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Joyce Clark Unfiltered

For "the rest of the story"

20140812_193537The August 12, 2014 meeting of the Glendale City Council was like watching a train wreck in slow motion. You know the inevitable outcome; you know it will be extremely painful; but you are utterly powerless to stop it. All you can do is watch it unfold. This is the first council meeting I attended since leaving office over a year and a half ago. People have been telling me for months that the animosity among councilmembers was evident. I thought OK, there were times when our council meetings were not happy affairs. Little did I know that the atmosphere reeked of councilmember nastiness and disrespect. It was palpable fueled by the absolute arrogance of the council majority (Sherwood, Hugh, Alvarez and Chavira). The meeting was not unusual as council sped through proclamations and the consent agenda. The last two items were casino related. One was council approval of the draft agreement between the Tohono O’odham and Glendale. The other was the first official groveling of the city council with a resolution supporting the construction of the casino.  All hell broke loose. The draft agreement was introduced and recited by Michael Bailey, Glendale’s City Attorney. Mayor Weiers opened the public comment portion. There were 22 speakers to the item. 15 citizens spoke in opposition to the draft agreement and 7 spoke in favor of the draft agreement. The speakers’ comments in opposition to the proposed casino revolved around these general themes: casinos produce greater crime in the adjacent area; they create a greater rate of gambling addiction and subsequent bankruptcies and home foreclosures. The two major themes were comments about the rush to get this agreement done and the fact that it simply wasn’t a good deal for Glendale. There were some memorable comments to share (my apology if I butcher someone’s name). John Burnell of the Sahuaro district related that a family member, as a gambling addict, maxxed out credit cards and lied to keep it secret. The husband had to take two jobs and it took him over two years to get the family’s finances back on track. Barbara Roberts acknowledged the casino job creation but said, “Yes, we need jobs but what kind of jobs?” Timothy Green of Goodyear said, “Casinos only succeed on the backs of losers.” A rather profound statement. Ron Kolb, Ocotillo district said, “The West Side will never be the same.” Dr. Ron Rockwell, pastor of a Yucca district church very near the casino site, said, “You no longer care about the moral and spiritual culture of this community.” Randy Miller, candidate for the Barrel district council seat, called out Councilmember Alvarez and her continual homage about the importance of listening to the people…yeah, Norma, right. It seems to be a principle of hers only when convenient. Those speakers in support of the casino were arrogant and boastful. John Mendlelberg, former Mayor of Surprise, said, “You must concede.” Reverend Maupin of Phoenix, said, “You lost the war. You should be grateful for whatever you are getting.” He accused Councilmember Martinez of being a liar and a racist. Robert Quizneros of the Ocotillo district complained about the audacity of “the other side’s hiring of attorneys and lobbyists” to defeat the casino. A special “shout out” to Lauren Tolmachoff, candidate for the Cholla district council seat. It appears that she has become a one-trick pony as she reiterated her support for the casino in the name of jobs. Hey, Lauren, don’t you know about “job displacement?” Several pro-casino speakers kept referring to, “it’s their (TO) land.” Well, yes it is after a purchase kept secret for 7 years and its newly minted designation as a reservation. It’s all about a reservation WITHIN Glendale. I defy anyone to identify any city in the State of Arizona that has a reservation within its boundaries. Then it was time for the Councilmembers to speak prior to their vote. Alvarez’ remarks were priceless in their ignorance. She made memorable comments such as, “what’s the difference between a lottery ticket and a casino?” Or, “We have casinos in Scottsdale.” Or, “They (Tohono O’odham) are going to provide a service.” That one caused audible audience derision.  And lastly, “Make us responsible for what we’re doing.” Trust me, we will.   Councilmember Sherwood, self-proclaimed negotiator and leader, was strangely silent all evening except for his monologue prior to his affirmative vote. His comments deserve a special blog and its coming. Councilmember Martinez offered a series of amendments to the draft and that’s when all hell broke loose. Councilmembers Alvarez and Chavira, repeatedly and often, yelled out while Councilmember Martinez was trying to speak, “Call for the question!” Their obvious intent was to silence Councilmember Martinez’ efforts. What were they afraid of? They knew they had the votes to defeat any amendment. Chavira was literally in a rage because of Martinez’ efforts. He lept out of his seat and it looked as if he was about to confront Mayor Weiers physically. Wow, Sammy. Finally we see the true persona and your reaction when crossed and you don’t get your way. The lack of control he exhibited demonstrated that he is unfit to serve as a councilmember and cannot conduct himself in a manner required by the office he holds. Martinez offered 4 amendments: raising the TO payment to $20 million or 3% of the Class III net; offsite infrastructure costs to be paid by the TO up front; a waiver of sovereign immunity especially with regard to fraud and other bad acts; and payments to continue beyond 2026. Each was rejected. The vote was as everyone expected. The majority of 4 – Sherwood, Alvarez, Hugh and Chavira voting to approve the agreement and Weiers, Martinez and Knaack voting against. What was unexpected to the degree it manifested itself, was the vituperativeness and nastiness. At one point a citizen called Martinez a liar and a racist. Mayor Weiers should have stopped the speaker immediately and requested a police officer escort the person from the building. There is no doubt that Mayor Weiers lost control of the meeting during the first casino agenda item. His failure fueled the majority’s contempt and rage. Kudos go to Bonnie Steiger, a Glendale resident and faithful attendee at council meetings for 28 years. She is everyone’s Grandmother. She was so disgusted with council’s behavior that she said their lack of respect for the very office they hold merited the removal of all of them. Lastly, I offer two interesting items for your attention. One is the Coyotes publicly announced today that they had accepted a deal for arena naming rights. Are you ready for this? It will be called the Gila River Arena. Hooray for the Gila River. Although it may require Glendale approval, Glendale may only reject for very narrow reasons and the new naming rights do not fit the criteria. Can you say embarrassing, Glendale?? Or perhaps the majority of 4 will figure out a way to kill the deal. The second item is that just before 5 PM, yesterday, August 12, 2014 a group filed paperwork with the Glendale City Clerk’s office for a Political Action Committee for the purpose of recalling Councilmember Gary Sherwood. Things are heating up in Glendale. As I said at the beginning of this blog, this meeting was definitely a train wreck but the pain is yet to be borne by all of the people of Glendale. © 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.

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.

This is the last blog in a six part series about Glendale’s debt. In previous blogs we explored the different kinds of debt, how those debts are paid and the purposes for which each debt was created. Some debt such as Enterprise Fund debt, Highway User Revenue Fund (HURF) debt, Transportation debt and a portion of the General Obligation (G.O.) debt are reasonable debt. A portion of the G.O debt could be characterized as imprudent and unnecessary debt. The Municipal Property Corporation debt, in hindsight, is unnecessary debt created to fulfill the commonly held vision of former Mayor Scruggs and former City Manager Beasley.  

The purpose of this exercise is to manage Glendale’s debt by paying it down or eliminating portions of it. Very simply the city’s expenses are greater than its revenues. The result has been to strip the city bare and reduce services to its residents (such as reduced library days and hours) because the debt is absorbing revenues that could be used for other purposes. When a mistake is made it is better to accept accountability, rectify it and move on. A city is required to do the same.  

A simple example might be that you decide you want a new car. You don’t need a new car. The old one is fine but you have decided you must have a new car. You buy a Tesla (extravagantly expensive) just because you want it. However, to make the payments you cut back on food, utility expenses and other necessities. You end up eating beans and rice every day, live without air conditioning and stop using doctors but, by God, you have the car of your dreams. You may be comfortable with your decision but the rest of your family may not be so happy especially if they are not allowed to weigh in on its purchase. One day your child is ill and the family learns that you stopped making medical insurance payments. If it is a decision that affects only you, fine, but it’s not right to obfuscate when that decision affects others without their buy-in. In Glendale’s case it is the residents of the city many of whom are not fine with past decisions that incurred tremendous debt and have resulted in a diminishment of their services.  

Before I go too much further I wanted to share a newspaper clipping that I received. A scant 11 years ago this is what the Arizona Republic reported about Glendale’s finances:  Gl finances 3

By September of 2003, former City Manager Dr. Martin Vanacour had resigned (that’s a whole ‘nuther story) and Ed Beasley had been appointed by City Council. Make no mistake, Fiscal Year 2003 was Vanacour’s budget and Beasley never attributed its success to Dr. Vanacour’s management.

I hope Dr. Vanacour will not take offense if I refer to him as Marty. I respected and admired Marty a great deal. He was and still is, highly respected by his peers. Marty was an excellent city manager and was also fiscally conservative. I genuinely liked Marty. He was approachable and respected confidences. Sometimes he reminded me of a Buddha or sphinx as he would sit stoically, listening to my latest series of questions, comments or rants. 

There were a few, alas an important few, who wanted new management. They wanted someone who would lead Glendale into becoming the “new” Glendale acknowledged by all as THE Sports and Entertainment city. That someone chosen to be the new City Manager was Ed Beasley. Between 2003 and 2009, on former Mayor Scruggs’ and former City Manager Beasley’s watch all of the current MPC debt was incurred.  

The MPC debt is killing Glendale financially. This debt is paid out of Glendale’s General Fund because MPC debt is paid from sales taxes. Sales tax monies are received and accounted for within the General Fund. It should be the prime imperative for the city council to reduce or remove MPC debt by any means possible as quickly as possible. The elimination of MPC debt frees up General Fund money for other purposes such as restoration of library hours or other basic services Glendale provides to its residents.  

What does Glendale do now? It must use a combination of strategies that will bring Glendale’s expenses in line with its revenues eliminating the need to extend the temporary sales tax increase beyond its 2017 sunset date.  

STRATEGY #1: Implementation of the sale of Glendale’s assets. I am pleased to see that Glendale staff has finally drawn up such a list and presented it to council at the workshop on May 20, 2014. Staff acknowledged that they omitted the two city owned golf courses: Desert Mirage and Glen Lakes and that they belong on the list. Here is a link to Glendale’s current assets: http://www.glendaleaz.com/Clerk/agendasandminutes/Workshops/Agendas/052014-W02.pdf.

Executive Director of Finance, Tom Duensing, said recently, “Selling city property is just ‘one-time money’.” I beg to differ. Not in all cases. If a city facility’s O&M is being subsidized by General Fund revenues or if it still has construction debt then the city gains in two ways. It brings in much needed one-time cash that can be used to pay down or off the construction debt but it also eliminates an on-going General Fund expense.

A case in point is the Civic Center.   The Civic Center was built as Pay-As-You-Go with cash from the General Fund. It has no construction debt. Did you know that since it opened the city has subsidized its operation and maintenance in some form or fashion? There was even aCivic Center period of years when all city departments were required to hold all of their events at the Civic Center. It was a way to subsidize the Civic Center without being readily transparent since department event expenses are a line item in a department’s budget and there is no explanation regarding those payments.  

No matter what is suggested as an asset to be sold someone’s ox will be gored. There are so many stakeholders each supports a different city asset. It will be a painful experience for everyone. However, there’s either a will to finally fix this problem or not.  

What should be sold? My list will be different from yours. I welcome all comments to this blog that argue for or against the sale of a particular asset. My list would include, but not be limited Jobingto, in the downtown area, the Civic Center, the downtown parking garage, the Bank of America building, the Sine building, the Thunderbird Lounge property, the Civic Center Annex, the St. Vincent De Paul property and the city court property. In north Glendale, I would sell the Foothills Recreation & Aquatic Center. In west Glendale the city should sell Jobing.com Arena, the Media Center and Parking garage, and the Convention Center. If a legal way can be found to sell Camelback Ranch, that would be on the list as well.  

STRATEGY #2:  No employee raises until the General Fund has enough of a surplus to accommodate it. The current City Manager Brenda Fischer has complained that there is a 17% turnover rate of employees in Glendale but she never compared that figure to other Valley cities. In this economy people are thankful to have a job and we should know what vacancies currently exist, how many people apply and how long does it take to fill a vacancy? In other words, more information than the public has received to date. In police and fire there are always tons of people who apply.  

STRATEGY #3: While we are on the subject of vacancies, it should be standard practice to eliminate all unfilled vacancies each budget cycle. This is an accounting trick that has been used for years. It has always been a fist-fight to get staff to remove unfilled vacancies once and for all.  

STRATEGY #4:  All departments would be required to live within their annual budget appropriation, with no exceptions. No more fire department requests for additional money to cover overtime. Council should require (not request yet another study that goes nowhere) the fire department to move immediately to implement 3 man staffing on trucks and to implement the use of small, 2 man vehicles to answer medical calls.  

STRATEGY #5:   No carry-over requests from year to year with one exception. A project currently under construction but not completed within the year should be allowed carry-over to complete the project. If it is a project not yet begun it should have to compete for the appropriation the next fiscal year.  

STRATEGY #6:  Each department’s “Professional & Contractual Expense” must only be used for specific essential expenses. Only a specialty’s required licensing and organization membership should be permitted. The city’s payment for publications should be eliminated. The city’s policy on car allowances and cell phone use should be reviewed and the usage monitored carefully monthly.  

STRATEGY #7:  Council’s will to live within its means must be implemented as well. A majority of council possesses the prevalent attitude that it can approve new expenses and somehow the staff will find a way to cover them.

This is a time in Glendale’s history that calls for austerity. Austerity begins with the policy makers. If they cannot demonstrate their willingness to practice what they preach it sends the wrong signal to the entire organization. Signals emanate from Glendale regularly and are usually just as clearly understood as the white smoke that signals the choosing of a new Roman Catholic Pope. One clear signal that we all have seen is that Glendale will not stop spending. It makes one think of the people who declares bankruptcy but not before maxing out every credit card they possess. They “get their stuff” and use it before the court steps in to stop them. Sadly the creditors end up getting mere pennies on the dollar when that inevitable day comes careening down the tracks. I hear warning sirens in the distance…  

© 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.  

 

The Glendale Monthly Arena Report for March, 2014 is now online at the city website. Here is the link: http://www.glendaleaz.com/finance/documents/FY14MonthlyArenaReport-20140331.pdf . It tracks similarly to the previous reports with qualified ticket sales (of 14,061) being up slightly. April’s report will have the figures from the last 5 games. That report, also, will look quite similar. Here is the March Report: Mo Arena Report Mar 2014

I have also prepared a Summary of the last 7 months’ worth of financial information. Here it is: Mo Arena Report Summary May 2014_Page_1Mo Arena Report Summary May 2014_Page_2Take aways from the Summary show that all “enhanced revenues”, and I included the Supplemental Qualified Ticket Surcharge of $1.50 per ticket, to date have totaled $3,641,547. The city’s expenditures to date total $6,502,055.

Note that some items are prorated. The Agreement start date was August 5, 2013. It is one month and 4 days shy of a full fiscal year. As a result, the Base Rent for the first year is not $500,000 but rather $326,712. The Safety & Security Fee is not $174,122 for the first year but rather $156.948. The big one is the Management Fee the city pays of $15 million a year. The first year it is $13,750,00.

The extreme right column labeled “FY Est.” is an educated guess, based upon 7 months of fiscal performance to date, of the final numbers for the Fiscal Year. I have relied upon publicly available figures. The Fiscal Year estimated revenues to the city are $5,523,000 and the expenditures are $14,200,68.

The city has $6 million budgeted leaving it with a deficit for the year of $8,677,685. Add to that figure an annual construction debt payment of about $12 million a year. This year’s loss on the arena will come in somewhere around the $20 million mark.

The city’s Contingency Fund sits at zero as it was used to pay a portion of the management fee. If there is an immediate crisis the city will have to reapportion some regular line item amount to cover it. I’m sorry but I don’t see how the new senior management has done any better at managing the city’s money than the old regime. No matter what, the current situation is…Unsustainable.

© 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.

From the second I posted my last blog on the topic of the most recent Glendale Monthly Arena Management Report I have been inundated with Facebook private messages, emails and Twitter DMs asking so many questions I’ve decided to answer many of them here and now.

I’ve been asked how the Ice AZ deal is different than the Jamison deal I supported. Why was that more beneficial and why did I support it? I received a flurry of offended IceArizona supporters demanding I announce why Jamison’s deal failed, why I “pick,” “target,” “harass” the new owners. I am not at liberty to discuss why the Jamison deal did not succeed due to confidentiality issues. I can, however, compare the two deals – Jamison’s and IceArizona’s. My only agenda throughout the entire process was to get what would be, in my opinion, the best deal possible for Glendale within the context of the financial environment as it existed at that time. Each deal had its strengths and weaknesses vis a vis Glendale.

 Then there’s the “interested-in-Glendale” crowd who want to know why I continually berate the new Council and is it because I’m running again in the future? Again, I categorically state that I will not run for any office, now or in the future. I have seen some councilmembers who remained well into their 80’s. One could see the diminishment in their faculties and abilities. It is a disservice to the constituents they represent. Instead I appreciate the gift I have been given to opine on Glendale issues and events using the benefit of my 16 years of service to the city. I am enjoying my retirement immensely and writing about Glendale is just plain fun.

Some asked, did I think individual councilmembers or the mayor personally benefit from deals? Then there are the few accusations of “I bet you benefitted just like these lousy politicians” implying that somehow I would financially benefit from a successful Jamison deal. Jamison never, ever made any offer of compensation of any sort and if he had it would have resulted in personal insult at the thought and would have insured my “no” vote on his bid.

Now…for the rest of the story as Paul Harvey would say…Let’s begin with the unsuccessful Jamison bid.  In page citations references with regard to the Jamison bid are the City Council Voting Meeting Presentation of November 27, 2012 or the Substantial Final Draft of the Arena Management Agreement dated October, 2012.

  • It was a long-term deal of 20 years with a 5 year option to renew with no opt out clause by either party (Council meeting of November, 2012).
  • Base rent was in years 1 to 5, $500,000; years 6 to 12, $650,000; and years 13 to 22, $800,000; (Final Substantial Draft of Arena Management Agreement, page 24, Section 6. Leasehold Interest. 6.6. Base Rent).
  • Stipulation if full 40+ games were not played it would be arena manager’s responsibility to book other events to compensate for lost games (Arena Management Agreement, page 29, Section 8. Arena Management. 8.1.0).
  • Minimum of 40 games per year with additional 30 events per year. Management fee reduced by $25,000 for each non-hockey event below 30 minimum. Reduction of $60,000 per game below 40 minimum (Council meeting of November, 2012).
  • Parking Rights belonged to team owner/manager (page 30, Section 8.2).
  • Stipulation of 15% of the gross from naming rights would go to the city (page 35, Section 8.5).
  • City surcharge on qualified tickets was years 1 to 5, $2.75; and years 6 to 22, $3.00 (page 51, Section 9. Charges and Fees. 9.1. City Surcharge).
  • Arena Management Fee: In year 1, $11M; year 2, $14M; years 3 to 4, $15M; year 5, $16M; years 6 to 10, $18M; and year 11, $17M; years 12 to 15, $16m; year 16, $14M; and years 17 to 20, $13M (Council meeting of November, 2012).
  • Stipulation of 5 year option to purchase the arena (page 89, Section 23. Arena Purchase Option).
  • City offered a bonus incentive of $500,000 for every additional 20 events over 30 minimum required (Council meeting of November, 2012).

Was it a perfect deal? Of course not but I supported it for several reasons. Mr. Jamison continually demonstrated his willingness to compromise during the negotiations with the city. Every nuance of the Jamison deal was highly publicized.  There was no backroom negotiating amongst councilmembers.

A restructured arena management fee was crafted and the first year fee dropped from $17M to $11M. Penalties and bonuses were added — something not seen in any previous deals. The Five Year Scenario presented at the November, 2012 council meeting showed an ending City Fund Balance in 2017 of $63.2M if the team stayed and an ending Fund Balance in 2017 of $63.4M if the team left. The difference was negligible and seemed reasonable as both scenarios required General Fund expense reductions.

It was a deal that offered the city arena stability over 20 years and most importantly, there was an option to buy the arena in the first five years making the balance of the deal a moot point while relieving the city of further financial obligations. The “buy” option in the first five years would have removed the financial debt burden the city was facing at that time. Jamison provided a long term contractual commitment insuring an anchor tenant in the arena for 20 years. His deal was based upon having raised the necessary team purchase equity – no loans were involved.

Why didn’t it happen? Many of the reasons are not public and I am not at liberty to speak of them but I do know that at the eleventh hour the NHL demanded greater team purchase equity. Jamison was raising cash to purchase the team rather than relying upon loans. It was simply impossible to raise in two months the additional equity that the NHL suddenly required before the city’s imposed deadline of January 31, 2013. The originally requested equity amount had been raised but the new, last minute NHL demand was a deal killer. Why the sudden and unexpected requirement of more purchase equity? One would have to ask the NHL officers and they are not talking.

Now, let’s look at the IceArizona deal. Since it was the successful bid and of recent vintage, many of the deal points are already familiar to you. The IceArizona citations used are from the Professional Management Services and Arena Lease Agreement of June 28, 2013. The council approved the agreement on August 5, 2013.

  • The agreement is subject to an early termination right after 5 years (page 3, Arena Lease Agreement, Section 1. Statement of Intent. 1.1.1.)
  • Revenues to be received by the city include surcharge of $3 on qualified hockey tickets; a $5 surcharge on non-hockey qualified tickets; and a supplemental surcharge of $1.50 on every qualified ticket; parking revenues of $10 per vehicle for hockey events and $11.33 per vehicle for non-hockey events less $20,000.00 per event to the team owner; 20% of the sale of naming rights (page 4. Section 1. Statement of Intent. 1.1.5. a through j).
  • Arena Management Withdrawal grants the right of agreement default if there is an arena manager dissolution, bankruptcy or insolvency (page 7, Definitions. 1.2. a through e).
  • Definition of qualified ticket with a distribution limit of 1,000 per event (page 16. Section 1.)
  • Annual rent is in years 1 to 5, $500,000; years 6 to 12, $650,000; years 13 to 15, $800,000 (page 25. Section 6. Leasehold Interest. 6.6.1 to 6.6.3)
  • Penalty of $150,000 per hockey game less than the 40 games per year. There is no penalty for non-hockey events or any minimum of non-hockey events required (page 31. Section 8. Arena Management. 8.3. Event Requirements. 8.3.1. b and c).
  • Qualified hockey ticket surcharge based on attendance of less than 15,000 is $3 per ticket; 15,000 to 15,999 is $3.25 per ticket; 16,000 to 17,000 is $3.50 per ticket; more than 17,000 is $3.75. All non hockey events will be $3 per ticket regardless of attendance figures (page 49. Section 9. Charges and Fees. 9.1.2 a and b).
  • Supplemental ticket surcharge of $1.50 per qualified ticket imposed (page 49. Section 9. Charges and Fees. 9.1.3).
  • City receives 20% of arena naming rights (page 35. Section 8. Arena Management. 8.6.4.b.ii).

Is this a perfect deal? Of course not but it is one that is far more difficult to support. I cannot speak as to whether there was a spirit of compromise as I was not directly involved with the prospective team purchasers. There appeared to be “back room” negotiating amongst councilmembers in the search for the elusive 4th vote.  

Obviously there was no compromise on the annual management fee of $15M. There couldn’t be compromise because the team purchase relied heavily on loans from the Fortress Group and the NHL rather than on raising a large amount of purchase equity. I find it ironic that the NHL killed the Jamison deal by requesting even greater purchase equity than he has already acquired and now it is stuck with granting an $80M loan to the new owners. The $15M that the city pays for arena management is passed through by the team owners as interest payments on their loans. They quite simply must have that $15M for interest payments.

On the face of it the IceArizona deal speaks to a long-term commitment but that is not necessarily the case. There is an opt out clause after 5 years and that is extremely disturbing. It has been highly publicized that the opt-out trigger is losses aggregately of $50 million. Anyone who is under the assumption that the team owners will not suffer loss is dreaming. Business 101 classes teach that any new business venture can routinely expect losses in the first 2 to 3 years. The question becomes how much will the owners lose and how quickly will it reach the target of $50 million? Even though the city has and will exercise its right to audit at the end of every fiscal year that information will not be publicly available. P&L statements are usually proprietary. The public will not know until if and when the team owners choose to exercise their opt-out provision.

 The city could go through another exercise of crafting an agreement with another new owner but more likely, the team would be sold or relocated. There is also an Arena Manager Withdrawal clause that provides a default opportunity for sale or relocation.

Keep in mind in BOTH deals there are very few new revenue streams to the city. The city had been, in years previous, collecting all sales tax generated within and outside the arena. That is not new money. It also had been collecting a ticket surcharge on all events. That is not new money. These revenues were already going into the city’s General Fund and specifically used to pay the arena construction debt. In the IceArizona deal the revenues flow to the General Fund as well but there is no specific dedication of those revenues to fulfill the city’s arena debt obligations and may be used for any purpose.

In the Jamison deal the only new money was 15% of the revenue from naming rights. In the IceArizona deal the only new money is 20% of naming rights, the supplemental ticket surcharge and parking revenue. None of these revenues are predicted by the city’s Executive Finance Director as being substantial enough to recompense the annual $15M management fee.

In my judgment the better deal was the Jamison deal. He offered a long-term commitment to stay in Glendale with no opt out clause and an opportunity to buy the arena in the first five years. It would have relieved the city of the financial obligations of the arena. Not so with the IceArizona contract. While their advertising states, “Here to stay” there is always that pesky 5 year opt out clause lurking.

Because of the Jamison group’s purchase equity position there was flexibility in pegging the annual management fee to accommodate the city’s needs at the time. Make no mistake. Each deal placed a tremendous annual financial burden upon the city. Coupled with the Jamison deal staff recommended city expense reductions and instituted other strategies such as restructuring city debt that would have offset that burden.  With the IceArizona deal there is too much reliance upon promised revenues that may or may not be realized.  With so little owner equity, their reliance upon large loans and the 5 year opt out clause I wouldn’t take a bet about their future. Would you?

 I am sure that in expressing my POV on the two deals I will raise a great deal of protestation along with, “your facts are flawed” or “you have no faith” or “once again you have delivered an IceArizona hate piece.” There is no doubt that the subject is divisive and highly polarizing. Please remember that my conclusions are based upon publicly available information. It is my best attempt to share my reasoning regarding the many questions received. My initial vote to accept the Jamison deal while still on council resulted in leaving the door open for consideration of other bids resulting in IceArizona’s success. I have never been anti-Coyotes. I have always been pro-Glendale. My prism has always been the best interests of Glendale. It is fair to question whether accepting the IceArizona deal the best choice for Glendale. You decide.

© Joyce Clark, 2014

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I have watched nearly every Coyotes game this season. The St. Louis Blues game on March 2, 2014 was positively painful as the team disintegrated in the third period and blew a lead. Does that suddenly make me an expert? Gosh, far, far from it. Yet even the most uneducated fan recognizes the team’s lack of consistency from game to game. In one game they are brilliant. In the next it’s as if they don’t know each other. What seems to be happening now is more than a lack of consistency. It’s as if a malaise has settled over the team destroying its chemistry.

Everyone has assumed since 2009 that stable ownership would offer certainty to the players and would remove the team’s collective anxiety causing them to play with more confidence. Yet in 2012 while under the ownership of the League’s front office and with no ownership surety the team made the play offs and won the divisional title. Is throwing money at the problem the solution? Don Maloney and Dave Tippett operated on a shoe string that year and pulled it off. They had no choice. They were magicians.

In the face of disappointing team play this year, the year of stable ownership, ffn the face of disappointing team play nce. Yetary 28, 2014 game against the Colorado Avalanched acquire new ones. hat was it wian chirping has begun – but in a subdued fashion as no one wants to anger or alienate the new owners. The collective fan solution seems to be to get rid of some players and acquire new ones. Candidates identified after the February 28, 2014 loss to the Colorado Avalanche are Schlemko, Stone, Riberio and Smith. The team’s core has remained intact throughout the years of uncertain ownership drama  – Doan, Hanzel,Virbrata, Bissonette, and Yandle, to name a few. Instead of removing and replacing players the real question is, what has happened mentally and collectively to this core? There is evident frustration and anger. Witness some of Doan’s public remarks about the team’s abysmal play. One would think it has spilled over into the locker room – oh, to be a fly on THAT wall.

It’s too late to right the ship this year. Maloney and Tippett have to identify the mental poison and apply the antidote. That takes time. Unfortunately this year’s poor showing will affect the bleeding bottom line of the owners and of the City of Glendale. How long can either entity sustain the financial loss? In the case of the owners they would have you believe it’s not a problem for them but it most certainly is for Glendale. Glendale entered into the ownership deal relying upon the new owners’ promise to partially reimburse (the estimate was $9 million) the city for the management fee of $15 million a year through “enhanced revenues.” All estimates are that this figure will not be met – not even close to it.

On a different note: The owners just hosted Jewish Heritage Night. Great. I would expect to see Christian, Muslim and Buddhist Heritage Nights as well. If there is no recognition of other faiths, don’t we call that discrimination in this country?

© Joyce Clark, 2014

FAIR USE NOTICE

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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

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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.

          

Caitlin McGlade has an article in the January 25, 2014 edition of the Arizona Republic. The information she provided is old news – stale. Must be a slow news day and therefore a good day to bash Glendale again. I would imagine Coyotes fans are in a dither while Glendale’s citizens are just shaking their heads. There is no need to become hysterical – just yet.

The information used has been up on the Glendale website for quite some time and the numbers have not changed. Do not expect to see any new numbers until after January 31, 2014 when the December 2013 Arena Monthly Report and the first quarterly (Oct-Nov-Dec 2013) parking revenue numbers will be posted. Here are the numbers as they are presented on the city’s website today:   

  Fund ID     Amount  
Arena Event Operations

$247,457.06

Arena Special Revenue

$1,947,103.03

   
Account

Amount

Arena Annual   Rent

$326,712.33

Arena Base Team   Fees

$48,681.51

Arena Naming   Right Revenue

$60,000.00

Arena Parking   Fees

$18,835.49

Arena Parking   Rev-Hockey Games

$309,898.94

Arena Parking   Rev-NonHockey

$91,719.49

Arena Ticket   Surchg-Hockey

$896,393.39

Arena Ticket   Surchg-NonHockey

$194,861.88

No where could I find what the city has spent to date in capital improvements to the arena. I am sure the numbers are there — somewhere. It may be labeled as Arena Event Operations although that may be the costs of providing public safety or it could be the first quarterly payment of the capital improvement bill. It’s hard to tell.

The picture as it stands today is incomplete and no one will have a good idea of revenues and expenses until after the end of the current Fiscal Year, June 30, 2014. If the current trend holds it will not be a pretty picture for Glendale’s financial health.

Glendale must pay IceArizona $15 million dollars a year for arena management. It is smoke and mirrors. IceArizona has assigned its entire rights over to Fortress Lending and the National Hockey League and that $15M is the payment on the interest on the loans it has with both entities. IceArizona has become a “pass through” for the $15M. In this current Fiscal Year the council budgeted $6 million toward the arena management fee. The remaining $9 million to cover the management fee is to come from “enhanced revenues” produced by IceArizona. As you can see it doesn’t appear that IceArizona will produce the much needed $9 million. What about the supplemental ticket surcharge of $1.50? It appears that it will come in under $1 million for the Fiscal Year.

Under a generous scenario it looks like this:

  •      $15 million to be paid each year to IceArizona for management of arena
  •    -$  6 million in city budget to pay management fee  
  •      $ 9 million not in city budget to pay management fee
  •     -$ 4 million received from IceArizona as “enhanced revenue” (approx. estimate)
  •     -$ 1 million received from IceArizona from supplemental ticket surcharge (approx. estimate)
  •     $  4 million shortage of revenues not covered by city budget or receipt of revenues from IceArizona (approx. estimate)

These figures are estimates and we will have to wait until the final numbers are available. The estimated $4M shortage could end up being lower or higher. Where will the payment of the shortage come from? There is only one place – the city’s Contingency Fund (rainy day fund). No wonder there will be little to no money in Contingency this Fiscal Year (the year end estimate is approx. $800,000).

Two other financial debts associated with the arena are the construction bond payments of approx. $12 million a year and the obligation of the city to pay for capital improvements to the arena. This year it is a million dollars and in the next few following years it is half a million. Then it cycles up to a million followed by another couple of years at half a million. 

Immediately some will point to Camelback Ranch as the 800lb. gorilla and it is. Keep in mind that the city does not have to pay annual operating and maintenance costs for the facility. They are paid by the two teams: the Dodgers and White Sox. What the city does pay in the construction bond debt annually and that too, is a substantial payment of approximately $13 million. The sales tax generated which is very small in the scheme of things does go toward the bond debt. The only light at the end of this tunnel is that in the future, way in the future, the Arizona Sports and Tourism Authority (AZSTA) has an obligation to reimburse Glendale for approximately 70% of the cost of constructing the facility.  In the meantime, it is another debt that Glendale can ill afford right now.

So, everyone take a deep breath, relax and wait until we have a complete picture of the numbers at the end of the Fiscal Year. 

There is a new poll to the left of this column asking if you believe that Glendale can straighten out its fiscal mess. To the upper right of this column you can sign up with your email address to subscribe to notifications of my upcoming blog post. Check them out!

© 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.