By Ray Stern
By New Times
By Amy Silverman
By Stephen Lemons
By Stephen Lemons
By Monica Alonzo
By Chris Parker
By New Times
THE CITY OF SCOTTSDALE AND WOULD-BE BUILDERS OF the $1 billion Los Arcos redevelopment project are suppressing crucial financial information related to the proposed 18,000-seat hockey arena and adjacent commercial development.
Voters in Scottsdale, Fountain Hills and Guadalupe will decide on November 2 whether to invest about $352 million in taxes in a project that is expected to generate as much as $32 billion and hundreds of millions of dollars in private-sector profits over the next 30 years.
A $185 million hockey arena would be the centerpiece of the proposed project, which also would include movie theaters, restaurants, retail space, a grocery store, a home-improvement center and a massive, 8,000-space parking garage. The complex would be built at the site now occupied by 30-year-old Los Arcos Mall on the southeast corner of Scottsdale and McDowell roads.
The overall project is expected to cost about $535 million to build, plus another $500 million in finance charges over 30 years.
Taxpayer exposure has not yet been determined. Developers would employ a complex funding mechanism that reduces their debt while increasing taxpayers' contribution. Developers say taxpayers may contribute between $352 million and $390 million toward the project over 30 years.
By comparison, Bank One Ballpark cost $365 million to construct. Taxpayers contributed $238 million to the project through a quarter-cent sales tax that has expired. The Arizona Diamondbacks are paying for the balance.
The City of Scottsdale, the Los Arcos Multipurpose Facilities District, the Phoenix Coyotes and the developer of the project, the Ellman Companies, are withholding key data that should be available for public review, including:
A report on projected arena revenue and expenses by the national accounting firm KPMG. The report was prepared for the Coyotes and, according to Coyotes president Shawn Hunter, a copy was given to the city. Scottsdale officials claim the report is not in their files.
An analysis of the KPMG report prepared by a consultant hired by Scottsdale. The consultant concluded KPMG significantly understated the project's revenue projections. The city and Facilities District claim they never received the report.
The fact that developers would be granted a property-tax abatement worth about $120 million during the first 10 years of the project. (See accompanying story.)
The Coyotes' audited financial statements.
The Ellman Companies' profit projections.
The lack of information presented to voters has already spawned a lawsuit against the city and the Facilities District -- the public body that would own the arena and collect taxes for the project.
Opponents of the redevelopment project last week sued the city and the district, alleging they failed to tell voters that Scottsdale must match the funds the Facilities District plans to raise by keeping one-half of the state sales taxes generated at the development for 10 years. Developers say the sales tax would generate $97.5 million.
Scottsdale plans to pay its share by giving developers the city's 1 percent sales tax and 0.2 percent transportation tax generated at the development for the next 30 years. The city would also reinvest nearly $16 million in property taxes collected from the development and $30 million in fees collected from developers.
Maricopa County Superior Court Judge Barry Schneider will hear arguments in the case on October 28.
The city and the Facilities District have refused New Times' public records requests to provide copies of the KPMG report and the subsequent analysis of that report by the city's private consultant.
The two reports could provide details on how much money the private interests expect to make from the project. The sketchy information that has been released indicates developers stand to reap a fortune.
Phoenix-based Ellman Companies projects that the arena and surrounding development will generate anywhere from $16 billion to $32 billion in sales over 30 years, depending on the economy.
The company refuses to state how much profit it and its partner, the Phoenix Coyotes, expect to pocket.
However, if private investors net even a slim 5 percent return on total sales, profits would range between $800 million and $1.6 billion over 30 years -- or about $26 million to $50 million a year.
Meanwhile, under the financing plan being promoted by developers and Scottsdale officials, taxpayers would be required to sink more than $352 million into the project over its life.
Furthermore, as the election approaches, Scottsdale taxpayers have no guarantee of benefiting from any of the lucrative revenue streams that will be created by the project, beyond the $30 million contribution from developers spread out over the first 10 years. That $30 million, however, would be spent on the project.
Unlike other major arena and stadium projects negotiated in recent years in the Valley, including Bank One Ballpark, Scottsdale has not yet hammered out the framework for a development agreement with the Coyotes and Ellman Companies.
Arena development agreements typically address such crucial provisions as who will pay for construction cost overruns and how revenue from such sources as arena naming rights and luxury suite proceeds will be divided between the public and private sectors.
Officials say the development agreement will be negotiated after the election -- a strategy that is drawing criticism from at least two Scottsdale City Council members, George Zraket and Cynthia Lukas.
"This is a decision for the voters to make, and I think they have the right to know all the information so they can make an informed and reasonable decision," says Zraket. "They don't have that information."