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Cap Runamok

They said it would never happen.The Maricopa County Board of Supervisors and Arizona Diamondbacks managing general partner Jerry Colangelo have said for years that taxpayers' share of construction of Bank One Ballpark would be capped at $238 million. All stadium-related costs over that, they said, would be the team's responsibility...
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They said it would never happen.

The Maricopa County Board of Supervisors and Arizona Diamondbacks managing general partner Jerry Colangelo have said for years that taxpayers' share of construction of Bank One Ballpark would be capped at $238 million.

All stadium-related costs over that, they said, would be the team's responsibility.

That promise is about to be broken.

Mired in debt and squeezed by falling attendance, the Diamondbacks are pressuring county supervisors to give the team additional funds beyond the cap -- including paying off a $5.8 million judgment stemming from a condemnation suit for two acres at the stadium site.

"They want to pierce the cap," says one county official familiar with the team's strategy. "It really wasn't a hard cap after all."

The spending cap has long been touted as one of the linchpins of the controversial project that foisted an unpopular quarter-cent sales tax on Maricopa County residents. The tax expired in November 1997.

Meeting in a closed executive session on Monday, supervisors discussed alternative financing plans the county can implement to help the team pay the judgment. Sources say supervisors Mary Rose Wilcox and Don Stapley are supporting the team's plea for financial assistance.

Team officials continue to insist publicly they plan to tap lenders for the money. But New Times has learned the Diamondbacks have been asking the county for a bailout on the judgment for more than a month.

County manager David Smith has been seeking legal advice concerning the judgment "and the Team's request for assistance in paying that judgment" since at least mid-March, documents obtained by New Times reveal.

Arizona Diamondbacks president Rich Dozer did not return phone calls seeking comment.

County officials are reportedly looking at $9.5 million in reserve accounts that are earmarked for stadium maintenance as one source of funds. The reserve accounts include about $6 million in extra sales tax that was collected in November 1997.

One plan under consideration would have the county give the Diamondbacks money from the reserve account -- or, alternatively, put up the money as collateral for the team to borrow funds from a private lender.

In exchange, the Diamondbacks would agree to allow the county to host more events in the stadium during the baseball season. Revenue from non-baseball events during the season is split between the team and the county. The team's cut would be earmarked for the repayment of any funds advanced by the county -- or possibly a private lender -- to pay the court judgment.

The county appears to be in a strong bargaining position.

In August 1999, the team and the stadium district renegotiated the facility use agreement. In a move that appears to have backfired on the Diamondbacks, the team asked to be released from an expensive letter of credit that guaranteed all stadium costs beyond $238 million would be covered by the team.

In exchange, the stadium district agreed to tap its reserve accounts if the team refused to pay a construction-related bill. However, the team would be required to repay the district for any advances from reserve accounts at the prime rate plus 10 percent.

In this case, rather than negotiate, the county could simply present the $5.8 million judgment to the team and demand payment. The team would then have three days to pay the bill. If it doesn't, the county could withdraw the money from the stadium reserve accounts and pay the bill. The county would then begin docking the Diamondbacks about 17 percent interest on the $5.8 million.

The $5.8 million judgment stems from a 1995 condemnation lawsuit filed by the Maricopa County Stadium District against the parcel's owners, Downtown Phoenix Partners. The parcel is located on the southwest corner of Seventh Street and Jefferson.

The stadium district sought the acreage for $900,000, but a jury agreed with DPP that the land was worth a lot more. DPP won a $4.7 million judgment in February 2000. The stadium district appealed, the Court of Appeals upheld the jury verdict. The judgment, with interest dating back to when the original condemnation suit was filed, has risen to $5.8 million. This is in addition to the $900,000 already advanced to DPP by the stadium district for the land, bringing the total cost of the two acres to $6.7 million with interest added in.

Although the judgment is against the county stadium district -- which owns Bank One Ballpark -- the payment is the responsibility of the team under the $238 million cap.

"This is the team's responsibility -- at this time," says Bill Scalzo, executive director of the Maricopa County Stadium District.

The team's hat-in-hand posture with Maricopa County is a sharp reversal from its public position a year ago. At that time, Dozer told the Arizona Republic that the $4.7 million DPP judgment was just "a bump in the road" and that "we'll manage."

The team's finances, however, have continued to deteriorate during the last year. Several of the team's stars have agreed to defer portions of their salaries into future years, and the team has slashed its administrative operations. Operating losses have averaged about $20 million a year the past two years and the team is mired in long-term debt of $125.9 million related to its share of stadium construction costs plus costs of forming the team.

Colangelo also owes his limited partners about $190 million for their shares in the team. Colangelo, who owns about 1 percent of the team, will reap a significant windfall only by repaying the limited partners their investments, with interest. Upon repayment, Colangelo's share in the Diamondbacks would jump to 25 percent.

The unexpected magnitude of the construction cost overruns, declining attendance despite winning the Western Division title in the team's second year, plus the sweetheart deals received by the Arizona Cardinals and the Phoenix Coyotes for their new stadiums in Tempe and Glendale is irritating Colangelo, insiders say.

Nevertheless, until now, the Diamondbacks steadfastly insisted that the team would be responsible for all cost overruns.

"One of the things I will not do is sacrifice the integrity of the project," Colangelo told the Republic in early 1996, when it became clear that the stadium was going to cost far more than anticipated.

Dale Zeitlin, a Phoenix attorney who represented DPP, says the lawsuit has been one of the strangest he's ever been involved in. Although the stadium district filed the condemnation case, all the negotiations were conducted with the Diamondbacks, he says.

"It's been wacky," says Zeitlin. "I've never had a case like this when . . . the party who is suing you isn't at the table."

Zeitlin says there is no doubt that he intends to seek money from the county to collect on the judgment.

"We are going to the county, baby," Zeitlin says. "We are going to where the money is."

Many Maricopa County voters were outraged that they had no say over the sales tax, which was approved by county supervisors by a 3-1 margin.

Those politicians who voted in favor paid dearly.

Supervisor Ed King was defeated in his bid for reelection, and Jim Bruner was trounced in a Republican primary bid for Congress. Mary Rose Wilcox is the only one of the three supervisors who voted for the tax who remains on the board. But she was shot by a deranged citizen who was angry over the tax. Wilcox has recovered from the wound.

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