By Ray Stern
By Ray Stern
By New Times
By Amy Silverman
By Stephen Lemons
By Stephen Lemons
By Monica Alonzo
By Chris Parker
Further delay in building the Arizona Cardinals' proposed $331 million "multipurpose facility" is far more serious.
And that's what looms on the horizon.
Weeks and possibly months of delay. If construction doesn't begin by October 1, the entire project could be in jeopardy as construction costs mount in the face of a project that's supposed to have a fixed cost of $331 million.
The latest hurdle facing the stalled project -- already a month behind schedule -- came Friday when West Valley developer John F. Long asked Attorney General Janet Napolitano to investigate the stadium financing and site selection process. As of presstime, Napolitano had not responded to Long's request, but did say in a radio interview late last week that she and her staff first must determine if it is a matter for the Attorney General or the courts.
Long is promising to file a lawsuit seeking to stop funding of the stadium if Napolitano doesn't investigate. He's also supporting a proposal to launch a citizens' initiative drive to strip the Arizona Tourism and Sports Authority's power to fund the stadium.
"It is my opinion that the selection of the Tempe site and expenditures made by the TSA have violated state statute," Long says.
Long's saber-rattling comes at the same time a New Times investigation of the stadium project has uncovered numerous problems on several fronts. These include:
The cost of building the stadium -- which voters were told would not exceed $331 million -- is now expected to increase sharply because designers failed to incorporate convention center uses as required by Proposition 302. Even at this late date, the final design of the stadium is not complete and the promised "guaranteed maximum price" contract to build the facility has not been signed. One estimate of the stadium's eventual cost is $360 million.
City of Tempe officials deceived the public when they said last February the city could finance approximately $23 million worth of infrastructure improvements for the stadium site at no cost to Tempe taxpayers through a complex repayment schedule.
Tempe intends to exempt the stadium from city zoning regulations, bypassing the need for public hearings and a possible referendum, which zoning attorneys say could open the door for another lawsuit. Bank One Ballpark, America West Arena, and Veterans Memorial Coliseum are all subject to City of Phoenix zoning regulations.
Tempe plans to grant the Arizona Cardinals millions of dollars worth of property tax abatements on at least 37.5 acres adjacent to the stadium controlled by the team's owners, B&B Holdings. The Cardinals plan to develop a hotel, restaurants, retail and office space adjacent to the stadium.
Tempe and Salt River Project worked together to keep the Priest Drive and Washington Street location in the background until after voters approved Proposition 302. Long alleges this was an illegal bait-and-switch.
It would be a mistake to dismiss Long's threat as mere rhetoric. The developer has a long history of tackling legal issues on principle and has the money to mount an aggressive legal attack. For example, Long spent about $1 million in a four-year battle with the City of Phoenix over the sale of effluent to the Palo Verde Nuclear Generating Station.
"He's probably one of the few civic-minded people with financial resources to do this," says Jim Miller, a longtime executive in Long's development company.
The mere threat of Long's lawsuit and his call for an initiative drive, coupled with a possible investigation by the state attorney general, makes it very risky for the Tourism and Sports Authority to sell revenue bonds needed to finance construction of the stadium, experts say.
Until this issue is resolved, construction will very likely be stalled. No bonds, no money, no stadium. The longer construction is delayed, the less likely the stadium will be completed for what the public was promised -- $331 million, and it's not clear who would pay for any cost overruns.
"This thing is on a tightrope and I believe it could fall off at any time," says Tempe City Councilman Dennis Cahill. "There's a lot of things that are uncertain."
To see what can happen when disgruntled citizens file lawsuits to block funding of stadium projects, just take a look at San Diego. The San Diego Padres were forced to stop construction last October on their new baseball stadium after a barrage of legal action halted bond sales financing the project.
Tourism and Sports Authority board member Roc Arnett says the stadium was headed to the West Valley until the Cardinals advanced Tempe $18 million to bolster Tempe's financing plan just two days before the authority made its site selection February 13.
The Cardinals' cash was enough to push Tempe over the top as the Tourism and Sports Authority voted 7-2 to place the stadium in Tempe.
Why did the Cardinals want to be in Tempe so bad?
The team isn't talking, but here's one likely reason:
The Cardinals control lucrative development rights adjacent to the stadium if it is built in Tempe. Development rights at the west Valley site would have been retained by John F. Long's real estate development company.
The bottom line:
The Cardinals -- who before the election claimed they couldn't contribute any more than $85 million to build the stadium -- are now investing more than $50 million to secure long-term leases and development rights at a location that will subject users of the stadium to incessant noise from low-flying jet aircraft and possible safety hazards.
Tourism and Sports Authority board member John Benton has weathered his share of controversy. Long the fair-haired boy of Tempe development officials, Benton has played a crucial role in the controversial redevelopment of downtown Tempe and the Rio Salado Project.
His prominence makes him a frequent target of critics who believe he has a much too cozy relationship with Tempe City Hall. He handles the attacks in stride, keeping focused on his mission to promote "neo-urbanist" development by promoting infill projects versus development on the urban fringes.
Benton is usually quite candid in his assessment of projects -- including criticizing his own development deals when plans don't work out. An avid baseball fan who has long supported the construction of a stadium along the banks of the Salt River, Benton now finds himself a target in John F. Long's attack on the stadium.
Long alleges Benton had a conflict of interest when he voted in favor of the Tempe site because he has development interests nearby. Benton dismisses the allegation, saying the stadium at the Tempe site could lure development away from his projects.
Whether a conflict exists remains to be seen. But even Long's associates acknowledge that Benton has been a valuable member of the Tourism and Sports Authority board who has kept close tabs on the design and financing of the project.
Reached while on vacation in Nova Scotia last week, Benton says the stadium is going to cost far more than the $331 million promised voters.
"There is no way it's going to cost $331 [million]," says Benton, who holds a construction engineering degree from Arizona State University. "It's going to cost a lot more because the design has evolved into a multipurpose facility."
Benton says despite the fact that many people believe that Hunt Development Company, which is expected to control the design/build contract for the stadium, would build it for no more than $331 million, there is nothing set in stone.
"I don't think there has ever been a valid commitment by Hunt to build it for $331 [million]," Benton says.
Hunt officials did not return calls seeking comment.
Benton recounts a story from his first meeting on the Tourism and Sports Authority board when he realized that crucial construction details related to making the stadium a true multipurpose facility had been ignored.
Benton says he asked about the design of the floor of the facility after the retractable playing field was removed from the stadium.
"What's on the floor? If you are going to have a convention there, or booths for a trade show, you have to have a power grid. It wasn't there. None of that was included in the $331 [million]," he says.
Since then, Benton says designers have been working to ensure that the stadium will truly be a multipurpose facility that can not only host football games, but also regional trade shows and conventions. But these changes cost money.
"You have a lot of different, minute details that were never contemplated and never evolved," he says.
Benton says he's focusing on making sure the Tourism and Sports Authority delivers "to the voters of Maricopa County a facility that meets the demands of a multipurpose facility and not just a football stadium."
But to do that, the $331 million cap must be tossed out the door.
"Don't get too excited about the $331 [million]," he says, warning that this is a nebulous figure that has little relation to what could be the project's ultimate price tag.
Benton says the Tourism and Sports Authority might be able to raise more money for construction because of lower interest rates on bonds. But that cuts both ways. Lower interest rates will also diminish earnings on bond proceeds that the Tourism and Sports Authority has been counting on.
Benton says it might cost $360 million or so to build the multipurpose facility that was promised.
So much for the statement in the official Proposition 302 publicity pamphlet provided to voters prior to the election which stated:
"The construction cost of the facility is anticipated to be approximately, but not in excess of, $331 million."
Tempe Mayor Neil Giuliano leans back on the sofa and kicks his feet up on to the coffee table. It's dress-down Friday at Tempe City Hall, and Giuliano is clad in jeans, a pullover knit shirt and tennis shoes.
Giuliano downplays the controversy related to the stadium siting and delays stemming from Federal Aviation Administration concerns. Instead, Giuliano says Tempe is moving forward with an aggressive marketing campaign to land major events like the Final Four to the new multipurpose stadium.
"What we are trying to do is make sure when they open the facility in 2004, it is more than a football stadium," he says.
Other than promotional efforts, Giuliano says Tempe is just waiting for construction to begin.
"There really isn't much left for us to do," he says.
At least publicly.
Which is the way Giuliano likes it.
The 44-year-old federal relations manager with Arizona State University likes to keep the details of governance off the front page of newspapers so that staff and council can manage the city's affairs without lurching from one uproar to another.
"Public perception is very important," says Giuliano. "You have to manage that."
Giuliano should know.
The four-term mayor faces a recall election next month in the wake of a public relations disaster after he tried to get the city to end United Way funding for the Boy Scouts because the group discriminates against homosexuals. He backed down after the situation escalated into a huge controversy, but the damage was done. Giuliano, who is gay, became the subject of a successful recall campaign to hold a special mid-term election.
Badly needing a major political victory to stymie the recall, Giuliano has focused his efforts on landing the Cardinals stadium. Part of his strategy is to create the appearance that Tempe government operates openly, when, in fact, the opposite is true, particularly when it comes to the stadium.
Tempe has kept citizens in the dark for more than nine months about the details of its financial dealings with the Cardinals and the Tourism and Sports Authority. Other than a misleading two-page press release outlining the city's preliminary stadium agreements -- which falsely asserts there is "no impact to Tempe residents" -- there has been little public discussion about the financial details.
Instead, the city council has met at least 22 times since November 29, 2000, in secret executive sessions to discuss issues related to the stadium.
Giuliano says given the tight deadlines for stadium construction, it's very unlikely the city will hold lengthy public hearings on Tempe's final financing plan to provide land, parking and infrastructure for the stadium.
"The small details in the financial documents are not going to be anything of great significance," he says.
That depends on what you define as significant.
Typically, a city will conduct a detailed cost-benefit analysis of a project of this magnitude before determining whether it's a good investment for the city. In many cases, this includes hiring an outside consultant, typically a major accounting firm, to analyze the deal. Scottsdale, for instance, hired a consultant to analyze every financial detail of the doomed Los Arcos project that would have provided a new arena for the Phoenix Coyotes. That project has since moved to the West Valley.
Tempe, instead, has opted to keep the analysis in house.
"I am comfortable with our professional staff," Giuliano says.
Perhaps because it is far easier to keep that information carefully contained inside the bowels of city government. Despite records indicating that the city has engaged in careful analysis of the Cardinals deal, the city is refusing to turn over those documents.
What information that is available reveals that contrary to the city's assertion that there will be no impact on taxpayers, Tempe is providing about $23 million to prepare the stadium site, most of which won't begin to be recouped for at least eight years.
In addition, the Cardinals advanced $18 million to Tempe to allow the city to offer the stadium site to the Tourism and Sports Authority for free. This was a crucial provision that put Tempe on par with the west Valley's financial proposal, which also was providing free land.
The Tourism and Sports Authority was mandated by Proposition 302 to give priority to sites that were providing free land, parking and infrastructure. If the Cardinals had not advanced Tempe the funds, the stadium site would have very likely ended up in the west Valley.
"I don't think there is any question at all that the thing was on the way to the westside until the Cardinals stepped up said, 'Here's the money,'" sports authority board member Arnett says.
The team's $18 million comes with two key stipulations:
First, the Cardinals would be repaid $10.8 million of the advance from stadium revenue before Tempe would collect a dime for its outlays. The Cardinals' loan is not expected to be repaid before 2009. The balance of the Cardinals $18 million would be spent on non-utility improvements at the stadium site and would be credited against the team's future lease payments for its South Tempe training facility.
Once the Cardinals get back their $10.8 million, plus interest, Tempe will begin to recoup approximately $5 million, plus interest. This repayment won't take place until after 2009 and won't be paid back for between five and seven years, says Pat Flynn, Tempe's assistant city manager.
The Cardinals will then be next in line to collect $17 million that the team was projecting to be spent on parking structures but that will now help finance the acquisition of 12 acres needed to move the stadium from beneath the flight path of the north runway at Sky Harbor Airport.
Repayment of the $17 million is expected to take more than 20 years.
The extremely complicated repayment plan leaves $3 million in Tempe advances uncollected for more than 35 years. By then, the amount with interest will exceed $10 million. But Flynn concedes it's unlikely that will ever be collected because the life of the stadium is only 30 years.
Second, and far more important, is that the Cardinals' $18 million contribution requires Tempe to cede all development rights for 37 acres surrounding the stadium to the Cardinals. This guarantees that the football team controls potentially lucrative development rights to build a luxury hotel, restaurants, retail and office space adjacent to a world-class, multipurpose facility heavily subsidized by taxpayers.
It's difficult to say how much the Cardinals believe the development rights are worth. One indication is how quickly the team agreed to pay a reported $12 million premium to pick up the development rights on the adjacent 12 acres that were suddenly acquired late last month.
All the revenue streams coming back to Tempe and the Cardinals are based on a crucial assumption that the stadium will generate $1.5 million in taxes and parking funds each year for repayment. This assumes average attendance of around 57,000 per year for Cardinal games -- not far from the 50,003 for the 2000 season played at Sun Devil Stadium.
"This repayment scenario assumes a lot of things," says Flynn. "It assumes they have a decent team on the field."
Tempe not only is borrowing money from the Cardinals, the city is also providing millions of dollars worth of property tax breaks for the team's planned hotel, restaurant, retail and office development.
Flynn says the property tax breaks -- which will last at least eight years -- will help the Cardinals finance the future parking structures, as surface parking lots surrounding the stadium are converted into buildings.
Nowhere has the city projected the value of the tax breaks compared to the cost of building the parking structures. The Cardinals, however, will be required to pay Tempe schools $100,000 a year.
Flynn acknowledges there is a dearth of financial analysis at this point, unlike other projects proposed for sports teams in the Valley. Firm projections will only be made once final agreements are reached.
"The devil is in the details, and these are still being negotiated," Flynn says.
And once the devil finally rears its head, it will be too late for careful and thoughtful public review, because Giuliano promises to get the city council to move quickly on the financial agreements. They likely will face little scrutiny other than from councilman Hugh Hallman, who is known to pore over the fine print.
Tempe's sleight of hand on the stadium's financial deal extends into zoning issues as well.
Giuliano says the city has no intention of subjecting the stadium to normal planning and zoning hearings. The city, he says, believes the Tourism and Sports Authority is exempt from zoning requirements because it is another governmental body.
While government operations are generally exempt from municipal zoning, there are exceptions.
The Veterans Memorial Coliseum -- which like the Tourism and Sports Authority operates as a state agency -- is subject to City of Phoenix zoning. A 1986 Arizona Appeals Court ruling states that "the general rule which bars municipal zoning of state functions does not apply to proprietary operations of the state."
The coliseum, the court ruled, is a propriety operation of the state.
Likewise, the Bank One Ballpark is owned by a governmental body -- the Maricopa County Stadium District -- and is subject to City of Phoenix zoning.
A staff attorney for the stadium district also said the ballpark was considered to be a "proprietary" operation, thus it was subject to the city's zoning.
Tempe's reluctance to hold zoning hearings on a $331 million project -- one that is still under design and whose overall layout will be crucial in how quickly the city will be repaid for its up-front investment -- seems shocking.
However, planning and zoning cases require several public hearings and take time to schedule and complete. More importantly, any zoning decisions could be subject to a referendum by the voters, which could thwart the project.
There are two potential zoning problems facing the stadium. First, the land, which is owned by Salt River Project, is subject to a 140-foot height limitation. The stadium is nearly 200 feet high.
Second, the 12-acre parcel that the Tourism and Sports Authority believes will meet FAA requirements is zoned multi-use general (MG), with a primary emphasis on residential use. The old site was zoned for light industrial use.
"They (city council) would have never thought of putting the stadium into the MG district," says Tempe city planner Sean Prior, because the city wanted dense residential uses in that area.
Zoning attorneys say Tempe's plan to bypass planning and zoning hearings could lead to legal challenges not only to the city's zoning laws, but to any building permit that is issued.
But Giuliano says he's not concerned about a challenge.
"We will just get it dismissed," he says.
Giuliano's cavalier attitude toward public review of the Cardinals stadium deal becomes somewhat sinister when he describes how Tempe worked with Salt River Project to keep the Priest and Washington site under wraps until after the November 7, 2000, election.
Giuliano says he first raised the Salt River Project site as a possibility for the Cardinals stadium in December 1999, when the governor's Plan B Task Force that laid the groundwork for Proposition 302 was just beginning to meet.
Giuliano says he had tacit approval from Salt River Project officials that they would welcome the stadium site on SRP land at the Papago Park Center, an office park that the utility has been slowly developing since the mid-1980s.
But, Giuliano says, SRP made it clear to him it didn't want to have the Papago Park Center site under formal consideration by the Tourism and Sports Authority until after the 2000 election. SRP's chairman, Richard Silverman, was on the Plan B Task Force. Giuliano said SRP didn't want to appear to be steering the stadium to its land.
Three weeks after Proposition 302 passed, Giuliano went to a Tourism and Sports Authority meeting and told the board that Tempe was pulling the site it submitted prior to the election at McClintock Drive and Rio Salado Parkway and replacing it with the SRP site. Tempe records indicate the city had given scant attention to the McClintock Drive site.
Tempe submitted a formal stadium site proposal for the SRP location to the Tourism and Sports Authority on January 5. A month later, the Tourism and Sports Authority voted to pick the SRP site. The motion to approve the SRP site was made by Tourism and Sports Authority board member C.A. Howlett, who now works for America West Airlines.
Howlett, however, is also a former SRP executive. One of his primary jobs was to develop Papago Park Center.
After voting to put the stadium in an office park he once was in charge of developing, Howlett has since recused himself from all Tourism and Sports Authority matters involving the stadium. An America West spokesman said Howlett continues to be a presence in other Tourism and Sports Authority activities, including funding of Cactus League facilities, construction of youth sports fields and tourism promotions. These were all perks promised to voters as part of Proposition 302.
Meanwhile, John F. Long's letter to Attorney General Janet Napolitano alleges that "Tempe unilaterally and unlawfully withdrew its proposed site" and replaced it with the SRP land.
Not only was the SRP land inappropriately selected by the Tourism and Sports Authority, Long's complaint says, but state law requires the land used for the stadium be owned by the authority. Under the current deal, SRP retains ownership of the land and leases it to Tempe, which, in turn, subleases the property to the sports authority.
Long also alleges that Tempe has failed to live up to the terms in a binding memorandum of understanding it signed in February with the Tourism and Sports Authority, including:
Executing the ground lease for the stadium by August 1.
Advancing $3 million for the ground lease by August 1.
Obtaining FAA approval of the stadium site by June 1.
"We understand as of this date [August 10], Tempe has not met any of these critical obligations," Long states.
Tourism and Sports Authority chairman Jim Grogan is all smiles as the interview begins late last week. Grogan was appointed chairman of the authority by Governor Jane Hull and has been a central figure in the effort to build a stadium since 1999 when Mesa voters soundly defeated the push for an all-purpose sports facility.
At times, the former lawyer for Charles Keating's infamous Lincoln Savings & Loan who became ensnared in the Keating Five scandal was downright ecstatic during an hourlong conversation.
His well-appointed office is located in the same north Scottsdale business center as the Hunt Development Company.
Grogan emphasizes that he -- along with the rest of the nine-member Tourism and Sports Authority board -- are volunteers simply trying to help their community.
He acknowledges that the project has had a few rough spots in the early going. He swears everything is back on track and that construction is set to begin as soon as the FAA approves the stadium's new location a few hundred yards from the original site that the FAA deemed last month to be a "navigation hazard."
The new site, Grogan says, is virtually guaranteed FAA approval.
"It solves all the issues," Grogan promises.
Of course Grogan told fellow Tourism and Sports Authority board members June 14 that the old location didn't need FAA approval because it would be less than 200 feet high.
A month later, the FAA told the Tourism and Sports Authority that the stadium would be a navigation hazard as long as it exceeded 115 feet in height. The FAA notice brought the stadium construction project to halt, triggering a mad scramble to find a quick solution to a vexing problem.
The proposed solution is to move the stadium to the southeast onto a parcel adjacent to the original site, but no longer on the center line of Sky Harbor Airport's longest runway. (The newest proposed stadium site is now located between Sky Harbor's north runway and the airport's middle runway.) The authority hopes to get FAA approval by August 20. The FAA has indicated it will make a decision by September 11.
Grogan says once the FAA issues an approval, the project will begin full steam.
But what if the FAA still has concerns?
"That's not in the stars," Grogan says with a trust-me smile.
The project, he promises, will be underway before October 1, when time constraints could become insurmountable.
He brushes aside the very likely possibility of a legal challenge from Long, which could delay the project for months.
"I doubt that John F. Long will file a lawsuit," Grogan says. "We had a great relationship with Mr. Long. We have great respect with him."
Grogan says he understands why westside interests are attempting to thwart the stadium at this late date. Obviously, those folks are disappointed they didn't land the project.
But they must understand something, Grogan says.
"The TSA board is committed to the site they selected in February," he says.
If that is so, why is the stadium being moved to a location different from the site selected in February?
"No, that's wrong," he says.
"Let me explain. It's important that you understand that," Grogan says leading into a convoluted argument that the "new" site really is the same site, before finally conceding that the stadium is no longer on the parcel that Tourism and Sports Authority approved in February.
"It's not moved entirely off the original site," Grogan contends. "It's still on the original site. Some of it is spilling into an expanded site, which only enhances the site."