DALLAS — Amid growing financial pressure on sports and tourism tax revenue, Arizona is hoping to seal an $84 million deal to keep the Chicago Cubs spring training facility in the Phoenix suburb of Mesa.
Caught in a bidding war with Naples, Fla., for the Cubs facility, the Mesa City Council last night considered a memorandum of understanding that would keep the most popular team in the so-called Cactus League in its spring-training home of 54 years.
The memorandum calls for an unspecified combination of general obligation and revenue bonds from the state and the city to build a new training facility at a site to be chosen by the Cubs. The Cubs, the most popular of the 15 teams that practice in Arizona, have played at HoHoKam Park in Mesa for decades.
Any deal agreed to by the City Council or the state would face a series of steep hurdles, including passage of a bond issue by Mesa voters in November, and approval by the Arizona Legislature, which has cut spending to the bone to cover growing budget deficits and must close a $3.6 billion budget gap in the fiscal year beginning July 1.
Mesa’s fiscally conservative voters rejected a National Football League stadium for the Arizona Cardinals in 2002 after the council had approved a memorandum of understanding. The stadium went to the western Phoenix suburb of Glendale, which has aggressively subsidized professional sports, including the National Hockey League Phoenix Coyotes and a new Cactus League stadium for the Los Angeles Dodgers and Chicago White Sox that opens this year.
For Arizona, Major League Baseball’s spring training season represents an economic boon comparable to hosting a Super Bowl.
But with tourism in a slump, the cities that host the Cactus League teams are bracing for a continuing downturn in revenue when play begins in March.
The chief economic impact of the recession comes not from attendance drop-offs but from falling income from a 3.25% rental car fee that supports debt on Cactus League stadiums.
Two public agencies, the Arizona Sports and Tourism Authority and the Maricopa County Stadium District, issue bonds for the league’s stadiums, with some help from cities in the Phoenix area. Two Major League Baseball teams also play their spring training games in Tucson.
“After registering nearly 7.5% average annual gains from fiscal 2004 to fiscal 2006, revenues declined more than 3% in fiscal 2007 and another 2.5% in fiscal 2008; fiscal 2009 witnessed a more dramatic 13.5% drop,” Fitch Ratings noted recently. “This trend reduced annual revenues from a peak of nearly $6.5 million in fiscal 2006 to $5.3 million in fiscal 2009. At this level, annual revenues (plus investment earnings) roughly equal the annual debt service requirement of $5.4 million.”
In noting that trend, Fitch shifted the outlook on the Maricopa Stadium District’s BBB-rated debt to negative from stable. The rating covers $41.2 million of outstanding revenue refunding bonds issued in 2002.
“Further declines in pledged revenues would result in less than 1.0-times coverage on a current basis, which would begin to erode the debt-service cushion in place and be inconsistent with the current rating category,” analysts wrote.
Julie Schweigert, director of the stadium district, said auto rental revenue is down sharply from last year, primarily due to drops in business and convention travel.
But the impact of falling revenue will probably hit the district about 18 months from now, she said, because the district dedicates funds for debt service a year ahead of schedule.
“When we look at that next year, we will have to decide whether to go into our reserves to pay the bonds,” Schweigert said.
For the Arizona Sports and Tourism Authority, the declining revenue comes in a year when debt service on its stadiums, including the showpiece Arizona Cardinals football stadium, will increase by $1.2 million.
“The reality is that the decline has been even more significant and is projected to grow over fiscal years 2010 and 2011 by 5% per year,” AZSTA chief financial officer Charles M. Foley wrote in his annual report. “This backward slide of our primary revenue source continues to put additional pressure on our remaining revenues in order to meet our ongoing financial obligations and statutory distributions.”
Losing the Cubs would be a serious blow to the state’s efforts to boost revenue through sports tourism.
If the Cubs were to move to Florida from Mesa, it would be the first team to move east since 1993, when the Cleveland Indians left Tucson for Winter Haven, Fla. The Indians returned to the Cactus League last year to share a new $108 million training facility with the Cincinnati Reds in Goodyear, a neighbor to Glendale.
Arizona in recent years has had more success in luring teams from Florida with attractive incentives. The Los Angeles Dodgers, who moved from Vero Beach, Fla., last year, will share a new $110 million stadium in Glendale with the Chicago White Sox, who moved from Tucson. Glendale agreed to provide $54 million in financing for the stadium.
To keep the San Francisco Giants playing in Scottsdale, the city and the stadium authorities put together a $23 million package to refurbish Scottsdale Stadium, with $13.3 million coming from the AZSTA, $6.67 million from the Maricopa Stadium District, and $3.1 million from the city.
The Cubs were seeking a state-of-the-art ballpark that they would not have to share with another team. A group of investors in Naples promised to buy property and lease it to the city for building a stadium.
With Arizona appearing to win the Cubs bidding war, Florida Gov. Charlie Crist yesterday said his tourism office was working with Rep. Robert Schenck, Rep. Tom Grady, and Sen. Mike Fasano from the state Legislature on a bill to provide up to $15 million in state sales tax revenue to finance spring training facilities in the Grapefruit League, as Florida’s spring training circuit is known.
The program would give certified communities the ability to receive $500,000 a year for 30 years in sales tax revenue for spring training facilities, according to Chris Hart, interim director of the governor’s office of tourism, trade, and economic development.
For Arizona, the creation of the Maricopa County Stadium District in 1991 was a defensive move designed to keep Las Vegas from luring teams into a proposed training site there. Later, the district became the financing agent for the Major League Baseball stadium in downtown Phoenix, now called Chase Field, where the Arizona Diamondbacks play.
The Diamondbacks stadium is a rarity in that it was financed without any bond issuance. In four years, the district collected enough revenue from a quarter-cent sales tax to build the $235 million stadium.
“We’re really quite unique in terms of stadiums,” Schweigert said.