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 this 3-part series of blogs I examine the Coyotes’ response to the city of Tempe’s Request for Proposal (RFP) in their effort to secure a permanent playing site in the East Valley.

On September 20, 2021, Pauline Pineda authored an exclusive look at the Coyote’s proposal. Here is the link:  https://www.azcentral.com/story/news/local/tempe/2021/09/20/arizona-coyotes-reveal-proposal-for-new-arena-entertainment-district-tempe/8376362002/ .

Let’s begin with the first fact. Ms. Pineda states the site is “46 acres on the south bank of the Salt River that previously were used as a sand and gravel mining operation and a dump.” In comparison, Glendale’s Westgate Sports and Entertainment district is a 223-acre site. The Coyotes’ proposed site is roughly 20% or 1/5 the size of Westgate.

The second fact is their proposal in Phase I calls for, “300,000 square feet of commercial space, 320,000 square feet of office space, 1,600 residential units and two hotels.” It includes a 16,000-seat arena, a 1,500-seat theater, a commercial district, a 200-room boutique hotel, offices, and a 12-story apartment complex of 180 units. Their Phase II includes more than 1,500 apartment units in three apartment complexes 12 stories tall, a convention-style hotel with 300 rooms and additional retail and office space.

By way of comparison, Westgate currently has 8,000,000 square feet of mixed-use development that includes shopping, dining, entertainment, high-end condominiums, parks, and office space. Westgate has 5 hotels, convention space, 35 restaurants, and 3 apartment complexes. It has something else that cannot be replicated on the Coyotes’ proposed site…Tanger Outlets with nearly 80 retail shops. Their proposal sounds an awful lot like a mini-Westgate. No matter how much they try to stuff into those 46 acres, it will not generate the magnitude of sales tax generated by Westgate.

Here’s another fact to consider. There is a basketball arena that has just broken ground in Inglewood, California. It is where Steve Ballmer’s NBA Clippers will play beginning in 2024-25. It’s called the Intuit Dome and is expected to cost $1.8 billion to construct and you can be sure there will be cost overruns. To sweeten the deal, Mr. Ballmer will be donating $100 million to the city of Inglewood, funding job training, worker outreach, educational programs, and a rehabilitation of the Inglewood community center and library. It appears to be a project that Ballmer can easily afford (even with donations and cost overruns) as his net worth is pegged at $101 billion.

No one can guess at how successful Muerelo will be in obtaining additional investors. Keep in mind his net worth is reported to be $2 billion. It is certainly possible that he could end up using half of his net worth to develop his project. By way of contrast Bullmer can easily afford a $2 billion price tag to build new digs for his team and still have lots and lots of money left over. Bullmer is using his own money and Muerelo is relying on investor funding and sales tax to cover his proposed project.

 Fact number 3 looks at the proposed financial mechanisms for financing the project. What are the estimated costs for the Coyotes’ proposed project and how do they plan to pay for it? They are “proposing a $1.7 billion development in Tempe with a hockey arena, hotels, apartments and shops that the team says would be financed by private investors, although it wants to use a portion of city sales tax revenues generated on the site to help pay for $200 million in additional costs.”

They are asking Tempe to establish a “Community Facilities District, that would sell special assessment revenue bonds to raise $120 million for the east parcel and $80 million for the west parcel.  The bonds would be issued in phases to pay for projects as they get underway.”

“The proposal would repay the bonds over 30 years from three revenue sources:

  • A portion of the city sales taxes generated on the site and parking revenue. Tempe’s sales tax rate is 1.8%, with 0.6% designated for specific priorities such as art and transportation. The proposal is to use all but the designated sales tax funds generated on the site (1.2% of Tempe’s sales tax).
  • Up to a 6% surcharge on retail sales, including ticket, merchandise, and concession sales at the arena.
  • Real estate tax assessments on the property.                                                                                                                                                                                                                                                 The team did not say how much each source would contribute to the bond repayment but said sales taxes would make up the bulk of the pot.”

Note that one of the repayment mechanisms proposed to pay off the 30-year bonds is real estate tax assessments on the property. Yet the Coyotes also seek a property tax abatement by transferring ownership of the land to Tempe and then leasing the land back for a fee through the use of a GPLET (Government Property Excise Lease Tax). The non-arena portions of the project such as the retail, office and apartments could have up to 8 years of property tax exemption. The arena and practice facility are allowed to have a longer tax exemption which is subject to negotiation. In essence, the real estate tax assessments would be negligible for a period of years.

No one knows what will be Tempe taxpayers’ appetite for using sales tax generated on the site.  After all, Tempe taxpayers will want whatever development that occurs on the site to generate sales tax to be used in their best interest not to help pay for yet another sports complex in the Valley. In today’s economy with inflation soaring, the very mention of using sales tax to help pay for a sports complex will not be an easy sell.

In part II of my blog we’ll take a look at how the Federal Aviation Administration may affect this proposed development.

© Joyce Clark, 2021       


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