Phoenix mayor explains grooviness of using taxes for Suns-Coyotes arena: It’s cheaper than two arenas!

Phoenix mayor Greg Stanton made his pitch for a new publicly funded arena for the Suns and Coyotes yesterday, and he didn’t provide much more specifics than when he leaked it the day before: He will use tax money, but he won’t raise taxes to pay for it, and he’s for it because he thinks it will bring more spending to downtown Phoenix.

“I as mayor will do everything I can to pursue a course that makes a new facility home to the Suns, the (Phoenix) Mercury and the Coyotes,” Stanton said, noting the WNBA franchise as well. “Building two new sports arenas in our region simply doesn’t make fiscal or common sense.”

He’s right there, as far as it goes: One arena is definitely cheaper than two, albeit a lot more expensive than zero. So does building one new sports arena make fiscal or common sense for Phoenix?

Stanton’s funding plan, based on what little he’s revealed about it, would be a bit of a Rube Goldberg scheme, avoiding new taxes by siphoning every last bit of value out of existing ones. Currently, Phoenix levies hotel and car rental taxes and uses the proceeds to pay off a bunch of past construction projects, including the Suns’ existing arena (opened in 1992), a Sheraton hotel, and other buildings. (Note: This is separate from the county hotel and car rental taxes that pay off the Arizona Cardinals stadium and which were partly ruled unconstitutional in 2014.) The current arena will be paid off in 2022, however, and the hotel plus a downtown biotech building are in the process of being sold off, which would free up those tax revenues to be used for something else.

Great, free money, right? Not exactly. First off, the “something else” could be pretty much anything — in the most extreme example, the city could just cancel the hotel and car rental taxes once the existing arena is paid off, and either leave taxes low as an inducement to visitors or levy new ones to fund other needs. And on top of that, selling the Sheraton to get out from under its debt load isn’t without a cost: The buyer is effectively getting the building for free by paying off $300 million in remaining debt, and the city will lose any future profits it would be getting from the hotel. (The Sheraton currently loses money, but that’s partly because any revenue it brings in goes right back out to help pay off its construction debt.)

In short, then, Stanton is saying that the city’s decision in 1990 to build a new arena for the Suns is an open-ended commitment to keep on building new arenas for the Suns into eternity, while selling off any city assets necessary to make that possible. That’s a legitimate political position, I suppose, but you can see why he chose not to frame it that way. Or to put a price tag on it. Because people are cranky enough about it already.

9 comments on “Phoenix mayor explains grooviness of using taxes for Suns-Coyotes arena: It’s cheaper than two arenas!

  1. How is the buyer of the hotel “getting the building for free” when he is paying $300M? Is your intent to mislead your readers that severe just to try to better make your case?

    He is also not saying the 1990 vote is never ending. It WILL go to a vote of the citizens of Phx. Funny you left that out to enhance your mis information.

  2. You are a hater neil. You need to grow down a little. Taxes are meant to enhance lives and to give people something they could be proud of.

  3. Hey, everybody, it’s beloved punk rock icon John Doe! He uses hip modern lingo like “grow down,” because he’s cool like that!

    Taxes are definitely meant to enhance lives. If the people of Phoenix decide that having a brand-new Suns arena instead of an almost-new Suns arena is a priority for spending their money, that’s cool. But it doesn’t count if they do this because they’re told “your taxes won’t go up” when either their taxes absolutely will go up, or the other things taxes will buy them absolutely will go down, if money is instead used on an arena. Hence my explanation above.

  4. I have been to the Arena in Phoenix( it is a bit run down). The reality is unlike many places ( like Seattle), there is limited opposition to a New Suns/ Coyotes Arena, so I expect a strong YES vote. So that this building will get likely get built ( especially if the vote in Seattle is Pro Arena. Why? The threat of the Suns and ( or) Coyotes moving there). This will not be the only Sports Related Construction in the Area. ASU wants to replace the Wells Fargo Arena ( where the basketball team plays), and needs a Hockey Arena closer to ( or on Campus). The Diamondbacks are also looking for something New or really upgraded ( but that is down the line).

  5. Neil:

    You know I am not a hater, but I would like some clarity on your statement:

    “The buyer is effectively getting the building for free by paying off $300 million in remaining debt”

    Are you saying the buyer isn’t putting any skin (captial) into the game for the arena and/or just (has the luxury of) making small payments over time to pay off the debt.

    $300M isn’t diminimus to my pockeybook. But may be depending on how its structured for someone else’s.


  6. Sorry, would have been clearer of I’d said “after” paying off $300m in debt. Make sense now?

    The job of Field of Schemes copy editor is currently open. Must be willing to take payment in the form of civic pride.

  7. Awkwardly worded, but the point on the hotel isn’t that it is “free” or not, but that the city will sell the asset below cost in a manner that immediately transforms a money losing asset into potentially a money-producing asset. So the city will get all the downside and nearly none of the upside.

    The Republic article only makes a point that many others have made–municipal sponsorship or ownership of hotels and convention centers has a horrible track record around the United States–even in warm weather cities like Phoenix. Notice that this hotel supposedly “transformed” downtown by introducing empty hotel and meeting rooms. Not sure how that works. Stadiums supposedly do the same thing.

    Most people here say that arenas are fine to build and basketball and hockey are great sports to watch. The problem is in the dishonest or factually incorrect justification of arena building as a job producer/economic development program. It is a luxury item and should be discussed that way.

    (I can’t wait for this ASU hockey/basketball arena that will have Madison Square Garden size for 5,000 people crowds).

  8. Perhaps the city should do some real research like Calgary…

    Too bad our American politicians are bought and paid for by the rich sports owners.