'Bad neighbor': Phoenix struggles to manage its vacant city-owned lots

Alongside historic bungalows, apartments and manicured lawns that line Fifth Avenue in downtown Phoenix sits an empty dirt lot surrounded by a chain-link fence and a “No Trespassing” sign.

Jonathan Pring, owner of the Teapot coffee shop next door, fumes about the sight as he tends to the morning’s rush of customers. He says the vacant property is blight that detracts from the curb appeal of the surrounding Roosevelt Historic District.

“It’s not in keeping with the neighborhood,” Pring says, glaring at the open lot through a window. “It looks ugly. It attracts homeless people to it. People throw their trash over the fence. And it’s just a lose-lose-lose.”

Last year, Pring and his wife, Raelynn, bought and renovated a 1906 bungalow to open their business. The empty lot next door quickly became a concern.

Pring said he’s emailed the property’s owner several times, asking what they plan to do with the dirt parcel. He was told it will eventually be sold for someone to build a home. When that will happen, the owner couldn’t say.

The owner of the "eyesore" next door isn't a deadbeat developer or out-of-state land speculator waiting for its value to increase.

It's the city of Phoenix.

Pring’s frustration is shared by many throughout the city as Phoenix for decades has bought and acquired land, setting aside parcels for future municipal facilities or to help shape development.

The city’s real-estate portfolio is massive, with more than 5,530 parcels, or roughly 90 square miles of city-owned land. That’s more land area than the entire cities of Baltimore, Seattle or Pittsburgh. Of that, about 2.3 square miles sits vacant and likely could be developed.

MORE: How we got the data on Phoenix's real-estate struggles

Neighbors, elected leaders and private developers say Phoenix often is not a good steward of land. They say the city’s approach to managing its properties is overly bureaucratic and can stifle opportunity.

Selling property could help the city bring in millions of dollars in one-time revenue and partially ease chronic budget problems.

But critics say the real cost of Phoenix's real-estate strategy is lost opportunity. For every lot the city owns, someone isn't paying property taxes to support local governments. And every vacant lot means zero productive use or economic activity.

The Arizona Republic spent more than a year investigating the city’s land-management practices. Public records and more than three dozen interviews revealed several concerns:

• The city doesn’t keep track of how much vacant land it owns. An analysis by The Republic of thousands of parcels found about 1,400 pieces of property that appear vacant and developable — land with an assessed value of roughly $150 million. That’s enough dirt and gravel lots to cover nearly 1,087 football fields.
• Hundreds of those lots have sat idle for more than a decade, some with no use planned for the near future. One property, which the city is considering selling, has been vacant since 1977.
• Phoenix struggles to keep an accurate inventory of its properties. In 2013, a city list missed at least 1,200 vacant and non-vacant parcels it owned. The city has worked to create a better database, but its public list still does not include about 60 parcels the city owns or partially owns, according to county records.
• Vacant city-owned lots often are a nuisance for nearby homeowners and businesses, creating concerns about eyesores, illegal dumping, dust and weeds. One city councilwoman said Phoenix has been “a bad neighbor” at times.
• It can take months or years for the city to sell excess land, and prospective buyers say that can create missed opportunities for development.

Former Mayor Paul Johnson said flaws in the city’s real-estate practices go back decades. While Phoenix needs to buy land in some cases, he said, it’s not a good developer or land speculator because the city faces more legal restrictions on how it can acquire and sell land.

“In my experience, they’re not good buyers, they’re not good sellers,” said Johnson, who owns a building company. “They’re better off not to be in that business. They’re terrible landowners.”

Phoenix officials said they’ve worked hard to sell unneeded properties in recent years. However, they warn the issue is more complex than it might appear: The city faces a litany of rules when selling properties and must be careful not to get rid of property it could need later.

“There’s this sort of mythology that we have all these thousands of properties just sitting there,” said City Manager Ed Zuercher, adding that most city properties fulfill a purpose.

READERS' PICKS: Worst Phoenix eyesores of 2015

Zuercher said the city needs to be cautious because “once you release a property, you can’t go back.” He said a flurry of recent development in downtown, often on parcels the city once owned, is an example of how its intervention can be a success in the long term.

“When the city puts land on the market, everybody has an opinion about it," Zuercher said. “In a public process, you have to allow all those voices to be heard, and that takes time."

The city must also comply with extra legal restrictions to sell some excess land, such as parcels purchased using federal dollars for noise mitigation around Sky Harbor International Airport, light-rail construction or to remove slum properties in struggling neighborhoods. And if those properties are sold, the city can face limitations in how it can use the proceeds.

However, Zuercher said the city still can improve its management of land. He said the city is creating a new process to regularly reevaluate its holdings to ensure any unneeded properties that accumulate over time are sold.

Frustration with vacant city lots is a decade-old issue on Holly Street in midtown Phoenix near Central Avenue and Thomas Road.

Two gravel lots sit near the end of the street, a quaint tree-lined stretch of upscale Craftsman- and Spanish-style homes in the Willo Historic District. In 2006, the city used eminent domain to take the lots and a nearby office building, paying $15 million, to use for its Family Advocacy Center.

But the city never used the empty parcels it seized. The city planned to build a parking garage there, but dropped the idea after neighbors protested. In 2014, the city decided it didn’t need more parking.

Today, the lots languish, to the chagrin of Holly Street residents like Anne Stone, who lives four doors down.

"Basically, we're a very neighborhoody neighborhood," Stone said as her daughter splashed in their backyard pool on a summer evening. "So we like things that enhance the neighborhood and aren't just sort of empty eyesores."

Phoenix has considered selling the property, but a spokeswoman said city officials still are exploring potential uses given the lots are close to a historic neighborhood. It's unclear when the city will take any action. The lots have a combined assessed value of more than $351,000.

If the land is sold, it would be the latest in a string of deals intended to get unused parcels off city books. But some city leaders say the effort is too slow.

About four years ago, city leaders started pushing for Phoenix to sell unneeded properties. Several hoped revenue from land sales could help ease the city’s financial troubles as it climbed back from the recession and faced budget deficits.

Selling unneeded city land wasn’t easy because, council members said, they realized the city didn’t know what exactly it owned and why.

“They lacked a good handle on city properties. Period," said former City Councilman Bill Gates, who helped lead the drive to sell excess land and recently won election to the Maricopa County Board of Supervisors. “The city should at least know what it owns."

Officials in the Finance Department said Phoenix relied on a complicated accounting asset system to track land ownership. More detailed information about why it owned parcels was kept by city departments, which still have broad authority to decide what land is unneeded.

Public records the city released in 2013 missed numerous parcels in Phoenix’s land portfolio.

That year, The Republic requested an inventory of all city-owned properties, and the city produced a list showing about 4,100 pieces of land. But records from the Maricopa County Assessor’s Office, which tracks land ownership for tax purposes, show the city actually owned at least 5,330 parcels at that time.

The city's updated property list still appears to miss dozens of parcels the county says it owns, according to city and county data from August.

MORE: Phoenix leaders sound off on vacant land | Vacant land blooms on Central Avenue

Officials said most of those properties are parcels controlled by other entities, including leased to other governments or businesses. Other missing properties could be the result of parcel number changes by the county.

Still, the city has in the past several years improved how it tracks the property it owns.

Phoenix hired a real-estate brokerage to identify properties to sell, and city staff set out to create a more comprehensive list and map of properties. In a few cases, the city didn’t know why land was acquired decades ago, said Mary Vivion-Withrow, the city’s former deputy finance director who oversaw the division that manages city property. She retired this month.

The effort required a change in culture at City Hall, some officials said. The city bureaucracy often hadn’t questioned why it owned certain pieces of land.

Zuercher, the city manager, described a shift in culture in 2014 “from viewing land as just an asset that we count like desks and cars and those things to actually items that have a potential for possible income to the city.”

But some city leaders question the progress. They say the city’s approach is too piecemeal and could deter private-sector investors.

Since early 2014, the city has approved the sale of 40 excess properties, of which 20 have sold, generating roughly $4.2 million in revenue. Zuercher said the city is still working with its departments to identify unneeded land, and the council is expected to continue voting on whether to put more parcels on the market.

That effort recently ramped up as The Republic questioned why more vacant parcels were not listed.

To sell excess property, Vivion-Withrow said, a department must first offer the land to other city departments, in case the city needs the land for something else. If no need exists, council members vote whether to put the land up for sale.

Gates, who resigned in May to run for county supervisor, said the city has “moved slower, definitely slower than I had hoped.” He said he was frustrated by the small number of parcels the city sought to sell.

Similarly, Councilman Jim Waring said developers who want to build on vacant city-owned land along the light rail in midtown Phoenix have encountered a slow-moving city bureaucracy. He worries that delays in opening up city property for redevelopment could cause it to miss a strong building cycle.

The councilman said keeping the land seems counterproductive given the city already spent many millions to build light rail. Although he opposes rail, Waring said the city should make the best of what it's already built.

“The status quo I can’t see benefits anybody," Waring said. “It just seems like time is passing. This is actually a pretty good market. People are interested in building things now. They may not be interested in two years.”

In southwest Phoenix, the city owns a dirt lot in the middle of Country Place, a master-planned community with neatly landscaped greenbelts and parks maintained by the homeowners association.

A barbed wire fence surrounds the lot — an effort to prevent children and ATV-riders from going on it. Neighbors call it a dust bowl. It’s supposed to become a park, but the city doesn’t have the money to maintain it and nobody knows when it will.

Charisse Walls, who lives across the street, wipes tears from her face as she looks at the property with patches of overgrown thistle weed. She's waged a years-long battle to get city officials to pay attention to the parcel, at one point threatening to sue because, she alleged, the city was violating its own blight codes.

On a windy day, she said, dust clouds and tumbleweeds get blown down the street into her front yard.

“We are the forgotten zone,” said Walls, Country Place HOA president. “We’re just as important as anybody in this city.”

Fifteen years ago, Walls moved her family to Phoenix from out of state. She believed the city would transform the 8.6-acre property into a lush park. Now, the city and residents are exploring the idea of creating a special maintenance district, so homeowners would pay more in taxes to support upkeep of a park.

“Hopefully it will be in my lifetime,” Walls said.

And Walls isn’t alone in her frustration. The city’s Parks and Reaction Department owns vacant lots in the middle of several other master-planned communities where it’s supposed to build parks, but the land sits empty.

The city’s long-term ownership of vacant land is an issue in neighborhoods from south Phoenix to central Phoenix and Sunnyslope, where residents say the lots often are a headache.

City officials told The Republic they don’t keep a list showing exactly which of the city’s thousands of properties are vacant, and the city’s inventory often doesn’t indicate that, either.

However, The Republic examined county and city property records and satellite images of parcels. The analysis revealed that about 1,400 of the city’s more than 5,530 parcels likely are vacant and developable. That estimate doesn’t include parcels for desert preserves, landfills, street shoulders, drainage ditches or other uses that require the land to remain as it is.

A city spokeswoman said some properties that appear vacant may contain infrastructure.

The assessed value of the vacant land, more than $150 million, could be only be a portion of its real value. That valuation from the county assessor is generally 10 percent to 20 percent less than what a property might sell for on the market.

Though it can take decades for the city to find a use for vacant land, city ownership allows for some control of development. City officials and a few land-use experts said that can be a tool to encourage higher-quality development or save land for important city services.

The city sets aside land for future facilities, which could save money on buying land later. Or, the city has snatched up valuable parcels downtown — land assembled for massive projects like Arizona State University’s urban campus.

George “Mac” McCarthy, president of the Lincoln Institute of Land Policy, said cities often have valid reasons for owning land and have special abilities to assemble, rezone and prepare parcels for new uses. Because land markets “aren’t self-correcting,” cities can benefit from public-sector intervention, he said.

“It’s the city’s job to basically pursue the public good,” McCarthy said. “The mere fact that a piece land is vacant is not an indication that the wrong decisions are being made.”

However, McCarthy said, local governments that own large amounts of land should be transparent and accountable about sharing their rationale and strategy.

Steve Betts, a longtime Valley developer and former chairman of the Urban Land Institute-Arizona District Council, said Phoenix's assertive role was key to bringing development downtown, where ASU’s campus, light rail and other public projects sparked a boom of activity in a once-sleepy city core.

“They have the ability to land bank it until it’s really ready for development,” Betts said.

“We are slowly starting to become urban in some very, very nice pockets around the Valley. A lot of that has to do with our local governments playing an active planning and economic development role.”

Some pockets of the city are starting to see large swaths of vacant city land come into productive use after a decade or more of waiting.

Councilwoman Kate Gallego, whose district encompasses many vacant lots near Sky Harbor, in the Garfield area east of downtown and in south Phoenix, complained about the city’s land-management regularly when she ran for office in 2013.

“Right now, there are many District 8 residents who have a bad neighbor, and it's the city of Phoenix. I want to make sure that we fix that, and we become the kind of neighbor everyone wants to have,” Gallego said in a radio interview at the time.

Three years later, Gallego said she sees "significant forward motion" in her district, albeit slower than she hoped.

One of the areas where the city owns large swaths of vacant land is around Phoenix Sky Harbor International Airport. Starting in 2002, the city voluntarily bought out more than 700 homeowners living under jet flight paths using federal funds for noise relief.

The city demolished those homes and is now planning what it will do with the leftover vacant land, which could include mostly industrial and commercial buildings and some residential.

Farther south, another project will bring more immediate change for neighbors living near vacant city lots.

Phoenix has teamed with a developer to build 121 single-family homes on land the city owns near Broadway Road and 24th Street. The city began acquiring the properties roughly 15 years ago to remove dilapidated homes. But, Gallego said, residents have been agitated by blight on city land in recent years.

“They’re telling us, ‘It’s about time,’ ” she said of plans for new construction. “We still have work to do, but we’re getting good feedback.”

Still, many say the city's approach to managing its land needs a complete overhaul.

Part of the problem, according to some Phoenix leaders and developers, is the city’s process for selling land: Because land management at City Hall is decentralized and departments generally determine what they need, there can be little incentive to give up property.

Billy Shields, a developer with several major projects downtown and in central Phoenix, said the city’s “byzantine” method of trickling out properties for sale frustrates him.

A few years ago, Shields said he was interested in buying two small, vacant lots along the light-rail line on Camelback Road and Seventh Avenue to assemble for a retail or apartment project. He said he called and emailed the city’s broker multiple times, trying to get information.

“I never, never got a response,” Shields said. “I thought, ‘Well, I’ve got better stuff to do.’ ”

Lars Jacoby, a Phoenix spokesman, said the city wasn’t aware of any inquiries from Shields. Jacoby said the city will likely sell the properties at some point, though the city must get approval from the Federal Transit Administration and use a competitive bid process because the land was acquired using federal funds.

Several other Phoenix developers and city leaders also told The Republic that the city has done a poor job of making information public about the land it intends to sell.

Former Councilman Tom Simplot, who advocated for a new approach to the handling of real estate, said Phoenix has failed to make the issue a priority and aggressively market the properties it doesn’t need — land entrepreneurs could put into use.

“It’s a government bureaucracy dabbling in what the private sector does well,” said Simplot, who is now president of the Arizona Multihousing Association, a trade group for rental owners.

The city’s website doesn’t include a full list of for-sale properties, but potential buyers are invited to submit a real-estate inquiry form. Prospective buyers said the city would get more interest if it posted a comprehensive list of available properties and let the market determine what could be reused.

Other large cities are more aggressive in marketing unneeded municipal property to the private sector:

• In Philadelphia, developers and neighborhood leaders waged a years-long campaign to convince the city to create a “land bank,” a listing of vacant and abandoned properties available for sale. The Philadelphia Land Bank began operating last year with thousands of vacant publicly-owned parcels. It aims to ease the sale of vacant property by allowing buyers to deal with a single city department and search for available properties via an online map.
• New York City has a database of city-owned property and maintains a separate list of vacant city property, which describes how parcels are intended to be used. The city occasionally holds mass auctions to get rid of unneeded and oddly-shaped properties, but it has faced criticism for not selling vacant lots to developers of affordable housing.

Pring, owner of the Teapot coffee shop downtown, said he’s still waiting to hear when the city plans to do something with the vacant lot next door.

Phoenix has owned the parcel for more than 14 years. The city used eminent domain to seize the property and a dilapidated historic home that stood there. But the home was demolished in 2008 after it was severely damaged in a fire, a spokeswoman said.

Pring said he’s offered to buy the property to extend his garden patio and build a parking lot. City officials said the property must be redeveloped into a single-family home that’s compatible with the surrounding historic district.

A spokeswoman for the Neighborhood Services Department said the city cannot simply sell the property to Pring; it must use a competitive bid process. The city still hasn't said when that will happen.

“What’s their plan for the next two, three years?” Pring asked. “Just to leave it like this? Who would have thought it would have been so hard to give the city some money?”

Republic reporter Rob O'Dell contributed to this article.