he believes it's inevitable. "That's the way the government works," he said.
  • I've been covering the local development and environmental issues here for 17 years now, and this is the most harmonious I've ever seen these two men have ever been. Diamond said that's partly because he's retired. Another factor is that the issues here have changed--from how and whether to control the runaway growth of 15 years ago to how to get high-quality jobs here. The key decisions about the county's land use layout and portfolio have been made. The conservation plan and open space conservation are now realities here, as is continued urban expansion and sprawl. The big issues now are over how to make the economy grow.
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