Taxing Question

Law allows tourism authority to tap $1 billion for stadium construction

The TSA's proposed "multipurpose facility" must sidestep a minefield of potential budget-busting features to stay even within the higher $361 million cost estimate.

Not only does the TSA intend to put a retractable dome roof on the Arizona Cardinals new stadium, it also wants to have a retractable field to allow the facility to be used for conventions and other purposes, and these amenities don't come cheap.

In a belated attempt to add "multipurpose" features to the stadium, the TSA is considering adding 70,000 square feet of meeting space and a massive electrical grid embedded into the concrete floor to allow for trade shows.

TSA president Ted Ferris
TSA president Ted Ferris

Massive construction projects like the stadium are notorious for going over budget.

Just look at Bank One Ballpark, where cost projections and reality diverged from the moment construction began. Hunt Construction Company also was the general contractor for Bank One Ballpark.

Then take into account that Bank One Ballpark is significantly smaller than the Cardinals stadium, with 50 percent fewer seats. And Bank One doesn't have an expensive retractable field. Yet the cost of building Bank One Ballpark exceeded $375 million -- $14 million more than what TSA is now projecting to spend on its even grander version of professional sports palaces.

The TSA board cleared the way for the $361 million cost scenario late last month when it voted -- without discussion -- to approve the sale of up to $250 million in construction bonds.

According to TSA documents submitted to bond underwriters, a $361 million stadium would be financed by $245.5 million in TSA bonds, $85 million from the Arizona Cardinals, $16 million in interest from unspent bond proceeds, $11.5 million in construction sales taxes diverted back to the project and $3 million from the City of Tempe.

TSA board chairman Jim Grogan says the $361 million projection given to bond underwriters provides the TSA with "optimal flexibility" to finance the stadium.

"That's the highest of the high end," Grogan says.

At the same time, Grogan admits that no one knows how much the stadium will cost because a final construction contract has yet to be signed.

"Right now, there are a lot of question marks on cost," Grogan says.

The TSA has not signed a contract with Hunt Construction Company to oversee construction of a stadium for the Arizona Cardinals. The contract is expected to include a "guaranteed maximum price," calling for Hunt to cover all cost overruns other than change orders approved by the TSA board of directors.

Contract negotiations between TSA and Hunt have been delayed by a lawsuit filed last month by John F. Long challenging the constitutionality of the authority and by a pending Federal Aviation Administration review of the stadium's proposed location 2.3 miles east of Sky Harbor Airport's north runway.

Without a firm construction start date, Grogan says it is impossible for Hunt Construction Company to set a definitive cost to build the stadium.

"What they are saying is, we can't give you a price if you can't give us a start date," Grogan says.

The Long lawsuit is scheduled for a series of hearings later this month in Maricopa County Superior Court. The FAA will close its public comment on the proposed new location of the stadium on property owned by Salt River Project on October 22. The FAA has indicated it will issue a report soon after on whether the new location poses a threat to air navigation.

Hunt Construction Company planned to begin digging the stadium's foundation last July. But work was stopped on July 11 after the FAA stated the stadium was a presumed navigation hazard at its former proposed location on the southeast corner of Priest Drive and Washington Street in Tempe. The TSA moved the stadium 1,200 feet southeast in an effort to win FAA approval.

The city of Phoenix already has filed suit in Maricopa County Superior Court to block the TSA from resuming construction at its new site until the FAA has finished its review. Phoenix has agreed to not seek a restraining order until the FAA submits the report.

While the city of Phoenix legal action could be resolved with a favorable ruling from the FAA on the new site, the John F. Long lawsuit has the potential to drag on for months, preventing TSA from selling bonds needed to begin construction.

"The Long lawsuit is creating a cash flow problem and obviously hurting our ability to aggressively go forward from now until it is resolved," says TSA president Ferris.

Long is alleging the TSA's enabling legislation violates the state Constitution because it provides special interest benefits to Maricopa County residents and the Arizona Cardinals. Attorney General Janet Napolitano, however, has issued a ruling that disagrees with Long's allegations.

As the legal action drags on, the likelihood of completing the stadium in time for the 2004 regular season becomes less likely with each passing day. The TSA has already given up hope of having the stadium completed before August 2004 exhibition games.

"We are trying to hold on to the stadium being available for the regular season beginning in 2004," Ferris says.

Meanwhile, Ferris says the TSA is meeting its funding obligations for tourism promotion, Cactus League stadium improvements and youth and amateur sports. He says TSA can sustain a 30 percent decline in hotel and car rental taxes this year and still meet these obligations.

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