Whistleblower zaps Axon's expansion plan

Sep. 24—Like a bureaucratic stun gun, an email from a whistleblower stopped Axon's aggressive expansion plans of Axon in its tracks.

This is pleasantly shocking news to neighbors who dread Axon's change-of-course plan. The company originally said it would expand its corporate offices, then unveiled plans to add four apartment buildings and a hotel to booming North Scottsdale.

Neighbors figured they had little chance of fighting the change, as the plans Axon — which has a development deal with Scottsdale — submitted to the city in August seemed to be fast-tracking without a hitch.

The Sept. 20 Airport Advisory Commission agenda originally included a request by Axon to change from industrial/office zoning to a category that would "allow for 2,552 multi-family residential units, a hotel and retail in six five-story buildings."

But, the day after a city attorney sent out a warning, the Axon agenda item was abruptly amended:

"Item Has Been Removed."

The whistleblower — who admits he is a rival real estate development marketer — accused Axon of an attempt "to circumvent the entire ASLD (Arizona State Land Department) process and cheat the K-12 public education out of $125 million and probably much more."

Arizona's Constitution requires money paid for parcels auctioned by the state Land Department to go to one of 13 state functions, including public education.

In an email to city officials, the whistleblower cited a crucial agreement between the city and state — signed before Axon's big state land purchase of 74 acres near Hayden Road and the Loop 101.

The wording "residential land uses are prohibited" is repeated multiple times in the intergovernmental agreement and other documents, the whistleblower pointed out.

The Progress is not revealing the name of the man, as the anonymity of whistleblowers is protected by law.

"Axon was fully aware of this," the whistleblower added, following with an ominous warning:

"This re-zoning requests (sic) is ILLEGAL and should NOT even being (sic) processed by the City of Scottsdale as they agreed in a legally binding IGA not to do so."

The email apparently set off alarm bells.

Late in the afternoon of Sept. 18, City Attorney Sherry Scott issued a stern warning to City Council as well as the mayor, city manager and multiple highly-placed city officials supporting the potential whistleblower's claims.

"Both the city's Planning Department and city attorney's office presently concur that the Arizona State Land Department would have to agree to amend the current development agreement with the city before Axon could fully process and finalize its pending rezoning application," Scott wrote.

Scottsdale, she added, "has yet to hear from the ASLD on this matter."

Axon purchase background

According to the Arizona State Land Department's website, "Public education is by far the largest beneficiary of trust land managed by the department. ... Today, approximately 8 million of the state trust's 9.2 million surface acres are designated for K-12 public education."

The property Axon purchased is part of the 500-acre Crossroads East area on both sides of the Loop 101, with Hayden Road as a rough east-west dividing point for four quadrants.

Developers here face several levels of approval, as Crossroads East is in the closely watched Scottsdale Airpark Area.

In 2018, the state — which then owned the land it would soon put up for auction — and city signed a document titled "Crossroads East Development Plan Amendment."

"Crossroads East may be the most visible and important undeveloped trust land in the Phoenix metropolitan area," the document states.

"ALSD, serving as fiduciary for the trust, is required by the Arizona Constitution to receive maximum value for the sale or lease of trust lands for the benefit of the trust. Given this Constitutional mandate, it is incumbent upon ALSD to carefully plan these properties to maximize their ultimate values."

Included in the 108-page document is a map showing the area Axon bought listed as "PRC and PCP prohibited."

As p. 62 of the intergovernmental agreement explains, PRC stands for Planned Regional Center. "This district is intended to provide for regional shopping, business and residential uses."

P. 76 explains PCP — Planned Airport Core Development — designation "is to promote, encourage and accommodate innovatively designed and master-planned mixed-use developments."

The land Axon successfully bid was zoned for only industrial or office use.

Development deal

On Aug. 25, 2020, a $9.4-million infrastructure reimbursement deal designed to keep Axon from leaving Scottsdale won unanimous approval from the city council.

In order to receive its full reimbursement, Axon must build at least 250,000 square feet of commercial or manufacturing space and have a payroll of $130 million over any continuous 12-month period within five years of the state land auction.

According to the development deal, Axon currently employs 850 employees at their Scottsdale facility and is anticipating adding an additional 650 jobs over the next five years.

Axon's office is about 100,000 square feet — plans in the development deal call for it to expand by triple that space.

But there was nothing in the development agreement between Axon and Scottsdale concerning a hotel and a few thousand apartment units.

At the June 20 neighborhood meeting, Charles Huellmantel, an attorney speaking on behalf of the company, explained Axon's change of course.

"We have housing needs for our employees. We also have entertainment needs for our employees and we're trying to create a campus — you're probably seeing other companies do similar things," Huellmantel said.

The real estate rival blowing the whistle on the Taser giant is not buying that.

"The legal auction notice put out by ASLD," he wrote, "... specifically says under the TERMS OF THE SALE section ... 'Development shall be limited to the use of the I-1 (Industrial Park) zoning district outlined in the development plan of the development agreement."

In fall 2020, just a few weeks after Council approved the deal, Axon won a State Land Trust auction, paying $49.1 million for 74 acres near Loop 101.

The whistleblower argues if the land was zoned for residential use prior to the sale, the state would have landed a much higher bid — with far more money going to the education system.

Huellmantel did not respond to questions on this issue.

Rezoning request

On Aug. 2, Axon submitted its plans for "Axon World Headquarters Mixed-Use Campus."

It includes a request for rezoning and major amendments to existing city documents — plus a "bonus request" for building heights.

Axon's plans outline "six proposed mixed-used structures and associated parking, landscape, hardscape and utilities. All six proposed structures are 5-story buildings containing residential units and garage parking."

According to Axon's most recent filing with the city,

"On Nov. 11, 2020, Scottsdale City Council approved the first phase of Axon's campus, requests for a Zoning District Map Amendment from Planned Community (P-C) to Planned Community District — Industrial Park (PCD I-1), amended development standards, and design review for the new Axon Campus office building."

Less than three years after the purchase, Axon requested "to rezone approximately 32 acres of the site to PCP PCD with an amendment to the Greater Airpark Area Plan to AMU-R and will leave approximately 26.9 acres as I-1 PCD.

"Axon's goal to create a campus that supports different types of uses and allows for a cohesive environment of office, retail, residential, and hotel in addition to the municipal development consisting of a fire station and water treatment facility on the southwest corner," the Axon request stated.

That referenced the part of the development deal calling on Axon to give the city land for public safety and utilities.

The request, the whistleblower insists, flies in the face of the city-state plan for the area.

"For the duration of this agreement," the agreement states, "the city shall not initiate any changes to the zoning."

Owners of former state land requesting rezoning must first receive an amendment from ASLD — as the Scottsdale city attorney acknowledged.

The Axon rival who alerted the city insists if Axon does not follow this procedure, "it will forever taint the ASLD auction process."

Land Department spokeswoman Lynn Cordova told the Progress:"The Crossroads East Plan and Development Agreement was established by the State Land Department in collaboration with the city of Scottsdale.

"Axon must work with the State Land Department and the city of Scottsdale if Axon wishes to amend the Development Agreement, the Plan, or the zoning entitlements."

Axon's growth

Scottsdale business icon Rick Smith, a Chaparral High School graduate, founded Axon in the 1990s. After steady growth behind its Taser guns, the company made shocking money in recent years.

Axon anticipates sales of $1.5 billion this year.

In a December letter to shareholders, Axon reported $353 million in cash and $2.8 billion in total assets.

The stunning growth of the company encouraged Smith to expand his hometown footprint.

HOA president Susan McGarry and 50 of her Stonebrook neighbors attended a June 20 meeting with the company that left them shocked to hear the Taser-maker now plans not only a previously-disclosed new office building, but also four apartment buildings and a hotel.

Three Scottsdale City Council members — Betty Janik, Tammy Caputi and Solange Whitehead — attended Axon's Stonebrook meeting.

Axon is hardly alone, as the development of former desert land just south of the Loop 101 has accelerated in the last two years.

With Mark-Taylor apartment complexes going up across Hayden Road from Stonebrook and plans for the $400 million Banner Scottsdale Medical Center at Hayden and the Loop 101 recently announced, Stonebrook residents fear their former tranquility is doomed.

Now, with Scottsale putting the brakes — for the moment, at least — on Axon's plans, neighbors sense a small but crucial victory.

Mayor David Ortega did not immediately respond to a request for comment on the whistleblower's accusation.

The man attempting to tame the Taser giant's wild expansion plans described himself as torn over making the accusations about Axon:

"I find myself in a (sic) awkward position as the one to bring to light this incredibly egregious situation as ... I am a leader in the marketing of new housing and have been involved in approx 10 state land auctions within a few miles of the Axon site."