How City of Glendale Got In Over Its Head

In the past few years, Glendale has taken on 500 million dollars worth of debt with the construction of 1) Jobing.com, 2) the spring training center known as Camelback Ranch baseball park, 3) a Conference Center attached to the  hotel, 4) parking garage, and 5) a media center. These projects were undertaken when the economy was good and the idea was to get people into Glendale. Mayor Scruggs has stated as such.

Camelback Ranch is the home to the Chicago White Sox and LA Dodgers. It was to have been paid off in two parts. The first part is the Arizona Sports and Tourism Authority (AZSTA). The second was from the taxes collected on a resort and high end shopping center that was to be built next to Camelback Ranch.

About the AZ-STA

The AZ-STA was formed in November 2000 as a result of voter proposition 302. Voters in Maricopa County approved the measure when it was deemed the Cardinals needed their own stadium. Sun Devil Stadium did not have the NFL desired amenities such as luxury boxes, ability to sell naming rights, their own parking fees that do not have to be split with the college, and the Bidwell family not wanting to pay rent to ASU when they can get someone to build them a stadium. Plus having a roof and being in air conditioning is nice when it is 110 outside in September. The AZ-STA is responsible for:

• Owning and operating the University of Phoenix Stadium;
• Funding tourism promotion in Maricopa County;
• Funding the construction and renovation of Cactus League Spring Training facilities;
• Funding youth and amateur sports projects and programs.

The AZ-STA is funded in two ways. The first source is the collection of a tax of 1% on every time a hotel room is booked in Maricopa County. A 3.25% tax is placed upon renting a car. This forms the Tourism Revenue Clearing Account. The second funding arm for the AZ-STA is from events at the arena. NFL income tax, sales tax recapture (generated from the sale of  food, drink, and items at the arena), and facility event revenues (RV show, Cirque de Soleil in the parking lot).

The money collected from the AZ-STA is used to first pay off the principal (224 million dollars) plus interest and long term bonds (53 million dollars final maturity in 2036) that were sold to finance the construction of the arena. That is the first money out the door. Next comes 265.8 million dollars pledged to Maricopa County for tourism and marketing promotion. The third priority is 205 million dollars paid out over a 30 year period that is then to be used for the Cactus League General Fund. Of the Cactus League General Fund (CLGF), 32 million dollars goes toward bond debt service, a bond debt reserve fund was created, and the third distribution of dollars from the CLGF is funding renovation projects with a 50/50 split of the remaining dollars for Scottsdale and Tempe. That was the plan for AZ-STA.

About Camelback Ranch

Camelback Ranch was to include a high end resort and shopping center to accompany the Spring Training baseball stadium used by theWhite Sox and Dodgers. It would generate sales tax revenue from; the shopping sales tax, the hotel room bed tax, and the food and beverage tax from all the restaurants that would open in the shopping center. These, along with giving people a reason to stay in Glendale after the game ended, were used to sell the idea of paying for a stadium for two legacy baseball teams. Plus, the Camelback Ranch could be used for more than baseball as it doesn’t need to serve as just a baseball stadium. Imagine the mid-level events that could be held there that are too small for University of Phoenix stadium but don’t need the indoor venue Jobing.com offers.

So What Went Wrong?

• People are not renting cars in Maricopa County at the forecasted levels due to tourism being down for the past four years. This has reduced the car rental tax collection fund.
• People are not staying in hotels in Maricopa County at the forecasted levels due to tourism being down for the past four years. This has reduced the hotel bed tax collection fund.
• There have been less events at University of Phoenix stadium than desired, including mega-events such as the Fiesta Bowl. One Super Bowl and one BCS game were  held, more were needed. Food and beverage sales were lower than expected.
• The high end resort planned at Camelback Ranch was not built. The forecasted taxes to be collected from this resort never materialized.
• The shopping center planned at Camelback Ranch was not built. The forecasted taxes to be collected from the shopping center never materialized.

AZ-STA was forced to reduce the fees paid to the City of Glendale for Cactus league baseball due to not having the amount of money needed to meet it’s obligations. Principal and interest as well as bond holders for UofP stadium were first to get paid. Maricopa County tourism needed its funding to keep advertising to bring in tourists and conventions as anticipated. So, Glendale gets less money to reimburse for building Camelback Ranch, and Youth and Amateur Sports got less money than previously planned.

The City of Glendale budgeted it’s future based on projected revenue from Camelback Ranch. It is not getting the return on the investment. This is why the best course of action is to sell Jobing.com to Mr. Jamison and collect revenue from him to offset further losses. Then start asking the Dodgers (they just sold for 2 billion dollars, I’m sure there are a few million dollars laying around somewhere) and Mr. Reinsdorf of the White Sox to contribute. You have his number.