The Phantom Report

Lost in the euphoria over approval of the Los Arcos redevelopment: a key financial document that somebody is lying about

Now that the November 2 Los Arcos election has passed, will Scottsdale finally make public the crucial Flexer report?

City officials have kept the financial analysis from becoming public since this summer, when city-hired private consultant Allen Flexer says he gave it to Scottsdale redevelopment director Gary Roe.

Flexer tells New Times his report projects how much money the Phoenix Coyotes stand to make off the Los Arcos hockey arena, information the team refuses to share with the public.

Early voting has steadily increased in Scottsdale. Click here to see larger graph
New Times
Early voting has steadily increased in Scottsdale. Click here to see larger graph

The report was prepared for Scottsdale after Flexer reviewed a financial analysis of the project prepared by the national accounting firm KPMG. The KPMG analysis was commissioned by the Coyotes.

Flexer says his analysis of the arena deal -- titled "Summary of revenue and expenditure changes from the KPMG pro forma for 2002" -- shows the Coyotes making far more money off the project than KPMG projected.

"I came up with significantly more revenue than they forecasted," Flexer told New Times.

How much more?

Flexer wouldn't say.

That's why it's crucial that the Flexer report -- along with the KPMG analysis -- be made public as the Scottsdale City Council prepares to finalize a redevelopment agreement that would clear the way for construction of a $535 million project that includes an 18,000-seat hockey arena.

Roe claims he's received nothing in writing from Flexer, even though the city is paying Flexer $175 an hour to analyze the controversial arena deal. Flexer says he's accumulated more than 100 billable hours.

There is reason to doubt Roe's veracity. Why would Flexer lie about giving Roe the report?

And after Roe claimed he had no written communications from Flexer, the city did produce a Flexer memo that had been sent to Roe's office -- but only after New Times' attorney demanded production of all of Flexer's written reports.

Yet neither Flexer nor Roe, nor Roe's boss, Scottsdale city manager Richard Bowers, has produced a copy of Flexer's financial analysis.

The city is not only flouting the Arizona Public Records Act by refusing to produce the document it paid to have produced, it also has not provided a copy to Scottsdale City Councilman George Zracket, who demanded the report more than a week ago.

Scottsdale's refusal to disclose public records regarding the Los Arcos project prior to the election raises questions about how hard a bargain city negotiators will drive in upcoming redevelopment-agreement negotiations with the Coyotes and the Ellman Companies.

Zracket, who opposes the project, says the majority of the council is unlikely to seriously challenge the Coyotes and Ellman Companies on any key financial points. "They are going to make this project despite any facts to the contrary," he says. "They don't care. They are going to forge ahead."

The redevelopment agreement is the linchpin. If the council rejects the agreement, the project dies.

The margin of support is thin.

The council voted 4-3 in November 1998 to create the Los Arcos Multipurpose Facilities District, which will own the arena and collect sales taxes to help pay for it. Opponents challenged the vote, forcing a referendum in May, which easily passed.

In the November 2 election, voters agreed to allow the district to collect one-half of state sales taxes generated by the arena and adjacent development for the next 10 years -- an amount equal to about $100 million. The district would use the money to help pay for the development.

The election also forces the city to contribute an equal amount to the project, or another $100 million.

The redevelopment agreement will spell out how, and if, the city will make the contribution.

The redevelopment agreement will also stipulate how much revenue generated by the project -- including naming rights, which can fetch up to $50 million, and cash streams from luxury suites and advertising -- will be shared with the city.

Ellman Companies vice president Bob Kaufman has made it clear that he expects the private parties -- his company and the Coyotes -- to recoup their investments and earn their profits before any money is shared with the city.

The redevelopment agreement will also spell out details of a proposed property tax abatement on ancillary commercial development that will save developers about $120 million over the first 10 years.

Finally, the redevelopment agreement will provide details over the size and construction of the project, including a massive 8,000-space parking garage that will be located within 125 feet of neighbors' homes.

Scottsdale Mayor Sam Campana, a proponent of the project, says she hopes the redevelopment agreement will be concluded before council elections in March, when she and three council members complete their terms.

"I don't have a time line yet, even though I know sooner is better. We want to be sure we take all the time we need to make sure we have looked at every aspect of the project and are comfortable with all revenue and expenses," Campana says.

Part of the review of revenue and expenses will likely include the Flexer report, which Campana promises to make public after she sees the document.

"There is going to be all the sunshine there possibly can be," she says.

Project opponents will carefully monitor redevelopment negotiations.

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