Glendale is a city that loves sports facilities, but they often don’t love the city back. It is home to professional football and hockey as well as baseball spring training.
The city’s hockey franchise – now known as the Arizona Coyotes - has been a problem for some time. The team went bankrupt in 2009, just six years after it started playing in Jobing.com Arena – built with $220 million in public financing. The Coyote’s management was then assumed by the National Hockey League, which charged Glendale $25 million per year to keep the franchise at the arena. By the end of fiscal 2012, the City was in a deep financial crisis as evidenced by the $27 million general fund deficit reported on the city’s CAFR.
Since then, the Glendale’s condition has improved somewhat. The City is now paying less each year to retain the Coyote’s, has imposed a temporary 0.7% sales tax and recruited a cost-conscious City manager.
But now there is more bad news for Glendale – courtesy of the Arizona Sports and Tourism Authority (AZSTA). In 2007, AZSTA agreed to pay the city up to two thirds of the cost of constructing a stadium for Chicago White Sox and Los Angeles Dodger spring training. Later this share was fixed at $60,000,000 and AZSTA told the city to expect annual payments starting in 2017.
On Tuesday, August 5th, AZSTA management gave Glendale’s City Council a new, less optimistic payment forecast. The new projection calls for payments to start in 2021 – four years later than planned – and that the total amount may not be forthcoming by the time AZSTA goes out of existence in 2031.
Funding for spring training facilities is relatively low on AZSTA’s payment waterfall – behind debt service on AZSTA’s senior bonds and its mandated contribution to a state tourism fund. Because AZSTA revenues are not keeping up with the rosy projections made at the time Maricopa County voters approved the authority, it lacks the capacity to pay Glendale as much as the city expected.
The shortfall is probably not enough to jeopardize AZSTA bondholders sitting atop the waterfall, but they may have another worry. A major source of funding for AZSTA is a rental car tax targeted at tourists. In June, a Maricopa County judge rules the tax unconstitutional. If the ruling stands, AZSTA would lose $15 million of its $53 million in annual revenue, and may even have to repay $150 million in rental car taxes that it previously collected. If the ruling is not overturned, the authority would likely default on its single-A rated senior obligations.
