Lost Arcos

Officials suppress documents that say how much developers would profit from a hockey arena and commercial complex that's seeking at least $350 million in public subsidies

Lukas says the general terms of the development agreement should be completed prior to funding the project. She's concerned about the high cost of the project for taxpayers.

"I've been uncomfortable with the financing since day one," she says.

Based on statements made by Ellman Companies senior vice president Bob Kaufman, the public shouldn't expect to receive much of the billions in revenue the project is expected to generate.

Phoenix Coyotes owner Richard Burke has long sought a public subsidy for his hockey team.
Minneapolis Star Tribune
Phoenix Coyotes owner Richard Burke has long sought a public subsidy for his hockey team.
Ellman Companies vice president Bob Kaufman, center, won't reveal how much money his company will make off the deal.
Paolo Vescia
Ellman Companies vice president Bob Kaufman, center, won't reveal how much money his company will make off the deal.

"Let's figure out what the revenue streams are, let's figure out what the project needs," says Kaufman. "So at the end of the day, if there is money left over, then we can discuss how it's going to be split up."

The state law that allows for sales-tax recapture for sports facilities also contains a quirk that requires municipalities to team with other cities and towns to create the stadium district, even if those cities are not contiguous. Hence, Guadalupe. It could have been Ajo.

The Los Arcos Multipurpose Facilities District board is made up of two representatives each from Scottsdale, Fountain Hills and Guadalupe. But the Facilities District's day-to-day operations are controlled by Scottsdale's redevelopment department.

The Facilities District will eventually own the arena, but at what point is unclear. The district's primary task is to collect one-half of the sales-tax dollars generated by the project and turn the money over to developers.

Facilities District operations are being funded by a $500,000 contribution from private developers.

So far, the Facilities District and Scottsdale officials are following the developers' lead in designing a project financing plan. Little information has been released by the developers or the public bodies to date.

Los Arcos proponents are refusing to release a detailed financial report prepared this summer by national accounting firm KPMG that would shed light on how much money private investors could expect to make off the project. The KPMG report projects revenue and expenses that would be generated by the arena during the first five years.

The Coyotes say they won't release the report and Scottsdale officials claim they don't have it, even though Coyotes president Hunter says he gave the city a copy.

Perhaps more important, the city is refusing to release a detailed analysis of the KPMG report prepared by a private consultant the city hired in July.

Consultant Allen Flexer -- who is being paid $175 an hour, and has racked up 100 hours -- tells New Times he prepared his written critique of the KPMG study and presented that report, along with a four-page memo on managing the arena, to Gary Roe, who wears two hats -- he serves as Scottsdale's redevelopment director and as the Facilities District executive director.

Asked about Flexer's work, Roe said he had nothing in writing from Flexer.

"He hasn't given us any written reports, but he has given us verbal briefings," Roe said when New Times asked for copies of Flexer's reports.

Scottsdale officials later produced a copy of Flexer's management memo after New Times' attorney Dan Barr contacted the city and demanded production of Flexer's documents.

Scottsdale, however, still has not produced Flexer's critique of the KPMG study.

Scottsdale Mayor Sam Campana is out of the country and could not be reached for comment.

Flexer tells New Times he concluded that the KPMG analysis of arena operations understated revenue and overstated expenses that would be generated by the arena.

"I came up with significantly more revenue than they forecasted," Flexer says.

Flexer's company, Flexer Enterprises LLC, is based in Phoenix. Flexer says he started the concept of "public/private" partnerships for arenas in the early 1980s while serving as president of Philadelphia's Spectrum arena. Flexer says he also helped develop Desert Sky Pavilion.

Flexer says he was hired by Scottsdale to undertake a broad range of work, including:

• Assessing the feasibility of the project.

• Analyzing arena marketing plans.

• Reviewing arena design and construction costs.

• Determining ways to increase public revenue from the arena.

• Analyzing the arena's projected revenue and expenses.

Meanwhile, the Ellman Companies also refuses to provide details of how much money it expects to earn from the arena and adjacent development.

When asked to provide projections of the project's profitability, Ellman senior vice president Bob Kaufman's response was direct: "I'm not going to do it."

Kaufman says the public is not entitled to the information because taxpayers are not taking any risk, nor are they putting any money into the project on the front end.

Since private money will build the project and public money will only be invested after construction is complete, Kaufman says the public has little say in how profits will be divided.

The Ellman Companies and the Coyotes will be first in line to profit from the arena and surrounding development, Kaufman says. Taxpayers, he says, will get what's left over, if anything.

"Put up your money, take the risk with us -- then we can talk about sharing revenue streams," he says.

The Coyotes also refuse to discuss how much money the team anticipates making from the new arena. The team will not release its audited financial statements, but claims it is losing $10 million a year playing at America West Arena.

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