National Football Cartel

How the Arizona Cardinals and their NFL brethren exert monopoly power to extract billions of dollars from American taxpayers

It's Super Bowl weekend, and, as usual, the Arizona Cardinals are nowhere near the playing field.

Despite the absence of their team, Cardinals owners Bill and Michael Bidwill will enjoy the game nonetheless, most likely from a well-appointed luxury suite inside New Orleans' Superdome.

It doesn't really matter who plays in the big game -- if you're one of the wealthy few to own a National Football League franchise.

Joe Forkan
Arizona Cardinals owner Bill Bidwill will see his team's profits soar when the new stadium is completed.
AP World Wide
Arizona Cardinals owner Bill Bidwill will see his team's profits soar when the new stadium is completed.
Mayor Skip Rimsza says the stadium will not be a profit center wherever it is located.
Mayor Skip Rimsza says the stadium will not be a profit center wherever it is located.
Washington State University sports economist Rodney Fort says it's time for NFL owners to compete.
Washington State University sports economist Rodney Fort says it's time for NFL owners to compete.
Stanford University economist Roger Noll says professional sports have little, if any, economic impact on a community.
Stanford University economist Roger Noll says professional sports have little, if any, economic impact on a community.
Lake Forest College economist Robert Baade says the NFL is an "unregulated monopoly."
Lake Forest College economist Robert Baade says the NFL is an "unregulated monopoly."
Two-thirds of the Arizona Cardinals' revenue comes from the team's share of NFL television and radio contracts and the sale of NFL licensed merchandise.  The Cardinals' share of NFL revenues is about equal to players salaries.

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National Football League
Two-thirds of the Arizona Cardinals' revenue comes from the team's share of NFL television and radio contracts and the sale of NFL licensed merchandise. The Cardinals' share of NFL revenues is about equal to players salaries.

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NFL players receive about two-thirds of the league's revenue, which topped $3 billion last year.
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Source: National Football League Players' Associat
NFL players receive about two-thirds of the league's revenue, which topped $3 billion last year.

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Tourism and Sports Authority chief executive officer Ted Ferris is issuing no-bid contracts to companies with ties to the Cardinals.
Tourism and Sports Authority chief executive officer Ted Ferris is issuing no-bid contracts to companies with ties to the Cardinals.

All that ultimately matters to NFL owners is that the game is broadcast to a worldwide television audience.

Well, one thing more.

That the loot generated by Super Bowl XXXVI is divided up equally among all the NFL teams, including the Bidwills' perpetually miserable Cardinals.

It's truly a situation where the Bidwills win by losing.

Back in Arizona, the Bidwills know that eight Valley cities and Indian tribes are offering to spend more than $60 million to prepare a site for the Cardinals' new stadium -- a stadium that when the dust settles will cost the family nothing while shooting the value of the team into the stratosphere.

The stadium frenzy is so great that the City of Phoenix is moving quickly to scrap its long-range plan to build urban housing adjacent to the struggling Arizona Center and instead construct a second downtown domed stadium that will saddle the city with another financial loss and an urban design nightmare (see accompanying story).

From shared revenue to publicly subsidized stadiums, the Bidwills' membership in the NFL brings the reclusive family immense political power, far more than one would expect for a private business of its size.

In the past four years, the Cardinals and the NFL have engaged in a determined and often bungling effort to build a luxurious stadium featuring a retractable roof and a removable field.

The financial stakes are huge.

New NFL stadiums are gold mines for team owners, typically generating about $35 million a year in additional revenue compared with their old stadiums, confidential NFL financial data reveals.

For the Cardinals, the $35 million flowing from a new stadium would more than double the amount of revenue the team generated in 1999 while playing at Sun Devil Stadium in Tempe. Most of the money created by the new stadium will flow directly to the team's bottom line.

At the same time the Cardinals are receiving a stadium-induced windfall that will continue year after year, the value of the team is soaring. The new benchmark for an NFL franchise is at $700 million.

It's not the first time the family has received a windfall. In 1960, the NFL paid the Bidwills $500,000 to move the team from Chicago to St. Louis, an amount equal to the entire value of the franchise, according to NFL Commissioner Paul Tagliabue.

The best part of the story of the making of the Bidwill family fortune is yet to come.

The Cardinals' new "multipurpose stadium" will be paid for and operated using other people's money -- primarily $1 billion in taxpayer subsidies.


How could a medium-size business that generates only about $30 million in local sales be worth as much as $700 million? And how could this business extract $1 billion in public subsidies?

A New Times examination of the NFL's finances and the league's impact on Arizona provides some clues, including:

• Despite its roots in competition on the playing field, the National Football League operates as a powerful business cartel that restricts the supply of teams. This concerted action generates monopoly profits at the expense of millions of taxpayers, many of whom couldn't care less about the game; and football fans, who are forced to pay above-market ticket prices.

The league's 31 teams all benefit. NFL teams reported $385 million in operating profits in 1999 on revenue of $2.95 billion, confidential financial reports first obtained last summer by the Los Angeles Times show.

The profits are underwriting skyrocketing player salaries, steadily rising franchise values and the league's political cachet.

• The Arizona Cardinals receive about two-thirds of the team's total revenue from their share of the NFL's $18 billion television contract, postseason ticket sales and NFL merchandise sales. The NFL divides this money equally among all teams -- an amount that totaled about $65 million per team in 1999.

This money is in addition to the $30 million the Cardinals generated locally during the same year. The revenue-sharing formula means there is little incentive for a risk-averse owner like the Bidwill family to spend more money on players to field a winning team.

• The Cardinals' contribution toward stadium construction is far less than the $85 million the team claims. NFL and Tourism and Sports Authority officials say the Cardinals will receive about $28 million from the NFL, reducing the team's contribution to $57 million. The Cardinals should recover that investment when the team sells lucrative naming rights for the stadium.

• The state Tourism and Sports Authority, the public entity that will build, own and operate the facility, claims to be exempt from competitive bidding requirements for hundreds of thousands of dollars' worth of contracts. Most of the contracts so far have been given to businesses that supported the Cardinals during the Proposition 302 initiative campaign.

• The stadium will be a financial drain on the community in which it is located and will rarely be fully utilized, community leaders and economists say.

Not only will the stadium be an economic loser, sports economists say there is no evidence that professional sports teams have any economic impact on communities whatsoever.

"Nobody can detect any sort of difference in growth rates of communities where you have a sports team or not -- or how many of them you do have," says Washington State University economist Rodney Fort.


Strip away the NFL's bright lights and the competitive action on the field, and what is left is a huge entertainment cartel that exerts market power by artificially reducing the supply of teams in a nation hungry for sports entertainment.

"It's an unregulated monopoly," says Lake Forest College economist Robert Baade, who has conducted groundbreaking studies on sports economics for more than two decades.

In other words, the NFL is football's version of OPEC -- but far worse. At least OPEC has competitors in the world oil markets.

The linchpin supporting the NFL cartel, sports economists say, is the league's ability to restrict the supply of teams below the demand of cities that want teams and to control the ability of existing teams to enter new markets.

"These controls essentially restrict competition," says Michigan State University economist William Kern.

Restricting competition artificially increases the revenue available to the existing franchises in the NFL, thereby generating monopoly profits.

The NFL's spoils are so deeply shared that the Cardinals, which failed to make the playoffs, will receive the same amount of postseason ticket revenue this year as the New England Patriots and St. Louis Rams, who will play in the Super Bowl.

Why should the Bidwill family give a hoot about making the playoffs when the franchise gets the same amount of postseason revenue as the teams competing in the Super Bowl?

The Cardinals declined repeated requests for an interview to discuss the team's and the league's finances, as did NFL league officials in New York.

NFL financial records reveal that while the Cardinals have been fielding mediocre teams, the Bidwills have been making money.

The team reported operating profits of $5.3 million in 1995, $2.2 million 1996, $4.4 million in 1997, $4.5 million in 1998 and $1.5 million in 1999.

Operating profits probably understate how much money the family is making from the team since Bidwill family members may be drawing a salary that shows up as an expense on the earning statements obtained by New Times.

Operating profits will zoom when the stadium begins to kick in an additional $35 million a year or so with little increase in team expenses.

Since player salaries per team are capped, most of the increase in revenue from the new stadium will flow into the Bidwills' pockets. The Cardinals can elect to bring in big-name players with large signing bonuses that are exempt from the salary cap rules, but there is no guarantee that the Cardinals management will do so.

But given the lack of attendance at Sun Devil Stadium, where the team averages less than 50,000 per game in the 75,000-seat stadium, the Cardinals maybe be forced to spend more money on players in order to field a contending team to attract fans willing to pay higher ticket prices at the new stadium.

The image of the NFL as an OPEC-like cartel is not simply the ravings of academic economists.

The NFL says as much in a 1999 lawsuit the league filed against the Oakland Raiders:

"Each NFL member club has a direct economic interest in the successful business operation of each of the other member clubs in the League. Rather than acting as horizontal competitors, the member clubs of the NFL are cooperative partners in a joint business venture.

"No NFL club has an interest in forcing another team out of business, or in seeing it seriously weakened financially. While the clubs are vigorous competitors on the playing field, they act as partners in conducting their business operations."

Simply put, the goal is for each NFL team to generate as much revenue as possible, with the bulk of that money shared among all the teams. The only money that isn't shared comes primarily from revenue related to stadium luxury suite sales, premium club seats, stadium advertising and stadium naming rights.

Hence, the concerted and successful drive by NFL teams to build new, luxurious stadiums that generate maximum revenue to teams while shifting costs -- both building and operating expenses -- to taxpayers.

The Cardinals have shifted all operating costs of the new stadium -- about $11 million a year -- to the Tourism and Sports Authority. The team will pay annual rent of $250,000, down from about $1.8 million a year at Sun Devil Stadium.


The NFL cartel creates clear financial winners and losers.

Winners:

First, the players. Average salaries have jumped from $82,400 in 1981 to $1.2 million in 2000, a 1,356 percent increase. Players receive about 67 percent of total NFL revenue, which topped $3 billion in 2000. There were 545 players who earned $1 million or more in the 2000 season.

Second, the owners. In addition to ongoing operating profits, owners also receive substantial tax benefits from complex depreciation rules and have ways to move income off the team's balance sheet, particularly through joint ownership with media companies, says economist Fort, who has written extensively on the monopoly power of professional sports.

More important, owners benefit from the rapid increase in the value of their franchise. The increase in the last few years has been astounding. In 1998, the Minnesota Vikings sold for $250 million. That same year, the expansion Cleveland Browns paid $530 million to enter the league. A year later, the expansion fee jumped to $700 million with the entry of the Houston Texans, which will begin play next season.

The expansion fee is primarily determined by the value of the NFL's television contract. Current owners seek compensation from newly admitted owners for the dilution of their share of future television revenue.

Losers:

First, working-class fans. Average ticket prices have increased 51 percent -- from $25.21 in 1991 to $38.09 in 1998. Parking fees, concessions, personal-seat licenses and seat renewal fees add to the cost of going to the game.

Second, taxpayers. During the last decade, 28 NFL teams have new or refurbished stadiums either completed or under construction. Taxpayers have subsidized nearly all of these projects.

The monopoly power exerted by the Cardinals and the NFL has gone virtually unchecked in Arizona, with local media outlets including the Arizona Republic and Tribune Newspapers the leading cheerleaders for the stadium. Both businesses generate substantial advertising revenue from their sports pages.

State political leaders have remained silent on the issue, other than independent gubernatorial candidate Richard Mahoney, who is staunchly opposed to public subsidies for professional sports franchises.

"Attorneys, lobbyists and people in financing are getting in on the front end of this deal and are making a lot of money on this irrespective if it enhances the team or improves the economy," Mahoney says.

Through a quirk in the voter protection act that is supposed to prevent the Legislature from repealing voter-approved initiatives, the Legislature may be able to change or rescind the stadium law because it was passed only by Maricopa County voters, says David Thomas, Legislative Counsel deputy director.

It is unlikely, however, that the Legislature will dismantle the stadium taxes, political analysts say, even though the state is facing an $800 million budget deficit that will require deep spending cuts.

The only force working against the NFL/Cardinals monopoly has been West Valley developer John F. Long, whose lawsuit challenging the constitutionality of the TSA is pending before the state Supreme Court. A decision is expected in the next few months. Until the court makes a ruling, the TSA is prevented from selling bonds needed to begin construction of the stadium.

There appears to be only one way to break the monopoly grip the NFL and its franchises exert on local communities:

Competition.

One proposal supported by several prominent sports economists is to instill the same competitive nature that exists on the field and turn it loose on the business of pro football by enforcing federal antitrust laws and breaking up the NFL into four or more independent leagues.

True competition, sports economists say, would force owners to field entertaining teams at the lowest possible cost. Every city that could profitably support a team would have one. The values of teams would fall, player salaries would decline and television advertising revenue would drop.

Fans would benefit from lower ticket prices and cities would no longer be held hostage to build taxpayer-subsidized stadiums. The Super Bowl would become more attractive because it would feature the champions of competing leagues.

"If you are able to break the complete and utter control leagues have over the number of teams and the location of them, then this problem will go away," says Fort.

Until then, the NFL will continue to enjoy monopoly profits, largely at taxpayer expense.

With no reason to change, and the illusion of economic competition fostered by football games, there is little wonder why the value of NFL franchises continues to soar, with the $1 billion mark not too far in the future.

As Stanford University sports economist Roger G. Noll says, "It's great to be a monopoly in a world where everyone else competes."


The Arizona Cardinals reported $30 million in locally generated revenue in 1999. The proceeds came from ticket sales, local television and radio contracts, suite rentals, concessions, advertising and parking.

How does this stack up in the scheme of things in the Phoenix economy?

It's comparable to a medium-size travel agency.

According to The Business Journal's Book of Lists, the Carlson El Sol Travel Company in Tempe reported $28.5 million in revenue in 2000 to rank fifth on the Journal's list of top minority-owned private businesses in Phoenix.

But if El Sol Travel decided to pack up and leave town, it wouldn't be a matter of public concern. Another travel agency would quietly and quickly fill the gap.

It would be entirely different if the Cardinals left, leaving Phoenix without an NFL franchise for years to come because the NFL controls -- as an unregulated monopoly -- which city will have teams.

The NFL requires a three-fourths vote of approval by league owners for a team to relocate to another city. If no team wants to move to Phoenix, which has proved to be a dismal supporter of NFL football, then Arizona would have to wait for an expansion team.

Again, since the NFL strictly controls expansion, Arizona could be in for a long wait. And, if the time does come, the expansion fee will likely be huge, considering the $700 million paid by Houston.

Faced with the prospect of losing the Cardinals, community leaders led by Bank One's former chairman Mike Welborn and more than 30 other business leaders joined the Arizona Cardinals and Governor Jane Hull's former deputy chief of staff Ted Ferris to develop a plan to keep the Cardinals in Arizona after Mesa voters turned down a stadium financing proposal in 1999.

In early 2000, the "Plan B" task force successfully lobbied the Legislature to place an initiative on the November 2000 ballot that was written by the Cardinals' attorney Steve Betts. Known as Proposition 302, the initiative rallied from far down in the polls under the direction of campaign consultant Jay Smith to win a razor-thin victory of less than 1 percent. Smith focused the advertising campaign on Proposition 302's benefits for youth sports, which receives the least amount of money, rather than the Cardinals, which receives the most.

The initiative triggered an increase in hotel and rental car taxes along with a host of other diversions of sales and income taxes that will total $1.8 billion over the next 30 years to primarily build and operate a new "multipurpose facility" for the Cardinals.

Most of the tax money -- $1 billion -- is earmarked to build and operate the stadium. The balance will go to fund tourism promotion ($265 million), pay for construction of new Cactus League spring training facilities for Major League Baseball ($205 million), and pay for youth sports recreation areas ($73.5 million).

Duplicating the NFL's strategy of having cities compete nationally for teams to bid up incentives, the Cardinals have Valley cities and Indian tribes competing for the second time in a year to spend anywhere from $60 million to well over $100 million for roads, parking lots, plazas and sewers to support construction of the stadium.

No one -- except for the state Tourism and Sports Authority, which will build, own and operate the facility -- expects the investments the "winning" city or tribe makes into the stadium to ever come close to generating a reasonable return.

"This particular stadium will not be a profit center," Phoenix Mayor Skip Rimsza tells New Times. "They just do not generate enough revenues and enough events to be a profit center, no matter where it is located."

Nevertheless, intraregional competition is so intense that last year it spurred Tempe officials to lie about receiving preliminary approval from the Federal Aviation Administration for a site near the airport that TSA selected as its first choice. The FAA later declared the site an aviation hazard, forcing TSA to look for another site and delaying construction on the project by a year.

Cities are fighting to have the stadium in their backyard because the stadium will from time to time pour money into the neighborhood where it is located.

"For any politician in one of these cities, this is gold," says economist Fort.

The cost of building the infrastructure for the stadium can be easily obscured in a city's ongoing expenses. What's visible to the public will be hordes of crowds spending money a dozen times a year or so for football games and other events.

Politicians' constituents, Fort explains, "will get the redistribution of all the money that gets spent at the stadium. Where it gets spent matters to the individuals who collect it."

Which explains why, despite Rimsza's negative financial assessment of the stadium, Phoenix is still making a strong push to have the stadium built in one of two locations: Seventh Street and Fillmore in downtown and at 40th Street and Loop 202.

"The question before us, in my mind, should not be which location can it make a profit. The question will be which location in the entire Valley will it have maximum community benefit," Rimsza says.

Downtown, Rimsza says, may be the best site because of existing parking, freeways, future light-rail stops and hotels.

If TSA selects downtown or the 40th Street site as one of its two finalists for the stadium, the city will have to hold a special election in May to get voter approval to spend more than $3 million on a stadium.

After all the problems the Cardinals have faced trying to site the stadium, exposing the project to another vote is risky, says NFL sports consultant Mark Gannis.

"I would be very concerned about going through another referendum," says Gannis, president of Chicago-based SportsCorp Limited. "If I were the Cardinals, I would be focused on just getting it done."


The Cardinals stadium was presented to voters as a multipurpose facility that will be able to host scores of major trade shows and conventions. This will be a difficult goal for TSA to accomplish given that Bank One Ballpark is attracting only a half-dozen or so non-baseball events a year. Bank One earned $390,000 in 1999 from non-baseball events, up from $269,000 in 1998.

Ted Ferris, TSA's chief executive officer, says the Cardinals facility will be able to attract about $5 million a year worth of non-football events because of the stadium's unique design that will allow the field to roll out and expose a floor wired for convention events.

Even if Ferris' projections are correct, the convention-related revenue will fall far short of covering the stadium's operating expenses projected to be $11 million in its first year of operation.

Critics say linking the football stadium with a convention center will simply increase the likelihood that the facility will lose money.

"Publicly subsidized convention centers, like stadiums and arenas, are plagued by operating deficits and minimal economic impacts," said Joseph L. Bast in a 1998 Heartland Institute policy report on the impact of stadiums and the economy.

The Phoenix Civic Plaza is one example. The publicly funded plaza lost $21.3 million on operations in 1999 and $25 million in 2000. The facility generated only $12 million in fees from conventions in 1999 and $8 million in 2000.

If the Cardinals stadium is built next to the convention center in downtown Phoenix, the city will have four huge facilities within a few blocks competing with each other for major events -- the 20,000-seat America West Arena, the 50,000-seat Bank One Ballpark, a huge convention center and the proposed 67,000-seat Cardinals stadium.

Adding the Cardinals stadium to the mix will do little to attract more convention business.

"You already have facilities for conventions," says Stanford economist Roger Noll. "There is no convention on Earth that requires two domed stadiums, plus a basketball arena."

Phoenix Mayor Rimsza dismisses the threat of the Cardinals stadium stealing convention business away from the financially ailing Civic Plaza, saying few conventions would want to be in a stadium setting anyway.

"We don't really think there is any significant convention booking," he says while feigning a yawn to emphasize the city's lack of concern over the stadium. "That's why we have never been overly focused that they are going to build convention facilities."

Rimsza isn't the only one yawning over TSA's projections that the new stadium will be an economic engine that will create thousands of jobs and generate more than $300 million a year in economic activity.

Sports economists with no financial ties to the Cardinals project say stadium proponents use simplistic analysis to overstate the economic impact of a new stadium.

According to economist Noll, more than a dozen independent economic analyses of new stadiums from across the country come to the same conclusions:

"A new sports facility has an extremely small (perhaps even negative) effect on overall economic activity and employment. No recent facility appears to have earned anything approaching a reasonable return on investment.

"No recent facility has been self-financing in terms of its impact on net tax revenues. Regardless of whether the unit of analysis is a local neighborhood, a city, or an entire metropolitan area, the economic benefits of sports facilities are de minimus."


The Arizona Cardinals don't want to discuss how much money the team is putting into the stadium project.

There's a good reason for their reticence.

On the surface, it appears the Cardinals are contributing $85 million toward construction of the stadium -- or about 25 percent of the projected $334 million project.

But on closer examination, it appears the Cardinals will put none of their money into the project.

The agreement between TSA and the team allows the Cardinals to retain 100 percent of the naming rights for the stadium that is built primarily with public funds. Naming rights sell from anywhere from $50 million to several hundred million dollars.

But it's not just the naming rights deal that will cover most -- if not all -- of the Cardinals' "contribution" to the project.

The NFL operates a $1 billion-plus fund to help franchises build new stadiums. Each team contributes to the fund by paying a portion of revenue generated by premium-priced club seats.

Known as the "G3" program, the NFL stadium fund provides between 34 percent and 50 percent of a team's contribution toward building a new stadium. The larger the market, the greater the NFL's contribution toward stadium construction.

NFL spokesman Greg Aiello says the league approved a G3 distribution to the Cardinals at the NFL's annual meeting last fall. Aiello declined to state the amount, recommending that New Times call the Cardinals. The team declined to comment.

However, TSA boss Ferris says that the NFL's contribution is about 34 percent of the team's $85 million pledge, or roughly $28 million. Sports consultant Gannis also says the Cardinals received about this amount.

At the same time the Cardinals have managed to reduce the amount of money they are investing into the project, the team has negotiated a stadium-use agreement with TSA that allows the team to collect all ticket revenue from home games, all concession, parking and luxury suite revenue and all advertising except for temporary advertising related to the Fiesta Bowl.

While the Cardinals' contribution to the stadium is minimal, the public's exposure to cost overruns remains.

Proposition 302 stated that the stadium would not exceed a cost of $334 million. However, delays and statements made by TSA board members make it clear there will be cost overruns.

How far remains to be seen.

TSA board chairman Jim Grogan says he doesn't know yet what the cost will be, but doesn't expect it to rise much higher.

"Until we get a site and figure out where it's going to be and figure how it is going to fit in that site . . . we don't know," he says.

Other board members say the cost is in the $360 million range.

The TSA has yet to sign a contract with Hunt Construction Company to build the stadium. According to law, the contract is to include a "guaranteed maximum price" provision that is supposed to protect the public from paying more for the stadium.

However, under an interim contract that TSA signed with Hunt in June 2000, there are provisions for TSA board-approved "change orders" that could increase the cost of the stadium to the public. TSA officials say there is enough money from planned bond sales to cover the cost of a $500 million stadium.

With Cardinals/NFL contribution locked at $85 million, any unforeseen cost overruns will be fought out between Hunt Construction Company and the TSA.

Economists and attorneys familiar with stadium construction projects say an experienced contractor like Hunt -- which has built more than 70 stadiums and arenas worldwide -- will have the upper hand in shifting costs.

"In a cost overrun dispute, bet on Hunt," says a Phoenix attorney who worked on Bank One Ballpark, a stadium that also was built by Hunt.

Bank One Ballpark was projected to cost about $273 million. It came in at about $370 million. The cost overruns were absorbed by the owners of the Arizona Diamondbacks.


The Cardinals are not the only entity benefiting from the stadium project.

A host of insider companies that have worked with the team since the inception of the Proposition 302 campaign are receiving hefty, no-bid contracts from TSA.

TSA employees also have landed lucrative employment contracts. Both issues are attracting considerable attention from state legislators and Maricopa County officials.

The Maricopa County Attorney's Office hired a private attorney to review the TSA contracts and provide a report to the county Board of Supervisors, according to a copy of the confidential memorandum obtained by New Times.

The December 21 report states that contracts awarded by TSA to Banc One Capital Markets ($25,000, flat fee), Wells Fargo Bank, Bank One, Dain Rausher ($225/hour), Western Financial Group ($175/hour), Ernst & Young ($25,000, flat fee), Smith & Harroff ($5,000/month), Zurich North America Services Corporation ($115/hour) and International Facilities Inc. ($35,000/month) were all awarded without competitive bidding.

The County Attorney's Office declined to comment on the report. Members of the Board of Supervisors and County Manager David Smith did not return calls seeking comment. The author of the memorandum, Phoenix attorney Bill Sims, declined to comment.

None of the agreements, according to the report, contain provisions normally included in state contracts related to conflicts of interest.

Several of the companies receiving TSA contracts worked on the task force that developed Proposition 302. Others stand to profit by providing financial advice to the TSA and then participating in the actual underwriting and sale of approximately $250 million in bonds to be sold to pay for stadium construction.

Dain Rausher, for example, serves as the TSA's bond underwriting consultant. Dain Rausher is also expected to participate in the sale of those bonds.

Banc One Capital Markets appears to have the opportunity to not only provide consulting services to the TSA, but also to participate in stadium financing, according to the confidential county memo.

Sims, who has reviewed several other stadium projects, stated in his report to Maricopa County that "typically . . . the government bars the consultant from participating in the transaction that the feasibility consultant is analyzing."

Ferris says the TSA contracts with Banc One Capital Markets and Dain Rausher "are entirely legal" and were issued following the advice of TSA's attorneys, the Phoenix law firm Fennemore Craig.

Furthermore, Ferris says, TSA is exempt from state procurement laws and is not subject to competitive bidding requirements.

"There are situations where you can single source a contract if it is based upon being in the state's best interest," Ferris says.

TSA is negotiating contracts with companies that are already familiar with the stadium issue because they have proven expertise, Ferris says.

Contracting with these companies, Ferris says, is also "easier" and saves TSA time.

"You can choose to look at it this (nefariously) as being we are doing business with those we had a prior relationship," Ferris says. "I view that as a strength and something that is helpful."

Another apparent conflict of interest involves Smith & Harroff, an Alexandria, Virginia, political consulting firm with close ties to former governor J. Fife Symington III and current Governor Jane Hull.

Smith & Harroff was paid about $269,000 by the Cardinals to help design its Proposition 302 campaign, county campaign finance reports show.

Immediately after Proposition 302 was passed, TSA hired Smith & Harroff on a $5,000-a-month retainer to handle TSA's communications.

Smith & Harroff, however, continued to work for the Cardinals while being paid by TSA. County campaign finance reports show that the Cardinals still owed Smith & Harroff $56,000 as of December 2000, the last time finance reports have been filed.

Smith & Harroff owner Jay Smith did not return a call seeking comment.

Ferris says he sees no conflict of interest because of Smith's dual role of working for TSA and the Cardinals at the same time.

"Jay did a great job for us over the past year," Ferris says. "He was somebody that knew intimately what the purposes of the TSA are, and that's important."

Nevertheless, Ferris says TSA is "winding down" Smith & Harroff's duties, with communications responsibilities being picked up by a staff employee.

At the same time the TSA staff is issuing no-bid contracts to companies that appear to have conflicts of interest, the staff is being paid hefty salaries that come with plum perks.

Ferris is making $150,000 a year with a 5 percent annual escalator plus a discretionary bonus to be determined by the TSA board of directors. Ferris also receives a $600-a-month auto allowance.

Kenny Harris, TSA vice president for facilities, is paid $139,000 with a 3 percent annual escalator plus a guaranteed $8,000-a-year bonus. Harris also receives $500 per month for a vehicle.

Kelly Leid, TSA vice president of operations, is earning $100,000 plus the same additional provisions as Harris.

Charles Foley, TSA chief financial officer, is paid $98,000 with a 3 percent annual escalator and discretionary bonus.

All the agreements include four weeks' paid vacation. None of the agreements can be terminated before 2005 without substantial severance packages. Ferris, for example, is eligible to receive one-half of the value of his contract, including salary, benefits and car allowance, if he is terminated prior to December 31, 2005.

The salaries and perks are far higher than those received by county officials overseeing construction of Bank One Ballpark. The Maricopa County Stadium District entered only into short-term contracts with the highest paid employee receiving $98,000 a year, with no vehicle allowance. The employee could be fired at any time with no severance.

Ferris says TSA's employee contracts are comparable to stadium projects elsewhere in the country. He says he wanted to provide employees strong incentive to remain on the project throughout the construction process.

"I wanted to make sure they are not going to leave me for a better offer and leave me in a lurch in the middle of the project," he says.


The one-sided financial aspects of the Cardinals stadium deal, last year's site selection problems that led to the FAA's rejection of the Tempe location, and ongoing controversy surrounding TSA operations is eroding public support.

Several legislators, led by Senator Scott Bundgaard, are preparing legislation that could seriously affect TSA's ability to function.

Meanwhile, the John F. Long lawsuit hovers in the background, freezing TSA's ability to sell bonds to finance the stadium.

Longtime Phoenix economic development experts, like former Downtown Phoenix Partnership director Margaret Mullen, are growing increasingly disgusted.

"The whole initiative process through the design and construction of the stadium for the Cardinals is the case study that economic development and urban design specialists will look at for decades to come as how not to do things," Mullen says.

As former head of Downtown Phoenix Partnership, Mullen was instrumental in mustering civic support for the construction of America West Arena and Bank One Ballpark. Those projects, she claims, have been major benefits to downtown.

The Cardinals stadium, however, is a different story, particularly if it is located downtown.

"Do the numbers," she says. The football stadium "is something that happens 10 or so times a year. Do you really want to take 20 or 25 acres in downtown and deactivate it for 10 times a year?"

Mesa Mayor Keno Hawker is also skeptical of the benefits of the stadium, even though his city was one of the eight sites under consideration by TSA.

"It is very difficult for a host city with a straight face to face the residents and say, 'This is a great deal for our community,'" Hawker says.

While cities scramble to try to win the project, the Arizona Cardinals remain silent.

The Bidwill family is letting the power of the NFL cartel do its work, confident that, sooner or later, the team will get a publicly subsidized stadium.

There is an alternative to the NFL's monopoly market place.

Just look to the NFL's playing field -- where competition reigns supreme.

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