Letting the Diamondbacks Slide

Stadium district anted $1 million that the team was supposed to pay up-front

Missing documents.
Misappropriation of funds.
Spin control.

All of these things, and more, are swirling around the Maricopa County Stadium District--an offshoot of county government entrusted with overseeing the spending of $253 million of taxpayer money on a stadium for the Arizona Diamondbacks.

The problems at the district surfaced briefly last week in two front-page stories in daily newspapers--stories that were leaked by county employees after New Times had obtained documents indicating a litany of problems at the district.

The stories come on the heels of the stadium district's hurried approval of a series of complex agreements that essentially give the Diamondbacks control of stadium revenue.

The articles in the Arizona Republic/Phoenix Gazette stated that the stadium district had improperly borrowed nearly $1 million from the fund set aside specifically for the Cactus League and used it for expenses related to construction of Bank One Ballpark.

The transfers appear to be illegal, because the statute creating the stadium district requires all funds raised by a $2.50 per vehicle rental-car tax to be spent strictly on Cactus League items. The news accounts portrayed the transfers as technical problems that had been corrected.

The stadium district knew it was operating on friendly ground when its spin doctors fed the story to the Republic and Gazette on March 22--after all, the newspapers have at least a $5 million ownership share in the Diamondbacks.

Not surprisingly, the R&G ignored the most crucial element in the scandal: that $1 million, taken from the Cactus League fund to cover legal and other expenses related to the stadium, was supposed to have been paid up-front by the Arizona Diamondbacks.

The Cactus League fund never would have been raided if the Diamondbacks had advanced enough money to the stadium district, as the team promised to do.

The team's failure to pay all of the up-front expenses strikes at the heart of the county's relationship with the Diamondbacks. The project got off the ground only after Diamondbacks' managing partner Jerry Colangelo promised, in 1993, to prepay all development expenses.

The Diamondbacks agreed to cover the district's initial expenses from the time negotiations started in 1993 until money from a quarter-cent sales tax became available in May 1995. The Diamondbacks were then to be reimbursed for outlays from the tax proceeds.

But sometime in late 1994 and early 1995, that pledge broke down. It is unknown whether the stadium district simply stopped asking Colangelo for money to cover expenses or if the team refused to provide it.

But what is certain is that those expenses were to be initially paid by the team.

In 1993, Colangelo dispatched Phoenix attorney Mike Rushman to the Maricopa County Attorney's Office to present Colangelo's fast-track plan to bring major-league baseball to Phoenix.

Joe Duke, chief of the county attorney's civil division, listened to the plan, which would send a team of county lawyers into overdrive to quickly develop a complex and expensive series of contracts.

Duke immediately threw a wrench into the plan.
"I said, 'Mike, this is very interesting, but I've got to tell you, we can't afford to talk to you,'" Duke recalls.

Duke says he told Rushman that the only way the county could negotiate with Colangelo's team of attorneys from the Phoenix powerhouse firm of Gallagher & Kennedy was for Colangelo to pay the county's up-front costs.

"That was the quid pro quo for us being able to negotiate on Jerry Colangelo's timetable," Duke says.

Colangelo agreed, and put up $250,000 for legal and administrative expenses at the Maricopa County Stadium District on November 24, 1993. Colangelo pumped in $500,000 more in February 1994 after the Maricopa County Board of Supervisors voted 3 to 1 to impose a quarter-cent sales tax to raise $238 million for the downtown baseball stadium.

But the $750,000 wasn't enough. The baseball team kicked in another $250,000, stadium district records show.

That still wasn't enough.
In fact, the district ran up nearly another $1 million in expenses in early 1995 during the frantic weeks that led up to Major League Baseball awarding a baseball franchise to Colangelo's partnership in March 1995.

But instead of the team covering the bills, the bills were paid for by the Cactus League fund.

Most of money was spent on stadium district legal fees. The Phoenix law firm of Snell & Wilmer topped the list at $395,169, followed by $156,877 to reimburse the Maricopa County Attorney's Office and $158,468 to the law firm of Mariscal, Weeks, McIntyre & Friedlander.

Former stadium district director Eric Anderson and the current director, Robert Williams, both say they didn't know there was a problem until it was discovered by an accountant last summer. Although the district is collecting $7 million a month in sales-tax receipts earmarked for the stadium, plus millions more from rental-car taxes for the Cactus League, it didn't have a full-time accountant until June 1995.

Barbara Smith, a certified public accountant, says it took her several weeks to sort out the paperwork mess left behind by former stadium district director Anderson. Once Smith completed her review, Williams quietly repaid the Cactus League fund account on October 13, 1995--from funds collected by the quarter-cent sales tax.

One senior county official says Williams should have required the baseball team to repay the Cactus League accounts and let Colangelo seek reimbursement from the sales-tax fund controlled by the stadium district.

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