Note: I know I promised to relate the Council’s discussion of the casino next in Part II of What do these two things have in common? but this is such a timely issue and is now being reported widely I decided to post it before the casino issue.
On March 5, Paul Giblin of the Arizona Republic reported that, “the Arizona Cardinals training camp would provide economic impact of $15.3 million, Glendale says. More business at Westgate City Center, Tanger Outlet mall.”
OK then. Joe Ferguson of the arizonadailysun.com on March 5, 2013, reported, “The training camp is estimated to inject roughly $2.3 million into the Flagstaff economy annually, according to a study performed by the Arizona Rural Policy Institute at NAU — $1.6 million directly and $700,000 indirectly.
But those impacts, which are calculated according to a standardized economic model, might not be as great in practice. When the Cardinals went to Prescott in 2005 because of a virus outbreak at NAU, taxable tourist-related sales in Flagstaff showed no drop from 2004, nor were sales in 2006 much higher when the Cardinals returned.”
That’s quite a discrepancy between the $15.3 million Glendale says could be realized and the $2.3 million Flagstaff actually does realize. Who is right? I don’t think anyone has a blinking clue but let’s take another look at the figures presented by Glendale City staffers to the councilmembers at their workshop meeting of March 5, 2013. Staffers said Applied Economics was retained to perform the study on economic impacts to Glendale if the training camp is located here.
It reminds me of a City Council Meeting that occurred on November 27, 2001. At that meeting council received information from the Arena Mixed-Use Development Agreement. Steve Ellman contractually agreed to this schedule for development of Westgate:
Deadline for Completion Cumulative Min. SF of Qualified Use Space
6 mos. after substantial
completion of arena 800,000
30 mos. after substantial
completion of arena 900,000
42 mos. after substantial
completion of arena 1,100,000
54 mos. after substantial
completion of arena 1,300,000
66 mos. after substantial
completion of arena 1,450,000
78 mos. after substantial
completion of arena (by 2010) 1,600,000
Or this presented at the same council meeting, which was projected to produce these revenue figures for the city:
1 $2,921,034 800,000
2 $3,008,665 800,000
3 $3,464,057 900,000
4 $4,298,237 1,100,000
5 $5,157,442 1,300,000
6 $5,859,860 1,450,000
7 $6,583,350 1,600,000
It all looks so rosy, doesn’t it? Projections offered down to the dollar. Except it never materialized. Steve Ellman never met any of these development projections. In fact, if I remember correctly, today there is only about 600,000 SF of use space developed in Westgate.
Let this be a lesson. Projections and estimates can be anything and should not be relied upon as gospel. You know the old saying, “Fool me once, shame on you. Fool me twice, shame on me.”
The city is saying there “could be an economic impact of $15.3 million in 2013.” For whom? The region…the state? It then goes on to say, “total direct revenue for the City of Glendale is $509,000; including fan spending, hotels and utilities.” I thought part of the reason the Cardinals’ training camp is moving to the Valley is to accommodate the existing Valley fan base and to grow it. Hotel nights won’t be a big factor if most of the fans are living in the Valley. Joe Ferguson of the arizonadailysun.com, in the same article cited earlier in this post, reports, “In addition, local merchants report that many of the Cardinals fans are day-trippers from the Valley who pack picnic lunches and spend relatively little in Flagstaff.”
City staffers on March 5, 2013, provided council with a Youth Sports Complex Fee Comparison:
Global Spectrum Rojo Management
Management Fees $216,000.00 $285,000.00
Utility Costs (Water & Electric) 106,000.00 40,889.25
Total Cost 322,000.00 325,889.25
Revenue to City 50% 20% (after $150K)
Net Cost $322,000.00 $325,889.25
There are lots of questions about this staff presentation that were not asked by councilmembers. Without context it’s like comparing apples to oranges. Global Spectrum’s contract calls for managing and renting out the sports fields all year long for $216,000. We must assume that Rojo’s contract would call for the same yet their management fee is $69,000 higher. Why? Do they need more people to do the same job that Global does? Do they pay higher salaries to their personnel than Global does? What is their rationale for a higher management fee?
There are many youth sports leagues that rely upon the use of and rent these fields all year long – from soccer to football leagues. There is a major discrepancy between both contracts relative to utility costs. The $40K figure that Rojo cites, by assumption, does not seem to reflect the fields’ usage all year long. Is it their intent to only reflect utility costs incurred during training camp? Or was it a low-ball figure designed to make Rojo’s bid more attractive? I don’t know but these are questions that should have been asked. Rojo, by the way, is a Bidwell subsidiary.
Another question not asked is, what was the revenue generated by Global Spectrum last fiscal year? The city receives 50% of it from Global. Should we not know what that figure is? Rojo is proposing revenue share of only 20% and that is after the first $150,000 is generated. I am sure staff in preparation for this presentation should have been able to supply an estimate of revenue it expected to receive under the Rojo contract. Council should have asked about revenue projections or staff should have provided this information to council.
On the face of it when comparing these two costs for operating the youth sports fields there is only a $3,889.25 difference. (I always love it when they offer costs down to the penny. How can they be so accurate on the smaller items and often miss the big picture entirely?) Is the presentation designed to make you say, well there’s such a small difference between the two, why shouldn’t we enter into a contract with Rojo and reap the rewards of having the Cardinals’ training camp?
But until the questions I posed are answered, I’m not buying it and neither should you.