By Cecilia Chan
Glendale may never see any payments from the Arizona Sports and Tourism Authority for building Camelback Ranch, for which the city still owes $189.9 million.
The city is owed about $70 million with interest by the tax-funded entity with payments scheduled to begin in 2021, pushed back from the original 2017 start date. Camelback Ranch is the spring training home of the Chicago White Sox and Los Angeles Dodgers.
AZSTA, however, sunsets in 2031 and the funding may go away before the city is reimbursed, City Attorney Michael Bailey told the City Council during a June 20 workshop. He added the 2021 date was not a guarantee. AZSTA in 2007 committed 66.7 percent or $60 million toward the ballpark.
The presentation, requested by the council, looked at the agreements and the city’s debt on the baseball facility. The city partnered with AZSTA, the baseball teams and Rightpath Limited to build the stadium, which opened in 2009. All but Councilwoman Joyce Clark were not in office at the time the deals were made to build the stadium.
The project cost was $153 million. The teams kicked in about $11 million, which went for things such as the field, the Dodger’s clubhouse and broadcast cabling. The city financed $199 million, including AZSTA’s contribution, for the project.
With debt service and operation cost of the stadium, the city expects a $11.9 million loss in 2018 and a total of $64 million in a five-year forecast, according to Mr. Bailey.
He noted Rightpath, which was responsible for up to 5 million square feet of commercial and residential development known as Main Street on and around the stadium, never materialized. That meant, no sales tax or a portion of the development sales from the developer came to Glendale.
The city gave land, valued at $7 million at the time, to the developer as collateral for a loan but did not secure its interest and when nothing was built, the city lost that interest, Mr. Bailey said.
Rightpath filed bankruptcy in 2012 and no longer exists.
Vice Mayor Ian Hugh asked if there were guarantees in place to ensure the mixed-used development would be built.
Mr. Bailey said there was no evidence of such a guarantee.
Councilwoman Lauren Tomalchoff asked if staff went back to make sure all four agreements surrounding Camelback Ranch were voted in public by council.
Mr. Bailey said nothing was done illegally and back then agreements were brought to the council in a substantial format, voted on, and later signed later with some changes.
Ms. Tomalchoff asked if the changes were substantial.
“Yes, in some cases,” Mr. Bailey said, adding that practice no longer occurs.
“I know that now, but it’s a little late in the game,” Ms. Tolmachoff said, adding she had trouble wrapping her mind around what was capital improvement verses maintenance.
Under an agreement, the teams are responsible for maintenance of the ballpark while the city is responsible for capital projects such as a new score board it recently approved for the facility.
Mr. Bailey said staff was working on those definitions and that information would be brought back later to the council.
Councilman Bart Turner asked if a pending appeal of a lawsuit could affect AZSTA funding and therefore the city’s chances of recovering any money.
A Maricopa County Superior Court judge in 2014 ruled AZSTA’s collections of rental-car tax, a key funding mechanism, to be unconstitutional and was ordered to refund millions of dollars.
Mr. Bailey said there are lots of open-ended questions but yes it could affect the city.
Mr. Turner questioned the agreement with Phoenix. The city built the stadium on Phoenix land. Under the agreement, Phoenix is to give 80 percent of the general sales tax revenue generated on the site each year to Glendale, capped at $37 million.
Mr. Turner cited a study that showed having the two teams play at the ballpark would result in a $14.9 million direct economic impact to the region a year.
However, when the city’s 2.9 percent tax rate is extrapolate from all that economic impact, it amounts to $432,000 a year and the city only gets 80 percent of that, according to Mr. Turner.
“We only get 80 percent,” he said. “It looks like the math did not work well from the beginning in this in terms of payback.”
Mr. Bailey noted times were different back then before the Great Recession hit.
“To your point where the numbers may seem inflated, I believe yes they probably were but they weren’t out of context as to what people were experiencing in regards to the market at the time,” he said.
Regardless, the math still does not work, Mr. Turner said.
“The presentation of the proposal to the council seemed to miss some connection between the economic activity generated versus what actually would end up being the taxpayers’ portion of that, which would have to be applied back to all the debt the city took on to pay off the facility, which was supposed to be the economic engine,” he said.
He said because the financing was done through bonding, were there not bonding attorneys or agents that “should not have done the math like this?”
Mr. Bailey said staff would need to look into that if directed to do so. Again, he noted that it was different times back then.
Councilman Ray Malnar asked if the city has refinanced any of the facility’s bonds.
Assistant City Manager Tom Duensing said almost $70 million of the $200 million are currently being refinanced. He was not sure of the savings and added it would be several years before the remaining bonds are eligible for refinancing.
Glendale is not the only Valley city facing this problem. AZSTA, which funds the building and renovation of Cactus League Spring Training facilities in Maricopa County, also owes money to Scottsdale, Tempe and Goodyear
.In late June the Glendale City Council approved $836,000 for capital repairs at Camelback Ranch, Glendale’s spring training home of the Los Angeles Dodgers and Chicago White Sox.
The authorization reimburses Camelback Spring Training, the operators of the city’s ballpark.
The item drew ire from resident Bill Demski, who called the payout “corporate welfare” at the June 27 meeting. He also complained about the city’s previously approved payment of $1 million to replace a failing facility scoreboard.
Mr. Demski said the spending comes at the expense of services to residents.
“The end result is the last time anyone in my neighborhood saw a loose-trash sweeper was two years ago,” he said, adding the teams should pay for the facility. “Just vote ‘no.’ We’ve paid our share.”
Public Works Director Jack Friedline told the council it was in the city’s best interest to maintain the level of use at the facility.
“It’s our asset,” he said.
Councilman Bart Turner noted Glendale is contractually obligated to invest in capital-type projects at the ballpark under a 2007 facility-use agreement.
“It wasn’t us, not most of us anyways,” he said, regarding who voted for the contract. “We are trying to mitigate the outlay of money.”
The facility-use agreement was approved by a prior council. The only sitting council member who was on the council that approved the agreement is Councilwoman Joyce Clark, who supported the stadium.
The items reimbursed in the $836,000 payment include:
• Emergency capital repairs such as mechanical, electrical and plumbing at $100,000
• Walking through metal detectors at $75,000
• Emergency lights and battery units at $61,500
• Irrigation equipment replacement at $19,000
• Tarps at $12,000