Thunder Canyon Brewery has been doing business since 1997 in Foothills Mall, a thriving business center. But Oro Valley was unwilling to meet demands that included a partial refund of sales taxes.

JIm Davis / Arizona Daily Star

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Oro Valley Council postpones annexation plans

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The Oro Valley Town Council voted unanimously on May 2 to postpone its plan to annex a 2.2-square-mile area that includes Foothills Mall, a Wal-Mart Supercenter and the Omni Tucson National Golf Resort and Spa.

Large businesses had requested too much in the way of tax incentives to make annexation of the area financially appealing, town officials said.

"The economic development agreements that were requested of the town made this not a workable thing," Councilman Terry Parish said.

The town hasn't specified when it will resume annexation plans.

"This area is in the general planning area of the town, and someday I predict it will be part of the town," said Scott Nelson, Oro Valley's special-projects coordinator.

In order for the town to annex the $410 million area, state statutes require that more than half of property owners — representing more than half of the property's total assessed value — sign petitions in favor of it.

Since November, town staff members have met with representatives from large businesses such as Omni Tucson, Foothills Mall and Wal-Mart to discuss possible incentives for their approving annexation.

"We were certainly looking for a mutually agreeable contract," said David Morgan, Omni Tucson's general manager.

The resort will begin $57 million in renovations later this month, including increasing the number of hotel rooms from 167 to 279.

Town officials had talked with resort representatives about possibly reducing or refunding part of the 6 percent bed tax that resorts and hotels pay in Oro Valley. No agreement was reached.

But Omni Tucson is willing to continue talks when Oro Valley is ready, Morgan said.

Town officials also failed to reach an agreement with the mall owner, Feldman Mall Properties Inc., co-founder Ed Feldman said.

Feldman said his company is amazed that the town doesn't want to go through with the annexation now.

By annexing an area with such large commercial entities, "the town of Oro Valley could have built up its tax base, and it would have alleviated the tax burden on all the residents," he said.

But mall representatives also had requested tax incentives that town officials were unwilling to make, such as refunding half of the local sales tax that mall tenants would have paid, said Economic Development Administrator David Welsh.

Taxes — including possible local property taxes, which the town doesn't impose now — are a hot topic in Oro Valley.

In public meetings with town staffers, residents of the proposed annexation area have expressed concerns that Oro Valley might levy more taxes.

In December, the Town Council approved assessing a 2 percent sales tax on natural gas, water and electric utility services.

Since then, the council has considered a property tax to pay for the Naranja Town Site; water rate and fee increases; and a 5 percent utility franchise fee on gas and electric use.

If the council and, when applicable, Oro Valley voters were to approve these proposed taxes, they and the current 2 percent utility tax would cost an owner of a $350,000 home about $52.28 a month, according to the town's Finance Department.