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
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