Land owners inside the downtown stadium site say their properties can't be condemned because the facility is being built to benefit private interests. They say the state constitution requires that property condemned under eminent domain must be for a public use, and that the stadium project doesn't meet that standard.
County shoppers are forking over $238 million in sales taxes to build the 47,000-seat, retractable-domed stadium, which is to be named Bank One Ballpark. The stadium--to be built on 22 acres south of Jefferson Street between Seventh and Fourth streets--will be owned by the Maricopa County Stadium District and operated by the Arizona Diamondbacks baseball team, headed by Jerry Colangelo.
But with the exception of Phoenix Newspapers Incorporated (a partner in the Arizona Diamondbacks), owners of property on the stadium site don't want to sell--at least at the prices the stadium district is offering. Phoenix Newspapers has agreed to sell its property for $2 million.
The rest of the property owners have rejected the stadium district's offers, although negotiations continue. The stadium district is offering property owners $9.1 million for their land even though it budgeted $17 million to acquire the property a year ago, county records show.
In June 1994, the stadium district projected spending $52,000 to acquire the 1,000-square-foot home of Beatrice Villareal, an 87-year-old woman who has lived her entire life on the property. But when the district offered to purchase her land in April, the bid came in at only $25,000. (Faced with a public relations debacle, Colangelo stepped in and offered to take care of Villareal financially for the rest of her life.)
The pattern of much lower offers compared to the district's June 1994 acquisition budget doesn't stop with Villareal's property. It holds true for all of the properties.
The property owners' reluctance to sell and vacate their land is cutting into Colangelo's construction timeline; he wants to break ground by early October and have the stadium completed when the Diamondbacks begin play in April 1998.
The stadium district has responded to private property owners' resistance by playing hardball. Attorneys for the district are accusing private property owners of resorting to "litigation blackmail" in a thinly disguised effort to extract outrageous settlement payments for their land.
"We have seen some unusual and fairly desperate efforts to delay this project," says Gary Birnbaum, a Phoenix attorney representing the stadium district.
The private property owners whose businesses the stadium district wants to displace decline to discuss the negotiations. But their attorney, condemnation expert Jay Dushoff, bristles at suggestions he is trying to shake down the district.
"They have the gall to publicly say we are engaging in litigation blackmail when we file a motion with the court asking for adequate time in which to prepare our case," Dushoff says.
Why, Dushoff asks, should private property owners--three of whom have long-standing businesses--immediately give up their land without just compensation because Colangelo wants a baseball stadium to be open by a certain date?
"They are trying to steamroll us," Dushoff says.
To keep the stadium construction schedule on track, the stadium district filed a lawsuit in April to force the recalcitrant property owners out. The district is seeking a court order allowing it to seize the property of ongoing businesses such as Stern Produce, King's Onion House and Case Tire within 90 days.
Maricopa County Superior Court Judge Thomas Dunevant will decide whether the stadium district can take the private property. The stadium district had hoped that Dunevant would already have ruled in its favor. But the judge postponed a May 5 hearing to give property owners more time to prepare their case and has set aside two 14-hour sessions beginning June 12.
Stadium district attorneys are confident that the Legislature granted the district condemnation power when it passed the law allowing creation of the stadium district and gave Maricopa County supervisors the right to impose the sales tax.
"We don't think there is any question at all under the applicable law, or under even a common-sense view of the matter, that a stadium is in fact a public use," Birnbaum says.
Birnbaum expects the court to allow the district to take possession of the property within 90 days. What the district will pay property owners can be settled later, either in court or through negotiations.
Dushoff, who also represented owners of property on the America West Arena site, hopes to block immediate seizure of the property by claiming the Legislature violated the state constitution when it created the stadium district. Dushoff says the law is unconstitutional because it is "special legislation" applying only to Maricopa County and improperly restricts the use of the stadium by preventing professional football games.
"We think the legislation setting up the stadium district and the right to condemn is highly suspect," Dushoff says.
Dushoff also is arguing that the primary beneficiary of the stadium will be private interests rather than the public, so the district has no right to condemn the land.
This will be difficult to prove, because the county has failed to prepare a detailed financial-impact study on projected revenues to the baseball team. The costs to the public, however, are well-documented.
The public not only is paying out $238 million in sales taxes, taxpayers also will be required to pay $1 million a year in interest payments on a $15 million bond the county will sell to help cover stadium construction costs.
In return for the county's total $253 million stadium investment, the county will reap about $2.5 million a year from stadium operations--a paltry 0.9 percent annual return. And the projections of revenue for the county are based on attendance of 2.5 million people each year, or 31,000 fans per game.
The debt-ridden county--which has been forced to lay off workers and close landfills and parks--could earn far more on its $253 million stadium investment if it simply deposited the money in a bank at 6 percent interest; that would yield $15.18 million in the first year alone.
Meanwhile, Colangelo's private partners--which include three major banks, two broadcasters, the state's largest newspaper, the state's largest utility, a Fortune 500 company and the most profitable franchise in the National Basketball Association--will control all stadium operations. The team is expected to contribute about $25 million to the cost of building the stadium.
The only financial analysis prepared for the county on the baseball team was a preliminary report completed in February 1994 by Welle Consulting Group of Minneapolis. The report projected the baseball team will accumulate a $42 million loss after the first ten years of operation.
But the Welle report also shows most of that loss being offset by the team earning $37 million from operating the stadium--leaving Colangelo's investment group $5 million in the red after a decade. But no one expects the Diamondbacks still to be operating at a loss ten years out.
"If the question is whether the team will make some money, we hope so," says stadium district private consultant Eric Anderson. "Is there any indication the baseball team will make tons of money, hand over fist, no, we don't see any indication of that."
Dushoff, however, sees every indication that Colangelo and his partners are preparing to tap into a gold mine at the public's expense. One example of the uneven nature of the deal is the plan for dividing the $1 million annual fee Bank One will pay to have its name on the stadium.
Colangelo's partnership will receive 65 percent of the fee, which increases by 5 percent each year, while the stadium district picks up 35 percent.
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Colangelo doesn't see anything wrong with the split.
"I believed the arrangement that was negotiated between the district and the team is not only fair to the team but fair to the county," Colangelo said in a May 24 deposition.
But Dushoff says the taxpayers, not Colangelo and his partners, should be the primary beneficiaries.
"He is selling the name of a $253 million stadium built by taxpayer funds," Dushoff says. "When you look at it that way, that is one hell of a sweetheart deal for Mr. Colangelo.