Originally Published: September 14, 2018 11:01 p.m.
Prescott City Council was in a real rush late last month when it approved the contract for construction of a Hilton Garden Hotel on city park property. The public found out about the proposed contract just two business days before the vote.
The major issue, besides the rush and initial bypassing of Planning and Zoning, is that Prescott granted a lease with purchase option to the hotel developer, WSH. The problem is that both state law and city charter require a formalized bidding process when any public property is sold.
But City Attorney Jon Paladini stated that the contract was not covered by the law because an “option is not a sale.”
Maybe not yet. But the contract grants “exclusive option to purchase” the two acres of prime downtown land for $300,000 five years after commencement of the lease upon the unilateral exercise of that option by WSH. So the city is now contracted to allow WSH to buy the land in the future without going through the required bidding process. Can that be legal?
Retired Yavapai County Superior Court Judge Ralph Hess doesn’t think so. He sent a letter to the Arizona Attorney General, requesting an investigation and for “intercession to enforce ... and void the adoption” of the contract if the AG determines the city violated laws.
If the option is ruled illegal and is severed from the contract, the taxpayers of Prescott could be on the hook. The contract states, “The city represents and warrants that prior to entering this agreement it will comply with any applicable legal requirements including any requirements necessary to lease property with an option to purchase found in the Prescott City Charter or other applicable law.” Also, “If application of this severability provision should materially and adversely affect the economic substance of the transactions contemplated hereby, the party adversely impacted shall be entitled to compensation for such adverse impact.”
So if the option is severed, the question will come up if the taxpayers will have to pay WSH.
The price of the two acres, $300,000, is also suspect. Miller Valley School sold for over $1 million per acre — and that’s before demolition expenses. City officials claim the hotel site would be very expensive to develop because of area flooding. But the building could be built above grade by using piers or earthworks. Even if those costs are added, the total price would be well below the value of the property.
I don’t know how much this property is worth, and since the city never obtained an appraisal of the property value and the estimated costs for piers/earthworks, they don’t know either. Since the developer is requesting six stories, the value of the property would be much greater than if it had the normal maximum of four stories. We shouldn’t be surprised if the property value is well over $2 million.
The hotel project may originally have been a good idea. But it was railroaded through council and got off the tracks at the start. In order to avoid a train wreck, major changes are needed.
Howard Mechanic has lived in Prescott for 17 years and has been active in public affairs throughout that time.