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Joyce Clark Unfiltered

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Feb 23

9

Don’t Puck with Tempe, Part II

Posted by Joyce Clark on February 9, 2023
Posted in Arizona Coyotes • City of Glendale • City of Tempe • Phoenix Metro issues  | Tagged With: , , , , , , , , | 1 Comment

Disclaimer: The comments in this blog are my personal opinion and may or may not reflect an adopted position of the city of Glendale and its city council.

In Part I of this blog, we looked at the finances of Alex Meruelo, majority owner of the Coyotes, and the Coyotes organization. Dun & Bradstreet rates all Meruelo- associated enterprises as moderate-to-high credit risks.

Are there risks for Tempe taxpayers based on the terms of the Tempe development agreement with Bluebird Development (Coyotes’ development entity)? Yes, there are. The deal relies upon providing Meruelo $700 million plus in tax breaks, in both sales & bed taxes and property taxes. For your reference, here’s is the link to the 175-page development agreement: Bluebird Tempe DDA 11162

The first part of the deal relies upon Tempe’s creation of a Community Facilities District (CFD) and the reallocation to the CFD of earned sales and bed taxes.  The CFD can issue bonds up to a maximum allowable amount of $247,134,726.00 million, which reimburses Meruelo for the cost of the land, remediation of the land, and the necessary infrastructure (which developers almost always pay for). These bonds are paid off by taking 0.9% of every dollar of city sales tax; 3.75% of every dollar of city hotel sales tax; and a 6% surcharge on every sale within the CFD (such as tickets, clothing, food and drink) and using the taxes to pay off the CFD bonds. It also creates a taxing district that can be charged an additional assessment if there are not enough taxes brought in – a heightened concern in the early phases of the project.

Within the agreement regarding the CFD, it states, “Developer has agreed…which costs for site remediation and development of certain other public benefits will be financed from the proceeds of the bonds issues by a community facilities district and certain other sources of the city…” This acknowledges that the city may use city funds other than those generated by the imposition of the sales and bed taxes explained above. Question: What other city resources could be on the chopping block to repay these bonds, if and when, these sales tax impositions do not raise the requisite bond repayments? Does the city tell you, the voter, what could be used? The first alarm bell should be going off.

Consider this fact when weighing whether the project has the capacity to generate enough sales and bed tax to pay back the CFD bonds. The project’s raw acreage is 46.26 acres. By the time all infrastructure is built, the useable acreage should be about 37 acres. Make no mistake, this development project can be called a mini-Westgate. But it will never be as large or as profitable as Westgate area which today encompasses nearly 3 square miles. Hear that sound? It’s another alarm bell.

Yet within the agreement, the developer states, “…that it believes it has available to it the financial resources…” Note the word “believes.” It does not state definitively that it has the financial resources but rather it believes it does. How is Tempe to be assured that the private development group is well capitalized? The city failed to hire a forensic economist to examine their financial resources but instead enlisted Beacon Sports, a marketing group that brings financial institutions, teams, and cities together but cannot go beyond the self-reported finances provided by the private developer Meruelo. Yet another alarm bell– this one screeching — should be going off about now.

The other major financial gift to Meruelo is the use of a GPLET (Government Property Lease Exercise Tax). This mechanism allows Meruelo to avoid paying property taxes by leasing each building, when completed, to the city. Cities do not pay property taxes. It amounts to tax avoidance for about 30 years of property taxes on the arena, practice facility and the music venue as well as 8 years of property taxes on the 2 hotels, approximately 316,000 square feet of retail, up to 1,995 of luxury apartment units, and office space. That’s approximately $494 million of property tax avoided (and that’s the Meruelo groups estimate). If Mr. Meruelo paid the property taxes, about $99 million ( or 20%) would go to Tempe’s General Fund. The other 80% (or about $395 million) would go to Tempe’s schools and community colleges in Tempe and the County. A great deal for Meruelo but not so great for schools.

There are two other issues not to be ignored. The first is transportation. Although fans complained about the time it took to travel from the East Valley to the West Valley, keep in mind the arena was directly and immediately off the freeway. This proposed site is several miles from the freeway I-10 but close to the 202 freeway and the exit to the airport..  The time East Valley fans complained about will now be replicated with the traffic jam in and around this site. Tempe recognizes there’s a problem and has required the Coyotes to help mitigate expected congestion at the airport entrance and to pay Valley Metro to try to ease the problem. We’ll see how well that works for Priest Drive, Rio Salado and surrounding neighborhoods, already plagued with traffic woes.

The other issue is the Coyotes’ history of charitable giving and civic involvement. In Glendale, it was crickets. There was no involvement. Have you noted the rash of the Coyotes’ very recent involvement in the Tempe community? I suspect it’s all for show. I assume they want you, the voter, to expect this same level of civic involvement once the deal is done. I suspect you shouldn’t hold your breath. Their current civic engagement is for selling purposes. Once Tempe has bought this deal, it will no longer be an imperative for them.

One issue that merits comment is why hold a Special Election? It seems quite simple. Don’t believe the hype that voters should decide this issue. It’s more basic than that. The Tempe City Council is seeking cover. They are your elected representatives. They are charged with representing your best interests and making the difficult decisions. They have more insider knowledge about this deal than you will ever hear about. The reason to put it to a public vote is, if and when, the deal goes south, your Council will not take the blame for it because it asked you, the public to decide and therefore, their hands are clean.

There is an organization that can provide you with further information about the Coyotes (Bluebird)/Tempe Development deal and that is Tempe1st.  Remember by voting “NO” on Propositions 301, 302 and 303 starting on April 19th (Early Ballots available) and through to the May Special Election on May 16th, you’ll will be telling the Tempe City Council that they can do better. I urge you to visit https://tempe1st.com. Get the facts from them. They have the resources to read the 175-page development agreement and to let you know what issues are problematical.

There is an adage, “A leopard cannot change its spots.” I suspect Meruelo can’t change his spots either. His organization’s propensity to stall on payments, to claim to forget or to claim human error, is not suddenly going to go away. Many observers of this new Coyotes saga believe he’s just looking for a new arena for his unethical practices and culture of dishonesty.

Are Tempe voters and its City Council who have not bothered to learn from history, especially that of Glendale, doomed to repeat it?

© Joyce Clark, 2023     

FAIR USE NOTICE

This site contains copyrighted material the use of which is in accordance with Title 17 U.S. C., Section 107. The ‘fair use’ of any such copyrighted material as provided for in Section 107 of the US Copyright Law and who have expressed a prior interest in receiving the included information for research and educational purposes. For more information material on this site is distributed without profit to those who have not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of environmental, political, human rights, economic, democratic, scientific and social justice issues, etc. We believe this constitutes a ‘fair use’ of any such material. For more information go to http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond ‘fair use,’ you must obtain permission from the copyright owner.

Feb 23

7

Don’t Puck with Tempe, part I

Posted by Joyce Clark on February 7, 2023
Posted in Arizona Coyotes • City of Tempe  | Tagged With: , , , , , | No Comments yet, please leave one

Disclaimer: The comments in this blog are my personal opinion and may or may not reflect an adopted position of the city of Glendale and its city council.

Even with the disclaimer above, I want to emphasize that this blog reflects my personal opinion as a resident of Glendale. It in no way reflects the public position of the Glendale City Council (of which I am a member) or any official position of the City of Glendale.

All the information cited in this blog is publicly available information acquired through various public internet search engines. No proprietary or private information is used.

This blog is directed specifically to the voters of Tempe. On May 16, 2023, Tempe will hold a Special Election consisting of three ballot propositions. These propositions, if approved by voters, will allow the Tempe City Council to finalize a development agreement with Bluebird Development, the entity created by the National Hockey League’s Coyotes and its majority owner, Alex Meruelo. If defeated by voters, Tempe City Council will reject the deal.

I would hope that Tempe voters defeat all 3 propositions.

It is a complicated issue, and there is much to consider. Hence the decision to divide the information into two blogs. Part I will focus on Mr. Meruelo’s and the Coyotes’ finances. Part II will tackle elements of the deal.

Meruelo holds business interests in banking, real estate, media, restaurants, food, casinos, and professional sports. He is the owner of Meruelo Group, as well as Meruelo Media, which owns five radio stations and two television stations in Los Angeles—KWHY-TV and KBEH-TV and radio stations KLOS, KLLI, KPWR, KDAY and KDEY-FM.

In addition, he is the owner of Fuji Food, two casinos, the Grand Sierra Resort in Reno, Nevada and the Sahara Las Vegas in Las Vegas.

The Meruelo Group has, among other entities, a construction and real estate development firm and has ownership of Neal Electric Corp, Select Electric Inc., and Doty Bros within the Southern California area.

The group also owns the Commercial Bank of California (CBA), which Meruelo co-founded in 2003. It was reported by PRWEB in November of 2022, that the National Merchants Association released an update about its ongoing lawsuit against CBA, a California chartered bank owned by the Meruelo Group, in the Superior Court of California, LA County, case number 21STCV44674 and JAMS Reference No. 1210038694.

In December 2021, NMA filed a seven-count suit against the Commercial Bank of California for various alleged violations, including, inter alia, breach of written agreement, breach of covenant of good faith and fair dealing, unjust enrichment and unfair business practices, among other issues.

NMA is suing for $280M. The trial is scheduled to take place in February 2023. The alleged unethical and unfair business practices include:

  • Taking NMA’s proprietary processes and information
  • Freezing assets for months at a time, resulting in vendors and partners not receiving payments
  • Misinformation about merchant risk reserves

In June 2017, the Meruelo Group purchased the SLS Las Vegas (formerly the Sahara Hotel and Casino) in Las Vegas. In May 2019, SLS brand owner SBE Hotel Licensing, LLC filed a lawsuit alleging that Meruelo’s Las Vegas Resort Holdings, LLC had failed to pay at least $450,000 in licensing fees since November 2018.

Meruelo owns the following private properties valued collectively at approximately $33 million:

  • A 8,500-square-foot, $7.05 million house at 36 Indian Creek Drive in Miami
  • A $10.79 million penthouse in The Langham, New York.
  • Colom Island in Spain for 3.2 million euros
  • A 22,000-square-foot, $12.1 million house in Paradise Valley, AZ.

The observation for every Tempe voter should be, why is this guy demanding that Tempe pay anything to help him develop the property?

One of Tempe’s councilmembers publicly shared the Dun & Bradstreet Financial Analytics of these Meruelo related entities. This information should have been a warning shot to the Tempe City Council:

How are the Coyotes doing under Meruelo’s leadership? The team looks like it’s a financial disaster. The Coyotes are running pretax cash losses of about $50 million a year. The team also has some $300 million of debt—$200 million from Frank McCourt’s MGG Investment Group at an annual interest rate of somewhere around 9% or 10% and another $100 million of NHL credit-facility debt.

According to Forbes, for yet another year, the Arizona Coyotes are considered the least valuable team in the National Hockey League. It listed the Coyotes as No. 32 at a $450 million valuation as of December 2022. It cites that Meruelo paid $300 million for the team in 2019. The valuation breakdown, according to Forbes is:

Currently the team is playing in ASU’s 4,600 seat Mullet Arena. The tickets are pricey. I have heard from others that as many as 2,000 tickets have been “comp’d” for games. Even in that case, it is said that not all the comp’d ticket holders show up.

The team seems to be bleeding money while it promises to pay Tempe for a lot of things to pursue their development becoming reality including footing up to a $250,000 bill to cover the cost of the May Special Election. They seem to be desperate and realize this is their last opportunity to remain a viable entity in Arizona.

Keep in mind that just last year the team owed $1.3 million in taxes to the State of Arizona including $250,000 to Glendale. That’s in addition to the previous year when the team owed Glendale at least $500,000 in back rental payments.

The team has promised that nothing like this will ever happen again…until the next time it does. Tempe City Council are you listening yet?

As Laurie Roberts said in one of her past Arizona Republic op-ed columns, “A business forgets to pay $1.3 million in taxes, dating to June 2020, due to an ‘unfortunate human error’? Anybody buying that?” It seems the Tempe City Council really, really wants to buy it and appears to be using this Special Election as cover.

Not to be forgotten are vendor and contractor complaints made over the years. Meruelo’s habit and pattern appears to be to stall paying them or disputing bills by threatening to go to court. Most of these entities are small and cannot afford the expense or time to fight in court. So, they end up settling for pennies on the dollar to at least salvage some payment from the job.

What can be learned about Meruelo and the team? Dun & Bradstreet considers all Meruelo associated entities as a moderate to high risk. The lowest amount of borrowing capacity resides with the Ice Hockey Arizona (the Coyotes) in an amount of $5,000; the highest amount of borrowing capacity is with Meruelo Enterprises at an amount of $1.4 million. That’s a far cry from the $2.1 billion plus needed to develop this project.

Team officials have assured Tempe that Meruelo has the real estate and financial bonafides to make this deal happen. But the only way it works is if Tempe will give a portion of city sales and bed taxes generated at the site to pay $230 million plus of the cost. This is from a guy who assured the public that he could generate the investor financing to cover the entire cost of this development.

© Joyce Clark, 2023  

FAIR USE NOTICE

This site contains copyrighted material the use of which is in accordance with Title 17 U.S. C., Section 107. The ‘fair use’ of any such copyrighted material as provided for in Section 107 of the US Copyright Law and who have expressed a prior interest in receiving the included information for research and educational purposes. For more information material on this site is distributed without profit to those who have not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of environmental, political, human rights, economic, democratic, scientific and social justice issues, etc. We believe this constitutes a ‘fair use’ of any such material. For more information go to http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond ‘fair use,’ you must obtain permission from the copyright owner.