Header image alt text

Joyce Clark Unfiltered

For "the rest of the story"

Mar 14

2

An idea whose time has come

Posted by Joyce Clark on March 2, 2014
Posted in Camelback Ranch Spring Training Facility • City Council Actions • City issue and actions • City of Glendale • Glendale elected officials • Glendale finances • Jobing.com arena  | Tagged With: , , , , , | 1 Comment

Glendale Mayor Jerry Weiers delivered his State of the City remarks to a packed audience at the annual Glendale Chamber of Commerce dinner at the Renaissance Hotel on Thursday, February 27, 2014. Although his news about Glendale’s finances was dire it was also a fair assessment. He is to be commended for his forthright speech. Here is a link to a recap: http://www.azcentral.com/community/glendale/articles/20140228glendale-arizona-state-of-the-city-mayor-financial-problems-real.html . Here is also a link to a Mayor Weiers You Tube video that visually explains Glendale’s debt and revenues: http://www.youtube.com/watch?v=s2nBWBojUh0&feature=em-share_video_user .

He didn’t remark on how Glendale got to where it is today financially but I will because I was one of the council that got us there. Although I approved the arena I did not approve of Ellman’s plans for his development of Westgate. His “vibrant” building colors look like WalMart on steroids and his billboards are monstrosities. He also would not dedicate an additional land to place another eastbound lane on Glendale Avenue. I was more reluctant about Camelback Ranch but the deal called for future reimbursement by the Arizona Sports and Tourism Authority (AZSTA). I agreed because there were development plans in place for the surrounding land and an AZSTA reimbursement on the horizon.

Council knew we would never be a Scottsdale, the west’s most western town; or a Tempe, a college town; or a Chandler and Gilbert, with their high tech manufacturing. We believed that these facilities would create a niche, a branding of Glendale and that they would help to grow Glendale.  After approval of Camelback Ranch the city began negotiation to place a USAA basketball training facility in the area. It looked as if we were about to add another major sporting facility. Glendale’s future looked bright.

There are two major contributors to Glendale’s current debt burden: Jobing.com Arena and Camelback Ranch Spring Training Facility. At the time of these facilities’ approval it was clear that Glendale could sustain the debt. Deals were in place to develop commercial and retail around both. They would generate new sales tax revenues to cover the expected construction debt. The arena did not have an annual management fee. Glendale’s economy was surging as was the national economy.

There was no hint of the Great Recession that would lay waste to so many of Glendale’s plans. Glendale’s sales tax and property tax revenues sunk like a stone as did its state shared revenue.  Developers and their plans dropped like flies as one after another went into bankruptcy.

Suddenly the city’s debt had become unsustainable.

What was council’s plan back in the day? It was three fold. Pass a temporary 5 year sales tax increase to provide much needed revenue while other strategies took hold; restructure our debt; and embark on a 5 year plan of targeted cuts to expenses while rebuilding the city’s contingency fund. It was even suggested, at the time, by Interim City Manager Skeete that the city sell the arena. I was shocked by the thought at the time but over time, it has become an idea that has a great deal of appeal.

It is no coincidence that Glendale’s future debt burden is about $30 million. That is very close to the city’s annual arena debt: $12-13 million in an annual construction debt payment; $500,000 to $1 million annual payment to a capital repair account; and $15 million in an annual management fee. The solution of selling the arena at fair market value is now very appealing. While the city loses money already invested in the facility the bleeding stops. Suddenly there would be no more construction debt; no more annual management fee and no capital repair account to maintain. It’s an idea whose time has come.

© Joyce Clark, 2014

FAIR USE NOTICE

This site contains copyrighted material the use of which is in accordance with Title 17 U.S. C., Section 107. The 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 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 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 14

22

Camelback Ranch

Posted by Joyce Clark on February 22, 2014
Posted in Camelback Ranch Spring Training Facility • City issue and actions • City of Glendale • Glendale finances • Jobing.com arena  | Tagged With: , , , , , , , , , | 5 Comments

On Tuesday, February 19, 2013 the city council’s afternoon workshop was devoted to an informational presentation by staff on the history of Camelback Ranch. It’s a good a time as any to review what happened and how did Glendale get into this financial sinkhole? For the record, I did support this project and voted in the affirmative.

Camelback Ranch was first discussed in the spring of 2006. Keep in mind, the national economy was booming. Glendale was earning record revenues. That was the character of the economic climate in which the decision was made to move forward. No one had a crystal ball foretelling of the Great Recession about to descend upon the country. There was no issue with the arena. Steve Ellman had just sold his interest in the Coyotes to Jerry Moyes who became the new arena manager. The city was not paying an arena management fee. It would be 2009 when Moyes declared bankruptcy and the national recession hit.

Council had commissioned an economic impact study by Economic Research Associates released in March of 2006 to determine the potential financial impacts of the proposed Camelback Ranch project. It said the potential estimated direct economic impact of the two teams would be $14.9 million a year if used only during the spring training season and $19.2 million if the facility was used year round. Part of that estimate took into account that Right Path Limited would be developing the land surrounding the actual ballpark facilities. It was against this backdrop that council moved forward with approval for the project.

It was a complicated deal. Glendale’s partners were or are: the City of Phoenix; the Arizona Sports and Tourism Authority; the Dodgers and White Sox teams; and Right Path Limited (as the developer).

Camelback Ranch is located physically within Phoenix. Glendale purchased the parcel on which the major league baseball facility (MLB) sits as well as several other parcels for commercial/retail development. Phoenix’s obligation in the deal is to pay 80% of the sales tax it received on this site for 40 years up to a maximum amount of $37 million. It was its contribution toward the development of the site. In return Glendale assumed the obligation of paying Phoenix for a specific right-of-way and land adjacent to that right-of-way. The deadline for that purchase in the amount of $3.7 million is October of this year. If Glendale reneges all terms of the Phoenix/Glendale Intergovernmental Agreement (IGA) become null and void. From 2009 until 2013 Glendale received over $200,000 from Phoenix in sales tax revenues.

Ralph Burton, principal of Right Path Limited, was to be the developer of the land adjacent to the MLB facility. At the time Glendale had a great deal of confidence in him. He had been very instrumental in Cabelas locating in the Westgate area. He had purchased a substantial amount of land along the western side of Loop 101 named “Main Street” and there were plans in the works to site the Olympic basketball training facility and headquarters there. He had taken over the airport fixed base operation (FBO) and had performed major renovations. He unfortunately partnered with Danny Herndon (of Danny’s Car Wash fame and illegal immigrant workers) and Bob Banovach to develop the Main Street project. It wasn’t long before there was in-fighting between them resulting in litigation. In the meantime the recession factored into their development plans. All plans ground to a halt and ended in bankruptcy.

The Dodgers and White Sox agreement with Glendale stipulated that they would operate and maintain the facility. Capital repairs would be Glendale’s obligation. They were required to pay $1 a year for rent. There is no management fee obligation for Glendale. Glendale is responsible for providing public safety services but the revenue it receives appears to cover those costs.

The Arizona Sports and Tourism Authority (AZSTA) pledged to cover 66.7% of the project’s costs as it has historically done with other baseball spring training facilities in Phoenix, Mesa, Peoria and Surprise. Reimbursement was originally scheduled to begin in 2017 but again, the recession destroyed that schedule. AZSTA’s revenues dwindled and the new projection for payments to Glendale is now scheduled for 2025-2026.

The debt service for construction of the project range from a high of $17 million in FY 2014-15 to a low of $9 to $11 million in subsequent years. Glendale is obligated to contribute to a Capital Repair account with annual payments of $400,000 to $800,000.

The financial obligations of Camelback Ranch and Jobing. com Arena are substantial for Glendale. The annual financial requirements of these two city owned facilities are clearly unsustainable.  Camelback Ranch requires infusions ranging from a high of $18 million (debt service and Capital Repair account) to a low of $10 million a year. Jobing.com Arena requires an annual management fee of $15 million and annual debt service of approximately $13 million. Add to those figures the $5 million a year owed to the NHL, the annual contribution to the Capital Repairs account of half a million to a million a year and another million to repay the city’s Enterprise Funds and we’re looking at a low of $28 million a year to a high of $34 million a year. Combined these two facilities require cash infusions each year from a low of $38 million to a high of $52 million. A disclaimer is in order. Since I am no longer on city council I am not privy to current financial information and obligations related to these facilities that may be considered confidential. However, the underlying concepts remain valid. Some of the cash required by these facilities may be offset by revenues they generate. We simply will not know how much offset there is for the arena until the start of the next fiscal year on July 1, 2014.

Is there any solution available? Perhaps yes. The many partners and contractual obligations associated with Camelback Ranch do not lend themselves to a sale by the city of Camelback Ranch. However, Jobing.com Arena is not in the same situation and could be sold. In doing so it removes substantial annual debt service and management fee obligations from the city. It is an option that merits consideration. Personally, I would be sad to see the city lose the arena but sometimes ya gotta do what ya gotta do.

As a side note I am discontinuing my informal polls, at least for now. It is obvious that those for or against an issue are padding the results by voting repeatedly. The results of the poll have now become meaningless.

If you would like to receive an email advising you of a new blog post, simply insert your email address in the space provided on the top right side of this column.

 

© Joyce Clark, 2014

FAIR USE NOTICE

This site contains copyrighted material the use of which is in accordance with Title 17 U.S. C., Section 107. The 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 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 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 14

8

There are two elephants in Glendale’s room

Posted by Joyce Clark on February 8, 2014
Posted in Camelback Ranch Spring Training Facility • City Council Actions • City issue and actions • City of Glendale • Glendale finances • Jobing.com arena  | Tagged With: , , , , , , , , , , | 6 Comments

The afternoon workshop session of the Glendale city council of February 4, 2013 was a presentation by Stuart Kent, Glendale’s Executive Director of Public Works (there’s that pesky Executive Director title again!) and the consultancy firm of Rider Levett Bucknell, Ltd. (RLB) at a cost of slightly over $100,000. The presentation was a Total Life Cycle Cost Assessment of the city owned facilities of: Jobing.com Arena; Renaissance Hotel Convention Center & Media Center; Renaissance Parking Garage and Camelback Ranch. Here is the link to the slides used for the presentation: http://www.glendaleaz.com/Clerk/agendasandminutes/documents/01PPT-TLCCAssessment-FinalFinalWorkshopPresentation.pdf  .

The afternoon session was over in the blink of an eye, and lasted for about the half hour it took to make the presentation. Councilmembers eyes glazed over and there was only one question from Councilmember Martinez on a point on which he needed clarification.  Did these councilmembers read this report? Your guess is as good as mine but I would wager most of you would say they did not read it. Well, I did – all 150 pages plus. I even had to find one of my Dad’s magnifying glasses to read all the exhibits which were compressed into teeny, tiny print to fit on an 8 1/2” X 11” sheet of paper. That was no mean feat.

The city can’t catch a break. The financial news goes from bad to worse as contractual costs of maintaining these facilities contribute to the ever-mounting bills the city must pay every year. RLB uses a 50 year life cycle for these facilities. They believe these facilities will last for 75 to 80 years. While that may be accurate, it seems that in 20 years or so the tenants will demand facility updates to remain competitive. That issue was never asked and never addressed. Here are the more important “take aways” from RLB’s Assessment.

Take Away #1: From the Workshop Council Report, Page 1: “The facilities are managed by the current tenants, with associated costs for operation and basic maintenance the responsibility of the tenants. The cost for the capital replacement and repairs are the responsibility of the city in each of the facility agreements.”

Take Away #2: The chart below is an estimate only. The figures could be higher or could be lower than projected or council may decide to delay some improvements.

Capital Improvements: Budget Recommendations, 5-Year Summary

FACILITY

 FY 2015 FY 2016 FY 2017 FY                   FY 2018               2019                 Totals
Jobing.com   Arena $4.9M $3.1M $0.0M $0.3M $9.6M $17.9M
Renaissance   Convention & Media Center $0.3M $0.5M $0.6M $0.0M $0.2M $1.6M
Renaissance   Parking Structure $0.1M $0.0M $0.9M $0.0M $0.1M $1.1M
CamelbackRanch   Park $2.1M $0.1M $1.3M $0.7M $1.9M $6.1M
Totals $7.4M $3.7M $2.8M $1.0M $11.8M $26.7M

Take Away #3: Assessment Page 5: “The (arena) facility includes adjacent sitework, parking areas and a service road.” On Page 9 of the Assessment it says, “The City shall be responsible for capital maintenance of the arena Parking Area, which shall include but not be limited to striping, patching, and resurfacing. Section 8.2.1(d).” Yet the city only receives parking revenue after the first $20,000 per event goes to IceArizona. One would think there should have been some cost sharing  for repair and maintenance negotiated.

Take Away #4: Although on page 7 of the Assessment it says it provides the following, no attached facility condition assessment checklists were provided in the report. “The defective items are listed in the attached facility condition assessment checklists and evaluated in the attached facility condition assessment estimate.” It is an important omission. The NHL when managing the arena identified the roof as needing major repair at an estimated cost of $2 million. Without the defect list it is difficult to determine if immediate major roof repair of the arena is included. Defects are categorized under the following headings; 

  • Programmed Maintenance
  • Preventive Maintenance
  • Unscheduled Repairs
  • Emergency Repairs
  • Deficiency Repairs”                                                                                                                                                   

Take Away #5: Page 21 of the Assessment states, “Based on review of the information received to date RLB believes the current building related Sustainment, Operations and Maintenance costs are in the region of $10,000,000 per annum (for the following items):

  • Custodial
  • Energy
  • Grounds
  • Maintenance & Replacement
  • Management
  • Pest Control
  • Refuse
  • Security
  • Telecom
  • Water & Sewer”

It continues on Page 22 with, “In addition to the above noted items there are other additional event-specific related Operational costs (direct event labor and expenses) which currently cost up to $4,000,000 per annum, depending on the number of events being held at Jobing.com Arena. At the time of commencing this TLCC Assessment RLB understood that a portion of the event related expenses were being reimbursed by the National Hockey League (NHL).” To whom?

Take Away #6: From 2003 to 2013 the Projected Arena Income was a negative $43,319,000. When you think about it, it is logical. From 2003 to 2009, 6 years, the city paid no management fee. Since then the city paid the NHL $25 million a year for a total of $50,000 million. There were revenues earned during that period but not enough to cover that major expense. What should be of concern that from 2014 to 2018, the next five years, the projected revenue income is projected to be a deficit of $20,577,000.

Take Away #7: There are 910 parking spaces in the 4 level parking garage per page 7 of RLB Renaissance Parking Structure Assessment. On Page 13 it states that the Hotel has 460 garage spaces + 240 surface parking spaces. Jobing.com Arena Management is allotted 450 of the garage parking spaces. Those are premium parking spaces for which IceArizona charges $20 or $25 per space.

Take Away #8: On Page 28 of the RLB Camelback Ranch Assessment it states,  “As noted previously within this report, RLB did not receive any detailed, specific information pertaining to current Sustainment, Operations and Maintenance costs for Camelback Ranch Park. Based on RLB’s review of a 2011 Cactus Little League Facility Summary (as researched by Broughton/Heimstead) we believe the current facility related Sustainment, Operations and Maintenance costs may be in the regions of $3,800,000 per annum (for the following items):

  • Custodial
  • Energy
  • Grounds
  • Maintenance & Replacement
  • Management
  • Pest Control
  • Refuse
  • Security
  • Telecom
  • Water & Sewer”

What does all of this mean? Darned if I know. No, really, it demonstrates that there are two elephants in Glendale’s room. Check out this comparison.  It’s down and dirty because some of the numbers can only be estimated at this point but it gives one a feel for what is happening at each facility.

                                                        Jobing.com Arena           Camelback Ranch

 

Annual construction debt                    $12M                           approx. $25M

Average annual Capital                      $3.5M                                      $1.2M

Improvement Expense Est.

(over next 5 years)                          

Annual Management fee                      $15M                                           0 

Total average annual expense             $30.5M                                  $26.2M

 

AnnualEst. projected revenue            –  $3M                                      -$ .3M

Annual Est. projected deficit               $27.5M                                   $25.9M

                                        

As can be seen, the deficit numbers for each facility are pretty close to one another. Yet, I cannot begin to count the number of times that someone has said, “Don’t blame the arena for Glendale’s financial problems. Take a look at Camelback Ranch. That’s the real problem.” As you can see, each is a tremendous financial burden on the city at a time when the city faces financial crisis. There are, indeed, two elephants in Glendale’s room. 

© Joyce Clark, 2014

FAIR USE NOTICE

This site contains copyrighted material the use of which is in accordance with Title 17 U.S. C., Section 107. The 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 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 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.

          

« Previous Page