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.
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© Joyce Clark, 2014
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