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SBJ/September 30 - October 6, 2002/This Weeks Issue
Phoenix suburb pins growth on sports
Published September 30, 2002
What's the dateline worth on a story involving a major league hockey or football team? Glendale, Ariz., a heretofore obscure suburban burg abutting Phoenix on the northwest, thinks it's getting a bargain by committing $228 million in public support for such attention.
That is what the city or its agencies will lay out to be the site of new homes for the Phoenix Coyotes and Arizona Cardinals.
Glendale's rationale for laying out the money runs counter to a sizable body of evidence that casts a fishy eye on the value of sports as an economic engine.
"It's not a sports deal, it's the creation of a destination draw," insisted Jim Colson, Glendale's director of economic development. "If we were some blighted urban area, the arguments against using public money for sports construction might be valid, but we're not close to being that. We're a fast-growing part of a fast-growing corridor, so it'll work for us."
While it will be some time before the returns are in on the Glendale projects, it's already certain that they weren't obtained without considerable wear and tear on its region's municipal fabric. The Cardinals' deal capped a bruising, two-year struggle between area communities that ended in late August, only weeks before a state-imposed deadline that might have forced the team to look elsewhere for a home.
The stadium was first ticketed for a site in Tempe, whose Sun Devil Stadium is the Cardinals' current base. Almost incredibly, the Federal Aviation Administration waited until just before construction was to begin last year to decide that the edifice would be a hazard to flights at Sky Harbor Airport in Phoenix, and the project found itself back on square one.
The battle to supplant Tempe pitted community against community.
Glendale, a late entry into the fray, prevailed in part because it had its political ducks in a row. That was because of a broad bonding authorization its voters had OK'd a few years previously, and what the local newspaper, the Glendale Star, called the "go ahead and get it done" mind-set of the city's leadership. Said Glendale Mayor Elaine Scruggs: "The Cardinals never really had a chance of going anywhere but Glendale. They just never knew it."
The Coyotes did have a chance of going elsewhere. In fact, they were supposed to.
In 1999, voters in Scottsdale, a tony eastern suburb of Phoenix, twice approved the underpinnings of about $100 million in public financing for a hockey stadium as part of a larger, entertainment-centered project that real estate developer Steve Ellman touted as a revitalization blueprint for a derelict shopping center he owned there.
But when the negotiations over specifics began, things began to come apart. Popular parts of the plan were jettisoned, and deadlines passed unmet as Ellman turned his focus to buying the Coyotes.
Then, in July 2001, the team finally in his hands, Ellman suddenly announced he was abandoning Scottsdale for a better deal with Glendale, which had quietly offered to put up the arena's full $180 million construction cost. Glendale also offered to exempt the team from local property taxes and let it keep all the hockey revenue from the building, plus most from other events there. In return, Ellman said he'd erect an adjacent, multiuse (and tax-generating) "urban village" on the 233-acre site, a much-larger project than he'd pledged for Scottsdale.
Scottsdale officials were taken aback by the end run, a feeling that was exacerbated by the fact that Ellman had leveled his old shopping center's buildings but left the rubble in piles while talks with Scottsdale sputtered along. After the negotiations broke down, the city had to threaten legal action to get the rubbish removed.
Scottsdale's mayor, Mary Manross, maintains that she harbors no ill will toward Glendale. "That's business," she said.
The $350 million construction price tag on the Cardinals' stadium is almost twice as large as the one for the Coyotes' home, but Glendale sees the hockey deal as the more important of the two. That's because the football stadium (for which the local share will be $48 million in facility-district revenue bonds) will be surrounded by parking lots and park land, while the hockey facility is to be the focus of Ellman's commercial development and, it hopes, others that will follow.
Thomas Hocking, Glendale's Phoenix-based financial consultant, says he's well aware of studies that downplay sports developments as community boons, but insists that Glendale's situation is "significantly different" from others of its sort.
"The stadiums will bring in construction and staffing jobs, and generate sales tax revenues, and that's good. But it's not what we're in it for," he said.
"With Glendale's growth pattern and the people the stadiums will attract from outside, we'll create the critical mass needed for diverse and important business growth. There's no downside to it as far as I can see.
"The kind of publicity that goes with big-league sports status will be a big factor in this. Not many cities our size [Glendale's population is about 225,000 people] have a major league team. We'll have two."
Others, however, see possible difficulties. While Ellman and Glendale officials have talked about having 6 million square feet of commercial space rise around the Coyotes' arena — a truly massive project — all the developer has contracted to build are l.6 million square feet: 800,000 within six months of the stadium's targeted December 2003 completion date, and 800,000 more within 72 months of that. That means the initial phases might not be completed until mid-2010.
The earliest buildings are supposed to be heavy with restaurants, specialty retail stores and movie theaters. Such enterprises might not relish the prospect of their customers sharing the roads and parking lots with the hockey crowd 40 to 50 nights a year, or battling the ongoing construction activity that's planned for the site. The reluctance of those kinds of businesses to line up for tenancy was cited as one reason Ellman's Scottsdale plan crumbled.
Further, Ellman's here today-gone tomorrow performance in Scottsdale has given some in Glendale pause. "I'd have to be an idiot to say it didn't cause concern, but I've read the contracts and think we've done everything we can to protect ourselves," said Glendale City Councilman Phil Lieberman.
Glendale will raise $30 million of the hockey arena's cost through general obligation bonds, with the remaining $150 million to come from bonds backed by taxes from the adjacent commercial properties. Lieberman said bond repayments will be heaviest when those taxes kick in, so "if the agreed-upon projects go through as they're supposed to, the city should at least break even."
Beyond that, though, he won't venture. "We might not get the whole [6 million-square-foot project] for 30 years, and maybe not ever," he said. "A lot of things can change in that time."
Frederick C. Klein is a writer in Arizona.