Cactus League Has Recurring Funding Shortages

While it’s the Chicago Cubs on the front burner at the moment regarding the need for new spring training facilities, the Arizona Cactus League seems to have a financing crisis every 10 years or so. In 1991 the Maricopa County Stadium District was formed with a Cactus League funding mechanism and in 2000 this agency was superseded by the Arizona Sports and Tourism Authority. In both cases, the concept was to provide an ongoing source of money for spring training capital improvements. Today, in 2010, these entities have outspent their revenue resources and the search is on for yet another source of money. Whatever may be cobbled together in the present instance, you can be assured it won’t be enough to stem additional begging for dollars campaigns in the future.

Spring Training Project Costs Could Soar in Future

While people are rightly concerned about the upfront cost of the proposed Chicago Cubs spring training facilities, future expenditures on this development could easily match the initial outlay. According to the Memorandum of Understanding signed by the Cubs and the City of Mesa, the city and the baseball team share equally for any required or agreed upon capital improvements to the facilities over the life of the agreement with two exceptions. In years 10 and 20 of the agreement an evaluation of other spring training locations will be made. If any five other locations have an amenity or feature lacking at the Mesa project, then the Cubs can demand those features be added to their spring training facilities with the city paying the entire cost of the improvements. Since it is obvious that spring training stadiums and practice fields have come a very long way in the past 20 years, there is no reason to think this will not be true in the future. Without any lid on the amount involved, this could be easily tens of millions more dollars down the road.

Why No Private Investment in Proposed New Cubs Stadium?

While there is no shortage of verbal support for a new Chicago Cubs spring training facility located in the City of Mesa, there appears to be a lack of commitment within the private sector on the monetary side of the issue. A competing proposal floated last year from a Florida group included $50 million in private investment. The lead investor in this arrangement was Esmark, Inc. To be sure, there would have been some public funds needed to complete the deal, but $50 million is a sizeable portion of the total that would have been needed. The strongest argument for using virtually all public funding in this case appears to be that it has always been done that way here in Arizona. On the other hand, we weren’t always going broke. With both the City of Mesa and the State of Arizona bleeding red ink by barrel full, maybe it’s time to rethink how to use what few resources remain available.

State Contribution to Mesa Spring Training Project in Doubt

Legislation in support of the proposed Chicago Cubs spring training facility in Mesa recently passed in the Arizona House of Representatives. However, it failed to contain any specific plan to raise revenue which could be used for debt service on bonds sold to finance the project. The previously included one dollar per car rental surcharge was dropped. Things now move on to the Senate where backers hope to assemble some consensus on a revenue source. Until then, it is impossible to estimate the amount which might flow to the city to offset initial construction of the facilities. The objections encountered thus far may well indicate that the City of Mesa may have to shoulder more of the financial burden than originally thought.

The $4 Million Giveaway

No matter how bad things get in your neck of the woods, there’s always someone worse off. In yet another sign of just how true this old saying is, the City of Mesa has decided to contribute over $4 million of the taxpayer’s money to a worthy charity – the Chicago Cubs. As part of the recently signed Memorandum of Understanding between the city and the baseball team, the politicians in charge eliminated the early termination penalty in the existing lease with the Cubs and they also changed the cancellation notice period from two years to one year. And, even though the city will own the stadium, another little bonus tossed into the deal gives the Cubs exclusive naming rights to the facility which could also be worth millions.

Of course, there are other considerations which go well beyond the money involved. As one economic development official stated, “Having millionaires pay their own way around here is not the sort of image we want to project to the rest of the world.”

Mesa Still Mum on Stadium Details

While anxious residents wait with bated breath, the City of Mesa has yet to reveal either a site or the source of funds to pay for the proposed new Chicago Cubs spring training facility. As to where the development might take place, perhaps the city believes nearby residents will be pleasantly surprised when the final announcement is made. With regard to finding the necessary dollars, assurances have been made that a variety of means are available to get the job done. The smart money, however, is betting that Mesa is wrong on both counts.

There is going to be considerable neighborhood opposition after the specific location is revealed. As for sufficient revenue for construction and operation of the facility, the people making these projections are the financial equivalent of “The Gang That Couldn’t Shoot Straight.”

The Spring Training Money Pit

For two years the accolades just kept on coming – “Award Winning”, “State-of –the-Art”, “Taj Mahal, “At the Forefront”, and on and on. All of these attributes were heaped on the Glendale-owned Camelback Ranch stadium complex which was recently constructed as the new home of Chicago White Sox and Los Angeles Dodgers spring training. The City of Mesa regularly refers to this facility as the pattern to be followed for the proposed Chicago Cubs project. Unfortunately, another description has lately been applied to the Westside development – “Financial Train Wreck”. It seems the City of Glendale borrowed big bucks ($200 million) to build the stadium with the anticipation of attracting a very substantial tax base of commercial improvements nearby. Alas, four years after the festive announcement of the project, nothing in the way of commercial real estate is on the horizon, home values in the area have cratered with market values down over 65% and Glendale does not have any cohesive plan to repay the borrowed funds.

On the brighter side, perhaps the residents of Mesa can learn from this experience and avoid being sucked into the same sort of financial black hole.

Mesa Guided By Mark Twain on Stadium Issue

Proving that we can all learn from the past, the City of Mesa has taken to heart one of Mark Twain’s noted comments: “Get the facts first, and then you can distort them as much as you please.”

The city has concluded that, if Chicago Cubs spring training leaves Mesa, every nickel and dime spent on any Cubs related activity in Arizona will follow them. This is simply not the case. The real sum of money going elsewhere would be far less the incessantly repeated $138 million in lost statewide economic activity touted by the city. It is true that a high proportion of attendees at Cubs games are from out-of-town and a number of these people come to Arizona primarily because of spring training. However, it is also true that a great many people would attend another Cactus League game or just spend their money on some other activity within Arizona.

Fuzzy Math Plagues State Bill on Stadium Funding

The chief sponsor of House Bill 2736 in the state legislature has been quoted as saying that this measure would raise about $59 million to help build the new Cubs spring training facility in Mesa plus another $81 million toward other Cactus League needs. While this turkey might fly with the math-challenged politicians in Arizona, to think the proposed $1 car rental fee and 8% Cactus League ticket surcharge will come up with anything close to the stated amounts is nothing but fantasy. The debt service alone on $59 million in bonds will be $4.2 million per year. Based on current activity levels, the bill would raise only around $3.9 million annually. Making matters worse, both of the named tourism related sources of revenue are falling, not rising. Of course, the likely strategy here is to tap the general fund for the difference.

Books Versus Baseballs

Despite a dramatic shortfall of over $55 million in general fund revenues over the past two years, the City of Mesa proposes to go further into debt by erecting a new Chicago Cubs spring training facility. Here’s the rub – from an economic point of view there is no justification for such an investment. Based on data from the city’s own economic analysis study, the Mesa sales tax revenue generated by the Cubs on an annual basis is much less than even the amount necessary to pay back the city’s portion of the debt necessary to build this project. Maybe the libraries can get by with even fewer books and less hours; maybe city offices can cut back to two days a week; or maybe its time to get real. The city says we need to look at the big picture. In terms of dollars and cents, this is it not a pretty picture.

Would You Pay $84 Million for the Next Wal-Mart?

By now, almost everyone has seen or heard the number $138 million as the amount of “economic activity” that would be lost each year in Arizona if the Chicago Cubs ceased spring training in the state. This comes from a study paid for by the City of Mesa which, along with help from the state, is proposing to develop a new spring training facility using $84 million in public funds. Economic activity is basically the money spent due to some particular enterprise. A far more significant number is the amount of revenue that would flow into public coffers because of this economic activity. According to the same Mesa study, the amount of state tax revenue generated annually by Cubs related spending is slightly less than $5 million. Put another way, Cubs spring training creates about the same tax revenue as a typical Wal-Mart store. While this is by no means an insignificant sum, it is worth noting that Wal-Mart uses their own money to build their own stores.

City Fast-Tracks Cubs Stadium

In order to expedite completion of the proposed Chicago Cubs spring training facility, the City of Mesa has completely reversed the usual approval process for large real estate developments. In the case of a typical proposed real estate project, developers must locate a suitable site, design improvements, summit to all manner of hearings dealing with master plans, zoning, impact on the surrounding neighborhood, traffic mitigation, et. al. and then receive final approval from the City Council. In the Cubs case, the City Council approved a development which had not yet been designed for a location which had not been selected. While the mandatory hearings will still be held and citizens will still have the opportunity to be heard, the process is meaningless because the final authority has already voted in favor of the development.

Proposed Mesa Spring Training Stadium

Our representatives learned just this week that the City of Mesa and the Chicago Cubs Baseball Team have narrowed down the number of sites being considered for the Chicago Cubs spring training facility.

One recent map overlay our representatives have seen places practice fields just north of Thomas Road and west of Recker Road. This basically wraps around Red Rock Park. Where the actual stadium goes is still a mystery. The City of Mesa says the final decision hasn't been made.

We would appreciate receiving your views on this matter and your thoughts on what impact this may have on your lifestyle should Red Mountain be chosen as the actual site.