The Arizona Diamondbacks would be able to finance hundreds of millions of dollars’ worth of renovations to Chase Field, and maybe add a hotel and other amenities to the area as well, by bonding against a new sales tax on tickets under a proposal working its way through the legislature and nearing Gov. Doug Ducey’s desk.
Proponents of the plan tout it as a way to make needed improvements to Chase Field without seeking direct taxpayer funding. A theme park district created by Maricopa County and the City of Phoenix would be authorized to issue bonds to pay for sports, entertainment and other recreational amenities. The bonds would be backed and paid off with revenue generated from a new 9% tax on sales of tickets, merchandise, food and beverage at the ballpark.
House Bill 2835 would allow the Diamondbacks to make what the team says is much needed repairs to the 23-year-old Chase Field, which was built with taxpayer funds and is owned by the county, and add possible other amenities to the area around the ballpark. The Diamondbacks would have to put up 20 percent of the amount of the renovations. The team’s current plan calls for the team to provide $100 million and to issue $400 million worth of bonds.
Using the theme park district to fund stadium renovations would also ensure the team doesn’t relocate to another city — the team spoke with Las Vegas officials about a possible move in 2019 — or even move out of downtown Phoenix. The plan would tie the team to Chase Field until the 30-year bonds are repaid.
Derrick Hall, the Diamondbacks’ chiefs executive officer, said the team will likely reduce capacity at its ballpark if it uses the theme park district to fund improvements. Chase Field’s capacity is 48,519, and Hall said the ideal number that most new ballparks aim for is between 38,000-42,000. While reducing total capacity, the team would add new clubs and suites, including at field level.
More improvements could be funded directly outside the ballpark.
Nick Wood, an attorney who represents the Diamondbacks and crafted the proposal on the team’s behalf, told lawmakers that a hotel would likely be located either on the corner of 7th and Jefferson streets on the Chase Field plaza, directly attached to the building. Hall said the team could also add restaurants, retail stores and office space to the area as well, though that could also be funded completely through private partnerships.
“It just gives us options to stay downtown and stay at Chase Field. The building is in need of renovation and we’ve looked at possibly doing development around it,” Hall told the Arizona Mirror. “This gives us the ability really to do it without taxpayer dollars and more or less tax ourselves and service the debt in a very creative way.”
The city, county and state won’t be on the hook if the new sales tax revenue is insufficient to pay off the bonds, and only the team itself would be liable, said Rep. Regina Cobb, who sponsored the legislation.
“(Creditors will) be able to go back to the D-Backs. They are the bondholders. So, that is who’s on the hook,” Cobb, a Kingman Republican, told the Mirror.
While the team could add a 9% surcharge to tickets and other items itself and use that money to go out on the bond market on its own, Wood told lawmakers that the high interest rates and short-term repayment plan it would likely face would make that option impractical. Bonding through the theme park district would provide much better terms and lower interest rates, making it a feasible option.
Wood differentiated the proposed sales tax that would fund the bonds with other kinds of taxpayer funding, such as the 0.25% increase to the county’s sales tax rate that was enacted in 1994 to fund the ballpark.
“The fans have a choice. The choice is they can either come to the game and pay the ticket price with the additional user fee added to it, or they can watch it on television,” he told the Senate Finance Committee on March 24. “It’s really a user fee that’s being paid by the team.”
While the City of Phoenix is supporting the legislation, Maricopa County, which spent years fighting with the team over demands for upgrades and repairs, has been silent on the issue. The Diamondbacks went to court in 2018 in an attempt to force the county to pay for $187 million worth of improvements to Chase Field. Under an agreement the two sides reached the following year, the Diamondbacks agreed to drop the lawsuit and the county agreed to let the team start looking for a new home immediately, several years before their previous agreement would have permitted relocation.
Supervisor Steve Chucri, who helped broker the 2019 deal, said he supports the legislation. It would keep the team at Chase Field like the public wants, he said, and avoid more litigation and fighting between the team and the county.
“What I like about this is that … this is very entrepreneurial and it allows the Diamondbacks to be entrepreneurial, to not necessarily use taxpayer dollars, to try and use this as a tool to find out what’s best, what’s the next best step for them as it relates to a facility for their use,” Chucri said.
HB2835 would amend a preexisting theme park district law to include sports facilities. The original law was passed in 2005 to provide funding for a proposed theme park that was planned for the town of Williams, but the plan never came to fruition. No bonds have ever been issued by a theme park district under that law.
The proposal has received widespread support in the legislature, passing 57-2 in the House of Representatives and 23-7 in the Senate. Due to an amendment in the Senate, HB2835 must go back to the House for another vote before it goes to Ducey.
But some lawmakers still have concerns. In the Senate Finance Committee, the bill narrowly passed on a 5-4 vote as lawmakers from both sides of the aisle raised concerns.
Some lawmakers found the proposal to be too similar to tax increment financing for their liking. Under a traditional TIF, as it’s often known, a government entity funds infrastructure and other projects by bonding against future property tax revenue that they’re expected to generate.
“I’ve got to tell you, Nick, it kind of looks like a TIF and it kind of swims like a TIF. We just changed the name a little bit,” Sen. Vince Leach, R-Tucson, told Wood during the Senate Finance Committee hearing.
Leach said he also had questions about the state’s authority to essentially delegate taxing authority to a private entity.
Sen. Michelle Ugenti-Rita, R-Scottsdale, chafed at the suggestion that the HB2835 allowed the Diamondbacks to fund stadium improvements without taxpayer money.
“Are fans not taxpayers?” she asked.
And Sen. Juan Mendez, D-Tempe, questioned why the team didn’t plan ahead for the types of improvements it wants to make.
“Was it their opinion that they were always going to be able to come to us to help them out of this?” Mendez asked. “Did the problem just happen? Have we not been aware that this was going to be a problem?”
Wood emphasized that the new tax would be imposed by the theme park district, not by the team. The Diamondbacks organization would bring its plan and its request to the district for approval, and the bond underwriters would vet the plan for financial viability. Wood said that’s a tall order, which is why no one has ever been able to take advantage of the theme park district law. But the team has 22 years’ worth of financial data on sales of tickets and other goods that would demonstrate its ability to repay the bonds, he said.
The district would be composed of one member of the governing body of both the city and county that established the district — in the case of Chase Field, the Phoenix City Council and the Maricopa County Board of Supervisors — along with a Maricopa County resident appointed by the Senate president and a resident of either Apache, Coconino, Mohave, Navajo or Yavapai counties, appointed by the speaker of the House.
Proponents also pushed back on the notion that HB2835 is a TIF. Cobb emphasized that there are no property taxes involved, while Wood told the Senate Finance Committee that the team would essentially be taxing itself.
The ability to use the revamped theme park district law wouldn’t be limited to the Diamondbacks alone. Any city of at least 1 million people — Phoenix is the only city in Arizona that meets that threshold — or any county with a population of at least 125,000 would be able to create a theme park district. All districts created under the law would be able to cumulatively issue up to $2 billion in bonds.