The State Land Department has nixed a deal that promised to bring a high-tech manufacturing firm, 200 jobs and $5 million in payroll to Payson.
The department's five-member appeals board refused this month to sell 13.5 acres of state trust land for 40 years near Payson Municipal Airport to Phoenix Logistics executives, who have been negotiating for the property for nearly 18 months.
Instead, the board offered to lease the land to the firm, which manufactures high-speed interconnects and electronic components for the Department of Defense and aerospace industry.
"The land was better suited for a long-term lease," Land Department representative Sandra Jacobs said. "It is our policy to lease commercial property because it provides a better return."
The department hasn't received any other offers on the property, Jacobs said.
The department, which raises money for Arizona schools through land trust transactions, is under constitutional mandate to secure the best possible return for the trust on each transaction.
The state offered to lease the parcel, which was appraised at $432,000, to the firm for about $38,000 a year, with five-year market adjustments, said Payson Town Manager Rich Underkofler, who helped champion the proposed land sale at the state level. At the end of the lease, all of the improvements -- the roads, the buildings and the utilities -- would revert to the state.
That didn't sound like much of a deal to Phoenix Logistics owner Ray Bellefueille.
"We won't go forward with a lease with the state," he said. "Partnering up with the state is a very difficult thing to do, and it's just not cost effective."
Council member Ray Schum, who lobbied for the sale of the 13.5-acre parcel at the Land Department, said he was disappointed with the board's decision.
"The town doesn't get many economic opportunities," he said. "This was a real plum and we needed the state to help us out. It doesn't make sense to leave 13 acres in the middle of town that's not doing anybody any good."
Town officials heralded the company's planned Payson expansion as an economic-development bonanza -- one that would provide the town with a clean, multi-million dollar company with a sizable number of high-paying jobs.
Representatives for Phoenix Logistics, which is one of 10 firms in the state building parts for the $40 million International Space Station, expected to open in Payson with 40 employees and expand to 200 workers within the first five years.
The firm's payroll, which was to fund a wide range of positions including assemblers, machinists, technicians, product line engineers and managers, was expected to swell to $5 million within five years.
Companies like this one don't come to Payson every day, Schum said.
The economic boon that Phoenix Logistics was poised to bring to Payson convinced Arizona Land Commissioner Dennis Wells to buck recent department trends that favor commercial leasing.
Instead, he recommended that the appeals board, a department watchdog group made up of private citizens who have final authority over all land trust transactions, sell the 13.5-acre parcel to the company.
"I felt as commissioner that Phoenix Logistics had a valid and legitimate reason for buying the land," he said. "I felt the town could use some economic stimulation. Sales to communities like Payson can better their economic outlook, so we tried to look at the big picture."
Although the appeals board denied Phoenix Logistics' request, the firm can appeal the board's decision and request another hearing. The board is under no obligation, however, to grant a second hearing.
In the meantime, Bellefueille hasn't given up on Payson, but the expansion has dropped lower on his priority list.
"We're interested in Payson because of the way the growth is controlled, the quality of life and the town's location to Phoenix -- not so much for the company, but for our people," he said. "This just delays the project. This is still what we want to do, but it will have to wait until we grow bigger and bring in more money.
"Right now I have no other plans. Unless something pops out of the woodwork, I'm just going to lay low for awhile."
He said he has looked for other property in Payson that falls within the company's price range -- a range that started a year and a half ago at $20,000 an acre -- and hasn't been able to find anything that fits the firm's budget.
The town doesn't offer incentives to companies to get them to move here, Schum said, "but we'll support him long and loud in any way we can. This is an outstanding opportunity."