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Joyce Clark Unfiltered

For "the rest of the story"

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.

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.

I would remind Coyotes fans that in 2010 and 2011 the City of Glendale paid the NHL $25 million a year to keep the Coyotes in Arizona. I guess no one remembers that if Glendale had not paid the NHL the team would have been sold and probably relocated at that time.

During that time fans heaped praise on Glendale and there was no lamenting of traffic difficulties in getting to a game in Glendale. My, how times have changed. The most often heard refrain today has been that it is too difficult to get to Glendale. That seems to be the owners and fans rationale for moving out of Glendale.

The fans have traded $25 dollar tickets and traffic inconvenience for $500 tickets and equally vexing traffic inconvenience. They will trade traffic at the Loop 101 for traffic at the Loop 202.

There are three major issues that it is believed will have to be satisfied if the Coyotes hope to locate in Tempe.

The first is the Coyotes’ proposal that Tempe pay $200 million to clean up the site. They propose a Tempe Community Facilities District. In essence, Tempe bonds for the $200 million which would be repaid by using the sales tax generated on the site for approximately 20 years or until the bonds are paid. In essence, Tempe taxpayers see no new revenue from this development until the bonds are paid and are not benefitting from the sales tax generated by the proposed project.

I would also historically point out that Steve Ellman when seeking City of Glendale financing to build the Gila River Arena represented development of over 1.2 million square feet that would generate enough sales tax to satisfy the annual debt payment. After 5 years there was only about 1/5th of the proposed economic development and that did not generate enough sales tax to pay the annual debt payment. The same scenario could be repeated forcing Tempe to use General Fund dollars to cover the short fall in the annual debt payment.

There has been talk that if the Tempe Council approves the development there will be citizen referendum petitions. If that occurs and enough signatures are acquired, it will put the project on the ballot and the voters of Tempe would decide whether the project moves forward. If this were to occur, add another year of uncertainty.

A second issue is the Coyotes’ proposal to construct 1,600 residential apartment units on the site. These residential units would be directly under Sky Harbor’s flight path. Recently four former Phoenix mayors offered an OpEd on this issue. Here is the link: https://www.azcentral.com/story/opinion/op-ed/2022/06/01/tempe-plan-arizona-coyotes-spells-trouble-sky-harbor-airport/9996700002/ . A little background is in order. In 1994, Phoenix and Tempe entered into an Intergovernmental Agreement (IGA). The purpose of the IGA was to stop residential development under Sky Harbor’s flight path. The concern was and is, that these new residents would complain about the noise generated by takeoffs and landings (at roughly one every minute). Residential complaints would most certainly have an impact on Sky Harbor’s continued and future development.

The four former mayors said, “For more than 25 years, Sky Harbor’s growth, expansion and development plans have been made with the IGA and adherence to its prescribed eastbound departure path in mind.

Tempe even appointed its own aviation commission to ensure that the terms of the agreement remain viable and enforced. All of this to protect Tempe neighborhoods from the life-altering experience of having a flight path directly over their homes.” They go on to say, “These residential units are proposed to be built directly under the very flight paths that were created by the intergovernmental agreement to protect Tempe residents.

As previously communicated by the Federal Aviation Administration, the Air Line Pilots Association, the airlines themselves and by the professional management of Sky Harbor, no residential development can be permitted in this area – less than 10,000 feet from the end of the two south runways – without compromising those flight paths and significantly threatening the airport’s continued operation and future growth.

As community leaders who embrace cooperation and compatible growth, it is essential, if the entertainment district proposal moves forward, that all residential development be removed from consideration.”

When you think about it, it won’t just be the 1,600 residences that will be impacted by the noise but really, everything on the site will experience the noise…people working in offices on the site and the fans while attending a game. Without the residential units, projected to earn income, is it still a viable investment?

The last and perhaps the most important issue to be considered is money. At the Tempe City Council’s June 2, 2022, meeting when approval was granted 5 to 2 to continue to negotiate with the Coyotes, one of the Tempe councilmembers publicly offered a slide depicting Dun & Bradstreet’s financial rating of the Coyotes, Alex Meruelo and associated affiliates. Here is that slide:

It’s not pretty. Tempe staffers circulated a Memo to the Tempe city council revealing staff’s rating of the proposed project. Here is the link: https://www.azcentral.com/story/news/local/tempe/2022/06/01/tempe-memo-gives-coyotes-proposal-low-marks-financial-strength/9973803002/ . In the Arizona Republic’s article about the memo it states, “On the financial front, a city memo released ahead of the June 2 City Council vote gave the team’s plan a 40% score for “financial strength/ability,” the lowest mark on the six-category evaluation completed by city staffers.”

To be successful and move forward the Coyotes will have to give up its ‘ask’ of $200 million from Tempe and its taxpayers, remove the 1,600 residential units to ensure continued viability of Sky Harbor Airport and ensure that a team that has lost millions of dollars year over year has the necessary guaranteed financial stability to successfully undertake a nearly $2 billion development. As Tempe has stated it will be months before the final decision is made and satisfactory answers to these three issues should be the basis for their decision.

© Joyce Clark, 2022      

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.