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Joyce Clark Unfiltered

For "the rest of the story"

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It has been 17 years and 129 days since the city’s pledge to build the West Branch Library.

When it comes to determining the actual cost of hosting the Super Bowl it is almost impossible using the city’s current financial tracking system. As the city responded to my Public Information Request it noted for Pro Bowl and Super Bowl expenses, “It was not announced that the Pro Bowl would be held in Glendale until budget development already took place so there were not separate accounts created for Pro Bowl expenses. Everything was charged to fund 1010 National Events.” In terms of Public Safety costs the city also responded with, “There was not a separate reporting code for Pro Bowl. Pro Bowl public safety costs were subject to the provisions of the city’s contract with Global Spectrum for public safety services at the stadium and the city will receive a partial reimbursement for those expenses.”

I requested a list of all departments that contributed, by event, in any way. The city’s response was, “A list as requested does not exist, but the documents provided somewhat address the request. There were obviously other departments involved as issues arose that affected their service areas, but a list was not created for tracking purposes.”

Based upon city provided figures I arrived at police Pro Bowl figures of 5,486 hours and wages of $309,387.54 and fire Pro Bowl figures of 1,400 hours and wages of $90,000. The city received partial reimbursement from Global Spectrum and I have established an estimated reimbursement figure of approximately $70,000 for police and $45,000 for fire services. Obviously this does not include other departments’ employee time and materials. Based upon figures available it is estimated that the city spent a minimum of $300,000 for public safety in support of the Pro Bowl. Other department costs are estimated to be in the range of $200,000. The city spent an estimated range of $500,000 in non-reimbursable hosting costs for the Pro Bowl.

Based upon city provided figures I arrived at police Super Bowl figures of 7,321.89 hours and wages of $527,527.08 and fire Super Bowl figures of 2,900 hours and wages of $241,000. The city’s costs for public safety alone are approximately $768,000. Add the city identified travel expenses for the 2014 Super Bowl of $19,000, Building Safety costs of $40,000 and Transportation Department costs of $787,000. These city identified costs total $1.61 million.

Add the untracked, unidentified costs such as the Super Bowl Operations Planning Team, the Code Compliance Enforcement Teams and the PIO team. Now add the untracked, unidentified costs of many departments: Sanitation, Marketing, Streets, Parks & Recreation, Planning & Zoning, etc. These costs are easily estimated to total $1 million to $1.5 million. It is fair to estimate the city’s true cost for hosting the 2015 Super Bowl between $2.6 to $3.1 million dollars.

What have you, the taxpayer, paid to be identified as a Sports Mecca in 2015?

  • Fiesta Bowl non-reimbursable cost of an estimated $300,000 to $500,000.
  • Pro Bowl non-reimbursable cost of an estimated $500,000
  • Super Bowl non-reimbursable cost of an estimated $2.6 million to $3.1 million
  • Total cost an estimated $3.4 million to $4.1 million dollars.

Ka-ching…

Next up…some interesting factoids discovered and did the city earn any money while hosting these events?

© Joyce Clark, 2015

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.

It has been 17 years and 119 days since the city’s pledge to build the West Branch Library.

Before we delve into the world of finances used to host the Super Bowl remember that the city actually hosted 3 major events at the stadium in 2015: the Fiesta Bowl, the Pro Bowl and the Super Bowl.

We’ll look at the murky finances of hosting the Fiesta Bowl. It is the only one of the three major events for which there is any mechanism of even partial financial reimbursement. When the University of Phoenix stadium opened on August 1, 2006 the city entered into an agreement not with the Arizona Sports and Tourism Authority (AZSTA) but with the management company, Global Spectrum, which AZSTA hired to manage the stadium. The Fiesta Bowl Committee rents the stadium and contracts with Global Spectrum to manage the event. The agreement between Global Spectrum and the city requires police and fire service partial reimbursement. Global Spectrum reimburses the city for only these two services.

The two latest agreements between the parties are dated October 22, 2013 for fire services and April 10, 2014 for police services. In the 2013 agreement Global pays an hourly rate of $40.00 for fire services. In the 2014 agreement Global pays an hourly rate of $51.10 for police services with provision for an annual increase of 3%.

From the March 20, 2012 city council budget workshop minutes we learned the following, “Councilmember Lieberman asked if the city paid the salary of all the officers from other municipalities that come to help them in trafficking for events such as the Fiesta Bowl. Assistant Chief Greg Dominguez, explained the city does have an account that was budgeted for the staffing that was specific to the Fiesta Bowl. Therefore, the city does cover salaries for those events.”

In response to my Public Information Request I received the following information from the city for police costs for the Fiesta Bowl:

  • Police billable hours are 1,152.38 and billable wages are $53,671.63
  • Police non-billable hours are 1,287.89 and non-billable wages are $70,765.20
  • Total police hours are 2,440.27 and total wages are $126,436.83

Yet another city document I received entitled 2015 YTD (Year to date) Budget Control Report Details listed police expenses for the Fiesta Bowl of:

  • Temporary pay of $36,640.00
  • Overtime pay of $43,999.07
  • Emergency Service pay of $880.00
  • Fire & Liability insurance of $727.51
  • Professional and Contractual to Airwest Aviation Academy of $1,174.50
  • Line Supplies (Insight, Zoro tools, Best Buy and Motorola) of $3,926.97
  • Total of these line items is $87,347.06

With no further clarification from the city I have to assume that $87,347.06 is in addition to the total wages reported of $126,436.83. These two city generated reports total $213,783.89 for which the city received reimbursement for billable hours and wages of $53,671.63. These reports confirm that city paid at least $160,112.26 from its General Fund to host the Fiesta Bowl. I suspect that this figure is low because in the city’s FY 2015-16 budget $245,975 is the figure used.

Fire costs for the Fiesta Bowl are:

  • Hours of 425.25 and wages of $26,953.18
  • There is no distinction between billable and non billable hours and wages

In its 2015 YTD Budget Control Report Details fire expenses are listed as:

  • Overtime pay of $19,330.61
  • Emergency Service pay of $2,200.00
  • Fire & Liability insurance of $296.24
  • Line supplies (Insight, Lowes, Salsa Blanca, Shane’s Rib Shack, Home Depot, AGP Propane, Segway of Scottsdale, RV Storage, Roadrunner Oxygen, Cabela’s, Office Depot) of $6,999.14
  • Total of these line items is $28,826.99

The two city generated reports total $55,780.17. This tracks with the FY 2015-26 budget of $58,816.00 for fire. Note that fire does not make any budgetary distinction between billable and non-billable hours and wages. Since it tracks so closely to the budgeted amount it may be safe to assume that this cost reflects non-billable hours and wages.

In yet another city generated 2015 YTD Budget Control Report for Transportation we see:

  • Overtime pay of $74.88
  • Fire & Liability insurance of $191.25
  • Professional & Contractual for shuttle services of $26,049.40
  • Line supplies (Culver’s) of $60.74
  • Total of these line items is $26,376.27

After reimbursement for some public safety costs the best estimate of total non-reimbursable costs for the Fiesta Bowl paid by the city’s General Fund is $301,783.99. But this figure is only attributable to police, fire and shuttle services.   Remember there are other costs not tracked by the city. Items not tracked are salaries, straight time and overtime in transportation, sanitation, marketing, building safety plus the use of city equipment. How much did they use in time, equipment and material? We don’t know and guess what; neither does the city because it doesn’t track any of these additional costs. That makes my assumption as to Fiesta Bowl costs as reasonable as theirs.

The figure to host the Fiesta Bowl is $300,000 on the low end and about $500,000 on the high end. It is reasonable to assume that it is closer to $500,000 when the hidden, untracked, unreimbursed expenses are identified.

Why doesn’t the city track all costs for these major events? Pick your reason. It could be laziness or sheer incompetence. Conspiracy theorists will say that the city doesn’t want its citizens to know. They believe, and they may be right, that Glendale residents would be outraged to learn exactly how much the city’s role as a sports mecca costs. Residents may realize that sports hosting costs remove available revenue to upgrade or to construct amenities that enhance a city’s quality of life…and that is a bigger deal than a football game.

Next up the cost of the Super Bowl (and Pro Bowl).

© Joyce Clark, 2015

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.

This is always a difficult subject because of all of the facts and figures that are presented. The numbers can be confusing to those readers who have not followed my other blogs on the monthly reports. Here is a link to the report:http://www.glendaleaz.com/finance/documents/FY14MonthlyArenaReport-20140430.pdf . Here is the report itself:

April 2014 MonthlyArenaReport 

This monthly report publicly released by Glendale will reflect the last of the hockey games for this season but does not capture the supplemental ticket surcharge which is due and payable 60 days after each fiscal year. The new fiscal year begins July 1, 2014 so this line item would not be paid to the city or reflected in this report until September 1, 2014.

The Interest Income-Escrow Account still sits at $4,620 and has not been updated since the first monthly report.

The agreement revenues to the city to date total $4,686,412 and reflect a prorated 11 month fiscal year begun on August 5, 2013. The total city expenditures to date are $10,252,055. In this first year all figures are prorated. The total management fee the city will pay is $13,750,000 and total capital improvement expenditures are $450,685.   The report reflects a loss to the city, to date, of $5,565,643.

For purposes of discussion let’s include as revenue the supplemental ticket surcharge. It comes in at $774,452. Let’s add that amount to the total qualified ticket revenue received by the city; and new ticket revenue figure is $2,323,357. The total management fee of $13,750,000 and capital expenditure requirement of $450,685 paid by the city this fiscal year is a total of $14,200,685. Subtract revenues received from fees paid and the loss to the City of Glendale in this fiscal year is the grand total of $11,877,328.

Consider this. Next fiscal year even if all 17,700 tickets per hockey game were qualified tickets the maximum amount the city would receive is $2,537,000 in qualified ticket revenue. For this exercise, let’s add to that figure another $1,268,500 in supplemental ticket surcharge. Add an additional million dollars more in parking revenues to the nearly $1 million generated this year and the maximum revenue 42/43 hockey games per season can generate is approximately $6 million.  

Global Spectrum and IceArizona would have to have approximately 100 revenue generating non-hockey events in order to earn an additional $9 million annually to be paid to the city to offset the $15,000,000 the city must pay as an annual management fee to IceArizona. They will be fortunate to host 25 non-hockey revenue generating events next year.

Some folks dismiss the $6 million portion of the annual management fee because it was already budgeted. It’s not to be dismissed because it’s in the budget. The money still comes from General Fund sales tax revenue. It still counts. It is still money the city has to receive from sales tax revenue to pay all required arena expenditures. 

I added the Supplemental Ticket surcharge to the total revenues to be received by the city. Even with that “enhanced revenue,” the fact remains that this year the city’s loss is $11.8 million dollars. There is no more money forthcoming to the city from any magical or secret source.

For purposes of this exercise, here is how this year and the next 4 fiscal years worth of loss to the city may very well pencil out. For this exercise I reduce the annual loss by an estimated $2 million a year by increasing revenue to the city by an equal amount annually:

  • This year, FY 13-14           loss of $11.8 million
  • Next year, FY 14-15          loss of $  9.8 million
  • Year 3, FY 15-16               loss of $  7.8 million
  • Year 4, FY 16-17               loss of $  5.8 million
  • Year 5, FY 17-18               loss of $  3.8 million
  • 5 Fiscal Years                   Total loss of $39 million

Add to the $39 million deficit in earned revenues approximately $12 million a year in construction bond debt for a total of $60 million. In five years I estimate the city will pay $99 million dollars between paying annual construction debt and covering annual revenue losses generated by the management fee.

My disclaimer is that these estimates are my best, educated guess based upon the numbers that are publicly available. The actual loss number for five years could be higher or lower than estimated.

What is ironic about this IceArizona contract is that the “enhanced revenues” (with the exception of naming rights and the supplemental ticket surcharge) are not really new revenue. Before IceArizona and the NHL’s two years of management, the city paid no annual management fee…none…nada. Yet it collected the very same revenues — a ticket surcharge and a parking surcharge. They were included in the price of every ticket. Those revenues: sales tax earned inside the arena and the ticket/parking surcharges were used to pay down the construction bond debt because the city didn’t have to also pay a management fee.

With this new deal the management fee consumes all of ticket/parking surcharge revenues (in addition to the other revenues like naming rights) the city was already getting and leaves the city struggling to cover some portion of the $15 million deficit every year. Oh, and don’t forget, IceArizona takes $20,000 off the top of parking fees for every game. That comes to $860,000 this year.

Another irony is that when IceArizona took over, it didn’t subtract the existent ticket and parking surcharges that were historically already included in the price of the ticket. Those charges were absorbed and became part of the base price of the new IceArizona tickets to which they added the new, qualified ticket surcharge. In essence, every fan’s ticket now includes the old ticket and parking surcharges within the base price and the new IceArizona ticket surcharge is then added.

The management agreement was and is good for IceArizona but it’s not so good for Glendale. Earned revenues once applied to the construction bond debt are now used to cover the $15 million annual management fee. Those earned revenues simply are not adequate to cover the management fee.

The argument for keeping the Coyotes as an anchor tenant was to benefit all of the surrounding businesses in Westgate. With the totality of Glendale’s excessive debt burden the question must be, is it worth it to keep the team and struggle to pay the annual management fee? Or is Glendale better off going back to accepting one of the Beacon bids solicited last year? You decide.

© 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.

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.

westgate 1

Westgate

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:

 

Tax Report Year    Qualified Tax Revenues     Min. SF Qualified Use SpaceBag of Money Clipart

 

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 football field 2then 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 Boy Playing Soccer Clipartlong 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.

Ice Skating ClipartAnother 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.

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