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Taxpayer-Financed Stadium for Sale!

Monday August 22nd, 2016   •   Posted by Craig Eyermann at 6:22am PDT   •  

14200458_S In 1996, construction began on a brand new major league ballpark in Phoenix, Arizona, which became the home of the Arizona Diamondbacks when it was completed and opened in 1998. Originally called Bank One Ballpark, the stadium is now known as Chase Field.

The stadium cost $349 million to complete, of which, $238 million (68%) was contributed by the taxpayers of Maricopa County and $111 million (32%) was contributed by the Diamondbacks baseball team.

Last week, Maricopa County’s Supervisors voted unaminously to move forward with negotiations to sell Chase Field to a private developer who made an unsolicited bid of just $60 million for the stadium, which is just a little over 25% of the amount they paid nearly 20 years ago to build it.

In terms of today’s inflation-adjusted dollars, the total cost to build the 48,569 seat air-conditioned stadium with a retractable roof, which is fully owned by the Maricopa County Stadium District, comes in at over $515 million, with the equivalent taxpayer-contributed portion working out to be more than $351 million.

These inflation-adjusted figures that the stadium has really depreciated by nearly 89% since its construction began 20 years ago. For Maricopa County taxpayers, that $60 million sale would represent the recovery of just 17% of the inflation adjusted dollars they spent to build the stadium.

That’s a fire sale price, so a very good question to ask is why are the county supervisors of Maricopa County leaping all over the opportunity to sell the stadium for so apparently little. Laurie Roberts of the Arizona Republic asked the same question and got part of the answer:

How could a ballpark we spent $250 million to build not even 20 years ago on prime land in downtown Phoenix be worth only $60 million?

I built my house around that same time. It’s now worth more than twice what I paid for it. Why is Chase Field worth only a quarter of what we paid for it?

Why would we sell it for $60 million when the county’s own assessor puts the value at $351 million?

Maricopa County Supervisor Denny Barney, in selling the deal to his colleagues, laid it out: “This allows us to honor the public trust by not only returning public dollars to the public coffers … and at same time finding a way to help Diamondbacks play and maintain their agreement to play in Chase Field.”

In other words, we’re holding this fire sale because team owner Ken Kendrick has threatened to go elsewhere if we don’t give him better terms than called for in his team’s contract with the county. Read: $187 million in ballpark upgrades.

Put another way: we’re contemplating selling a public asset for 25 cents on the dollar so that Diamondbacks can get what they want: Fewer seats, fancier suites and more doodads that the county says our contract doesn’t require us to provide.

If the sale doesn’t happen, then Maricopa County is on the hook to pay $187 million in upgrades to Chase Field, which would appear to be nearly $187 million more than the county has available to pay for such improvements. By selling the stadium, the Maricopa County government is also selling that liability to the potential new owners, who will be required by the stadium’s 30-year contract with the Arizona Diamondbacks to deliver those upgrades. For the buyer, that represents a cost of at least $247 million.

Otherwise, Maricopa County will need to both borrow more money to meet its contractual obligations and raise its taxes to pay for expenses it knew it would have from the outset and should have provided for paying.

But it didn’t. What the taxpayers of Maricopa County are really getting in this deal is $60 million in cash and the avoidance of at least an additional $187 million in costs. That combined $247 million then represents what the county is really getting in jumping on the opportunity to sell the stadium.

While that $247 million is almost 4% more than the amount it contributed to build the stadium back in the 1990s, once inflation is factored in, Maricopa County is really selling the stadium for a 30% discount, which is the gap between $247 million and the equivalent of $351 million in today’s dollars that it paid to build the stadium 20 years ago, which coincidentally happens to be the amount at which its assessor has appraised the current value of the stadium.

As bad as taxpayer financed stadiums are for the finances of nearly all cities that have built them, that may be the best deal the taxpayers in any city have been offered in return for their investment in major professional sport franchises.

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August 2016