Mesa approves Soul Trust as Grid on Main developer, allocates $3 million opioid settlement funds
MESA, ARIZONA — May 29, 2025

Mesa approves Soul Trust as Grid on Main developer, allocates $3 million opioid settlement funds

Study session covered resolution of failed downtown mixed-use development through bankruptcy selection of Soul Trust as new developer, annual pension and property tax funding approvals, and allocation of $3 million in opioid settlement funds to community programs and education.

Soul Trust Bankruptcy Resolution and Three Major Fund Allocations Advance to City Council Monday

Mesa's May 29 study session locked in three significant policy adoptions and one complex real-estate resolution for final council action on June 2, reflecting the city's response to a decade-long downtown development failure, long-term pension obligations, stable property taxation, and a $4.5 million opioid crisis investment portfolio.

The centerpiece—resolution of the Grid on Main bankruptcy—was presented by Jeff McVey, Manager of Urban Transformation, and represents the city's exit from a years-long litigation and development impasse that began when Grid on Main LLC defaulted and filed Chapter 11 bankruptcy after years of failed construction.

Key Speeches

"They have their lease with Crust um requires Crust to be open in a very short order. I believe October is the date they're shooting for. So, they want to get in the building and get construction going as fast as they possibly can." — Jeff McVey, Manager of Urban Transformation

"If it fell back to the city, which is was always an option, we could have played hard ball and said, 'We want it all. We're taking the land back, you know, the land. We're taking the improvements and we're going to fight everybody off on it, but then what, you know, what are we going to do with it?'" — City Manager Jim Brady

"And at one point we were stuck with a shell. I mean, it wasn't even I don't even what percent that would have been would sat there for a long time. So, I think it's remarkable. Frankly, I'm this is a big relief that we're going to be able to take a project at 60%, have a developer come in and finish it off." — City Manager Jim Brady

The Grid on Main: Bankruptcy and Developer Selection

The Grid on Main mixed-use development sits roughly 60% complete after Grid on Main LLC, the original developer, exhausted resources and filed for bankruptcy protection. The city, which owns the fee-simple land beneath the project, issued notice of default on the development agreement and lease in 2023. A bankruptcy trustee was appointed to oversee disposition of the developer's assets—primarily the partially constructed vertical improvements.

McVey detailed the selection process: eleven qualified developers expressed interest; four submitted formal responses. City staff and the bankruptcy trustee jointly evaluated proposals and selected Soul Trust as "the best and most capable responsive" candidate. Soul Trust, relatively new to Arizona but operating in Washington State for years, already manages over $500 million in Arizona projects, including the recently opened Forge Tower in downtown Mesa and the leasing of former Courtyard Towers on Robson and Main.

The bankruptcy court approved the sale on May 20, contingent solely on city council authorization of the lease and purchase agreements. McVey stressed that Soul Trust has successfully negotiated a lease with anchor first-floor tenant Crust Italian Eery and two companion concepts: Bombolinos (a deli operation) and a cocktail bar. The target opening date is October 2025.

Timeline

Project Details

Development Agreement Highlights

Soul Trust enters a ground lease with three phases, each with separate purchase options contingent on completion milestones:

Phase 1 (Existing Building):

Phases 2 & 3:

Force Majeure & Flexibility

Council Member Adams questioned what happens if material shortages or labor constraints prevent timely completion. McVey clarified that force majeure provisions, updated post-pandemic, now include pandemics and global supply chain disruptions. The city may grant extensions if circumstances are genuinely beyond developer control, but the burden remains on Soul Trust to demonstrate good-faith effort.

Council Member Adams also asked whether the developer could start Phase 2 during Phase 1 construction. McVey confirmed yes, but emphasized the lease ties Phase 2 and Phase 3 purchase eligibility to Phase 1 completion, ensuring the developer cannot abandon incomplete work.

Parking and Public Improvements

The Pomeroy garage contains approximately 850 total parking spaces. Soul Trust will hold a 50-year parking license guaranteeing a minimum 1 space per residential unit (76 for Phase 1; 24 minimum for Phase 2, adjustable via amendment). The city commits to maintaining sufficient public-time-limited parking for Crust and other commercial tenants.

The city will bear the ~$283,000 cost to complete electrical infrastructure necessary to serve Phase 1 and portions of Phases 2–3. This was negotiated as a offset to the $285,000 non-refundable deposit, effectively ensuring the city recoups electrical work costs regardless of project outcome.

Resolution of Prior Claims & Litigation

The bankruptcy settlement resolves longstanding litigation:

This resolution was essential to moving forward; without it, the city risked years of title disputes and indemnification claims.

City Council Discussion

Council Member Adams praised the deal as "in the best interest of everybody, primarily the city," noting the complexity of the structure and thanking staff for years of effort.

City Manager Brady called the resolution "a big relief," contrasting the outcome with a worse-case scenario where the city would have assumed full ownership of a 60% shell and faced impossible choices: sell at loss, complete at city cost, or litigate indefinitely against multiple claimants.

Council Member Go Forth questioned the appraisal methodology. McVey confirmed the appraisal valued land only at today's value, excluding the existing structure and Pomeroy garage. Thus, Soul Trust receives the built asset (Phase 1 building, 60% complete) at no purchase price premium; they pay only for the land and rights to develop Phases 2–3.

Council Member Spillsbury raised concerns about tightening timelines further than the 15-month window for Phase 1 completion plus Phase 2 amendment negotiation. Jim Smith (City Attorney) noted that the bankruptcy case moved slowly until the end, then "at light speed," and that Soul Trust already agreed to reasonable guard rails. The city and developer are now in a position where they must resolve Phase 2 feasibility within the 9-month Phase 1 construction window and 6-month closing window, before Phase 1 purchase must finalize. Brady indicated staff will report back to council with periodic updates on Phase 2 progress, though approval of the final amendment can be delegated to the city manager under council discretion.

Council consensus emerged that the deal represents fair value, eliminates litigation risk, and provides a credible pathway to completion. The vote was unanimous in favor of advancing to the June 2 council meeting.

Annual PSPRS Pension Funding Policy Adoption

Sam Schultz, Assistant Director of the Office of Management Budget, presented the city's fiscal year 2026 Public Safety Personnel Retirement System (PSPRS) funding policy—an annual adoption required by Arizona state law.

Background

PSPRS is a state-mandated pension system established in 1968 to support retirement benefits for Arizona firefighters and police officers. The fund is overseen by a nine-member board of trustees appointed by the governor and legislature. Mesa's pension liability is split into three tiers based on hire date:

The city's funding policy addresses only Tiers 1 and 2, which carry an unfunded liability (the gap between assets and accrued benefit obligations).

The Liability Context

City Manager Brady provided crucial context: the PSPRS board—not the city—created the original $800+ million unfunded liability by underestimating investment returns and demographic costs. When the liability was passed to municipalities circa 2008–2010, Mesa faced a choice: amortize over 20, 25, or 30 years. The city chose 25 years, targeting 100% funding by June 30, 2042.

Stabilized Contribution Strategy (2022 Decision)

In 2022, the city made a pivotal decision: rather than accept an escalating contribution that would grow annually, the city frontloaded contributions to stabilize payments over the amortization period. This means:

Schultz noted that had the city not made this 2022 change, the funded ratio would have dropped to ~50% (police) and ~48% (fire) instead of improving to 53% (fire) and 52% (police) today, despite a -4.2% market return in 2022.

Current Funded Status and 10-Year Outlook

The PSPRS board changed its assumed return from 7.3% to 7.2% in 2023–24, reducing projected revenue and widening the unfunded liability slightly. However, conservative forecasting (using lower assumed returns in budget modeling) and the city's stabilized payment structure insulate the general fund from year-to-year volatility.

Pension Stabilization Fund

The $20 million fund reaches its target cap in FY 2526. Once there, it provides a buffer to:

Key Council Questions

Council Member Adams asked whether the city has input into PSPRS investment strategy. Schultz clarified: the board appoints consultants; the city does not direct investments but monitors performance. The board recently diversified assets (increased gold, Taiwan semiconductors, Alibaba exposure; reduced U.S. tech) and performs competitively in peer comparisons.

Council Member Go Forth asked how Tier 3 differs. Schultz explained:

The first Tier 3 employee will not retire until ~2042 (20–25 years from hire in 2017), so Tier 3's long-term impact is not yet visible.

Brady emphasized the importance of the conversation: the city inherited a massive liability it did not create (investment and demographic risk passed to municipalities by the state). By adopting a stable payment and building reserves, Mesa is managing fiscal risk conservatively. He noted that few cities have avoided borrowing against buildings or assets to cover pension gaps; Mesa has not.

Vote Breakdown

No vote was taken at the study session. The policy advances to the June 2 council meeting for adoption.

Secondary Property Tax Levy – No Rate Increase

City Treasurer Mark Hugh presented the fiscal year 2026 secondary property tax levy, a straightforward but nuanced item reflecting voter-approved general obligation bonds.

Key Points

Property Value Context

Arizona law caps increases in limited property value (the tax basis) at 5% annually, even if full cash value (true market value) grows faster. This creates a cushion: the full cash value is $5.2 billion; the limited property value is lower. Brady noted that even if full cash value froze today, the limited property value could grow at 5% annually for the next 13 years without exceeding full cash value—a significant buffer against economic downturns common in other states.

Historical Trends

Public Hearing and Adoption Timeline

Opioid Settlement Funds: Phase 1 Allocation and Community Grants

Lindsay Balinki (Community Services Deputy Director) and Deanna Lopez (Human Services Coordinator) presented the city's $3 million Phase 1 allocation of $4.5 million in received opioid settlement funds from a $50 billion national settlement distributed over 18 years.

Settlement Funds Background

Mesa receives 6.06% of Maricopa County's share, administered by the county public health department. The One Arizona agreement specifies eligible use categories: prevention/education, early intervention/treatment, harm reduction/rescue, and recovery/resiliency. Council previously directed the city to prioritize youth.

Phase 1 Allocation ($3 Million)

  1. Community Education and Outreach ($1 million):

    • Street outreach team (unhoused community, opioid education, treatment access).
    • Digital opioid awareness campaign targeting K-12+, parents, and college-age students (leveraging existing school login systems, social media, and platforms used by ASU, Benedictine University, and Mesa Community College). Campaign to be developed over summer, launched fall 2025.

  2. Public Safety ($1 million):

    • Drug incinerator and body scanner for Mesa Police Department.
    • Additional programming under development (details to be presented later).

  3. Community Grants ($1.007 million to six nonprofits):

    • Neonatal Care ($415,000):

      • Jacob's Hope: $315,000 (substance-exposed newborn support, crisis-to-care recovery for mothers/families without fear of separation; includes marketing/outreach to pregnant women).
      • Hasha by Nursery: $100,000 (holistic services for parents with opioid use disorder; expands services to Mesa residents with education and family outreach).

    • School-Based Programs ($308,226):

      • Community Bridges: $193,226 (Thrive Resiliency Program—nine-session evidence-based curriculum for behavioral/social/emotional learning; covers all 12 Mesa Public Schools + ESMARK existing services).
      • Be Kind People Project: $115,000 (Power of Prevention initiative, built on existing Be Fit Be Healthy Be Kind program; supports students, parents, teachers in middle schools; includes Be Kind Crew life assemblies at participating schools).

    • Community-Based Programs ($283,860):

      • Big Brothers Big Sisters of Central Arizona: $100,000 (expands 1-on-1 mentorship; addresses current waitlist in Mesa; provides staff/mentor/youth/family training).
      • Boys and Girls Club of the Valley: $83,860 (Youth Resiliency for Opioid Prevention at three Mesa locations; incorporates Positive Action and Smarts Moves curricula for emotional wellness).
      • Not My Kid: $100,000 (parent education, youth Inspired 90-Day Program for substance challenges, family navigation services connecting families to recovery networks).

  4. Administrative ($100,000): Grant management and oversight.

Grant Selection Process

Opioid Impact Data

Balinki presented Mesa Fire Medical data showing:

Council Member Spillsbury emphasized that the data supports early intervention focus: the age demographics show young adults at highest risk, but education starting in elementary school can prevent progression to addiction.

Grant Terms and Evaluation

All grants are one-year awards with explicit understanding that renewal is not guaranteed. Nonprofits are aware they must identify sustainable funding beyond this cycle. However, some organizations plan to expand services using these funds and then maintain using other revenue sources.

Evaluation metrics will be contractually required. Council Member Adams pressed on measurement: prevention programs are inherently difficult to quantify (you cannot directly measure "prevented addiction"). Balinki acknowledged this challenge but committed to integrating before/after surveys, participation counts, training completion, and outcomes data into all contracts. Some programs (e.g., neonatal services) will have clearer metrics (mothers/babies served, follow-up safety checks); others (youth education) will rely on participation and self-reported learning.

Francisco Heredia requested emphasis on Narcan (naloxone) distribution in future phases. Balinki confirmed that some awarded nonprofits already integrate Narcan distribution, and Mesa Fire Medical and Police carry it routinely.

Council Member Spillsbury's Detailed Input

Spillsbury noted she had met with staff and had lengthy conversations about:

Balinki confirmed: approximately $1 million per year arrives; Phase 1 uses $3 million upfront to create immediate impact; future cycles will be evaluated based on lessons learned.

Timeline and Implementation

Controversies & Context

The Grid on Main project has been a source of frustration for council and city staff. What was originally envisioned as a catalyst for downtown revitalization became a cautionary tale in municipal real-estate risk management. The prior developer's capital dried up; the project sat incomplete for years; subcontractors and lienholders sued. The city, as fee-simple owner, faced potential liability and endless litigation.

Brady's comment—that the city "could have played hard ball" but then faced an unanswerable question, "what are we going to do with it?"—reflects the reality that a 60%-complete mixed-use building is an orphaned asset without an operator. The city could not complete it commercially, could not easily sell it encumbered by liens, and risked tied-up capital and litigation costs for years.

The Soul Trust deal resolves these risks: a known developer with $500M in Arizona projects takes the asset as-is, completes Phase 1 within 9 months (with firm anchor tenant Crust), and pursues higher-density Phases 2–3. The city retains fee-simple ownership and can walk away if Phase 2 amendment fails to materialize.

The pension discussion, meanwhile, highlights a structural fiscal challenge inherited from the state: PSPRS liability passed to municipalities without corresponding funding resources. Brady's point—that Mesa avoided the debt trap many cities fell into by not mortgaging buildings to fund pensions—underscores the importance of the 2022 stabilized-payment decision and the $20M reserve strategy now taking hold.

The opioid settlement allocation reflects a deliberate pivot toward prevention and early intervention rather than post-addiction treatment. The data shows impact across all ages and neighborhoods; the council's youth-priority direction acknowledges that prevention ROI (though hard to measure) outweighs post-addiction rescue in the long term. The emphasis on school-based and neonatal programs (catching kids and families early) aligns with evidence-based practice in opioid harm reduction.

City Manager Retirement Recognition

At the conclusion of the study session, John Giles invited City Manager Jim Brady to speak. Brady announced his retirement, noting that this was one of his final study sessions. Council members offered thanks; Brady responded that he came to local government with purpose, grateful to work with dedicated employees, confident in his successor and the city's future.

The council gave Brady a standing ovation. He indicated he would attend the June 2 council meeting to watch the swearing-in of his successor, then depart.

Duration

Other Notable Items

Current Events: Council members shared attendance at arts events (Mesa Contemporary Arts summer opening, Kazuki Takazawa glass installation and suicide-prevention talk), firefighter recruit academy graduation, adult education high school equivalency program, Bezos Academy partnership announcement (three free preschools opening fall 2025 at Fremont, O'Connor, and Poston schools), northeast public safety facility ribbon cutting, and Coffee with a Cop outreach event.

Minutes Acknowledgment: Council unanimously approved meeting minutes.