Judge rules car-rental tax for Cardinals stadium unconstitutional, could cost state $200m

University of Phoenix Stadium, which isn’t named after a university in Phoenix (its namesake is a for-profit online college that bought naming rights) and isn’t in Phoenix (it’s in Glendale) but does host the Arizona Cardinals, is having its $455 million construction cost paid off mostly with money from a 3.25% rental-car tax and a 1% hotel room tax passed by Maricopa County voters in 2000. That worked out fine until yesterday, when:

Maricopa County Superior Court Judge Dean Fink ruled on Tuesday that a rental-car tax passed by voters in 2000 and targeted at tourists violated the state Constitution because the revenue was being used for the wrong purpose…

Fink’s ruling is tied to a constitutional provision that requires the state to spend money raised from vehicle taxes on related issues like highways.

“You can’t have highway-related taxes and spend it on stadiums,” [rental-car company attorney Shawn] Aiken said.

This is a smidge of a problem, as:

  • The Arizona Sports and Tourism Authority relies on the car-rental tax money not just to pay off the Cardinals’ stadium, but to help fund Cactus League spring-training facilities as well. Without it, somebody would need to come up with a whole lot of cash, and quick.
  • Aiken is demanding that the state refund to the car-rental companies as much as $200 million in taxes already collected, on the grounds that the tax was illegal. (Yes, it would make more sense to refund the money to the actual people who rented cars and paid the tax. No, that is not going to happen, though I suppose if anyone out there who rented a car in Maricopa County wants to file a class-action suit, knock yourself out.)

This is a giant mess, and if the ruling is upheld on appeal (there will absolutely be an appeal), and if there’s no way to funnel the car tax money to roads and divert other road money to the stadium authority, it’s likely to provoke one of those “What would happen if we just stopped paying the bills for that stadium?” discussion that is all the rage these days.

The most entertaining part of all this, meanwhile, is that another part of the legal challenge apparently was rejected because the county’s attempt to levy the added car-rental fees only on out-of-towners utterly failed:

The lawsuit’s main argument was that it violated federal interstate commerce laws by attempting to assess a tax against visitors to Arizona, while not charging the tax against local residents who happen to rent cars.

Fink found that while the law meant to be discriminatory, it wasn’t discriminatory in practice. Rental companies were just assessing it against everybody. The paperwork for determining who should be assessed the tax and who shouldn’t was just too complicated for them.

So what was sold to voters as a car-rental tax only on tourists that would fund sports facilities in fact may turn out to be a car-rental tax on everybody that will fund car-rental companies. I believe that’s what the kids today call a fail.

Cardinals leave Flagstaff training camp, local economy surges

The Arizona Cardinals moved their summer training camp back to the team’s regular-season home in Glendale this summer after 25 years in Flagstaff, which no doubt was gripping news to all of you Arizona Cardinals training camp fans. But since the whole move was over money — money the Cardinals didn’t want to pay in rent to Northern Arizona University, money NAU didn’t want to spend on further renovations to its facilities, and money that football advocates claimed Flagstaff would lose without the annual influx of Cardinals fans — it’s interesting to see how the city fared with summer football gone.

And the answer is pretty darn well indeed:

Sales tax revenues from restaurants and bars for July and August were up by 5.3 percent over the same two months in 2012, according to city data.

For August alone, when much of the camp was held, restaurant and bar spending was up 11.6 percent even without the Cardinals.

Spending in hotels and motels also was up, although many Cardinals fans from the Valley are day-trippers. Lodging tax collections increased 7.7 percent in July and August, and 7.3 percent in August alone.

Taken together, August revenues from the 2 percent BBB tax were up 9.9 percent compared with August last year.

“This tells me that the Cardinals training camp has some entertainment value for Flagstaff but is not as significant an economic driver as we perhaps thought it was,” said Mayor Jerry Nabours.

Now, it’s hard to tell from these numbers alone whether the Cardinals leaving truly had no impact — local sales tax revenues have been up almost every summer since 2007, as the city has been marketing itself as a cooler summer destination for Arizona residents, so it’s possible the numbers would have been even better with the Cardinals. Still, it’s a pretty significant sign that losing visiting sports fans needn’t mean disaster for a local economy: If Cardinals tourists are being replaced by Grand Canyon tourists who don’t have to worry about fighting with football fans for hotel rooms and restaurant reservations, all the better — especially since the Grand Canyon doesn’t demand new locker rooms.

Happy new year, cities drowning in stadium debt!

Happy new year! The arrival of 2013 means a fresh start, and a time to put the troubles of the past behind — unless, of course, you’re Bridgeview, Illinois:

One of the Chicago area’s most debt-saddled suburbs is borrowing even more money as it tries to put off the worst of its financial pain over the struggling Toyota Park stadium.

The latest borrowing binge — $27 million — will put Bridgeview taxpayers at greater risk of funding an even bigger bailout of the village-owned stadium if it continues to flounder. Municipal finance experts say it is another worrisome sign for a small suburb that took a huge gamble to build the 20,000-seat professional soccer stadium.

As you may recall from past reports here, Bridgeview borrowed $100 million in 2006 to build a new stadium for the Chicago Fire, with the expectation that it would pay it off from stadium revenues. Except that the lease said that all soccer revenues would go to the team, leaving the city with only money from concerts and the like, which haven’t been enough to pay off $100 million in debt. So now Bridgeview keeps borrowing more money to pay off the existing loans, and as the Chicago Tribune reports, “The move comes as Bridgeview officials try to reassure residents in newsletters that do not detail how the downward spiral will be reversed.”

Okay, but it’s a happy new year for everyone else … okay, except maybe Glendale, Arizona:

Glendale, Arizona’s bet on becoming the Phoenix area’s sports and entertainment hub is resulting in higher taxes, fired workers and rising penalties on its debt.

The city confronts new budget cuts after agreeing last month to pay $308 million over the next 20 years to keep the National Hockey League’s Phoenix Coyotes, which had the worst attendance in the NHL last season. After downgrades by both Standard & Poor’s and Moody’s Investors Service that cited the hockey payments, investors demanded a 7.5 percent higher penalty on city debt compared with 11 months ago.

Glendale, of course, just put itself on the hook to pay the Coyotes’ new owner upwards of $12 million a year just to keep his team there, on top of the $12 million a year they’re spending to pay off the arena bonds. Plus the city put in money for infrastructure for the state-built Arizona Cardinals stadium, plus $200 million for a spring training baseball facility. Which all worked out great, if by “great” you mean having to fire large chunks of your city staff while being unable to borrow any more money at less than usurious rates.

Not every stadium and arena deal works out this badly, obviously, and the economic downturn hasn’t helped. (And isn’t going to be helping for a while yet, it looks like.) But if there are any suburbs and small cities out there reading this who had been thinking, “Yeah, a new stadium would totally be a way for us to get noticed!”, it’s worth noting: You might end up getting noticed for reasons you’d prefer not to.