DALLAS - Arizona's professional sports mecca of Glendale will take its chances in the bond market today with a $199 million issue to finance a new spring training facility for Major League Baseball's Chicago White Sox and Los Angeles Dodgers.
The deal begins with a retail order period today, followed by institutional orders tomorrow.
"Given the market conditions of the past few weeks, retail kind of dominates right now," said financial adviser Scott Nash of JNA Consulting Group. "We have a broad-based management team and a decent-sized selling group, so we'll be putting on a full-court press. We expect a good response from the market."
With Glendale officials aware that market turmoil could bring higher rates than they would like, the bonds will come with aggressive five-year call provisions, which is about half the wait before a call date in most bonds, Nash said.
In five years, the city may also be able to back refunding bonds with revenue from the sports facility instead of the city excise tax, according to Raymond Shuey, the city's chief financial officer.
"With the downturn in the real estate market," that was not really a possibility this time, Shuey said.
The underwriters comprise senior manager Wachovia Bank NA, JPMorgan, Merrill Lynch & Co., and Siebert Brandford Shank & Co. Greenberg Traurig is bond counsel and Squire, Sanders & Dempsey is disclosure counsel.
The fixed-rate, third-lien excise tax revenue bonds carry ratings of AA from Standard & Poor's and A2 from Moody's Investors Service. There are no plans to insure the bonds, Shuey said.
The bonds will be issued in the name of the Western Loop 101 Public Facilities Corp., a nonprofit leasing entity created by the city and authorized to issue $200 million of debt, a limit that will be reached with this week's issue.
The bonds will come in three tranches, with a $134.3 million tax-exempt Series A, a $49.9 million tax-exempt Series B, and a $15.9 million taxable Series C that will pay for a surface parking lot and a reserve stabilization fund that can be used to pay debt service if needed.
Additional financing for the spring training facilities comes from the Arizona Sports and Tourism Authority, which will provide $50 million. The agency, created to finance the new Arizona Cardinal's stadium in Glendale, also provides financing for Cactus League facilities in Arizona. Cactus League is the name for the teams that hold spring training in Arizona. The teams that practice in Florida play in the so-called Grapefruit League.
Luring the Dodgers from the Grapefruit League gives Glendale its first entry into the Cactus League, which includes cities such as Mesa and Tempe east of Phoenix. The White Sox hold their spring training camp in Tucson in southern Arizona. The Glendale training facilities will include a state-of-the-art stadium less than two miles from the Cardinal's University of Phoenix stadium and the hockey arena where the National Hockey League's Phoenix Coyotes play.
With the move of the Dodgers from Vero Beach, Fla., where they have been holding spring training since 1948, Cactus League will consist of 14 major league teams that hold spring training in Arizona.
To leave Tucson, the White Sox had to break a 15-year contract with Pima County that expired in 2013. The team may have to pay $28 million to break the lease or find a replacement team to train at Tucson Electric Park.
The White Sox have proposed converting the park to a youth baseball facility, claiming that use would bring in $49 million per year, compared to the $10 million per year currently provided by the White Sox.
The White Sox must play at least 20 games a year at the Glendale complex beginning in 2009 or pay a fine of $250,000 for each game below that level. Teams typically play 30 full games during spring training.
As Glendale, host of the next National Football League Super Bowl, prepares to welcome the Dodgers and White Sox, the town of Goodyear to the southwest is working on a spring training facility for the Cincinnati Reds, another team that practices in Florida.
Although Florida drew 22% more fans to spring training games than Arizona this year, the trend appears to be shifting in Arizona's favor. The Dodgers and Reds are expected to lure 250,000 fans to Arizona, particularly from Los Angeles, which is a day's drive away or a short flight from Phoenix.
"There's a real demand for seeing the Dodgers here," Shuey said. "From the day that this was announced, there's been tremendous interest."
Although the tumbling economy appears to be hurting ticket sales for some professional sports teams, the spring training ritual has not yet suffered a loss of interest.
The Grapefruit League's 18 teams drew 1.68 million fans last spring for a record average attendance of 6,478 in 259 games. The Cactus League drew a record 1.32 million fans for an average attendance of 7,436 at 177 games.
With an estimated population of 244,000, Glendale's economy has been traditionally built on aerospace, communications, health, chemical, and agriculture industries. The city's leading employers include Luke Air Force Base, with 8,400 employees.
The city's median household effective buying income in 2007 was slightly above average at 104% of national levels, according to Standard & Poor's, although per capita effective buying income indicators are more at the adequate level of 88% of the nation's level.
After hosting this year's Super Bowl, the new Cardinal's stadium will serve as the site of the annual Fiesta Bowl college football game. Development around the hockey arena and stadium within the past year includes a new AMC theater, restaurants, and a Cabela's outdoor retail store.
With a severe economic downturn in progress in Arizona's Valley of the Sun, Glendale citizens are not showing any buyers remorse about bringing the Cardinals, Coyotes, Dodgers, and White Sox to their city, according to Shuey.
"The community and the City Council are very supportive," he said.