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Spring training finances: the saga continues...

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Maryvale Stadium - are the Brewers the next team to threaten to move to Florida?
Maryvale Stadium - are the Brewers the next team to threaten to move to Florida?

The ongoing debate over plans by Mesa to keep the Cubs in the Cactus League (and, more particularly, in Mesa) rumbles on. Part of me - and probably, part of you - wants to roll your eyes and scream "Enough, already!" But there is definitely a significant issue at the heart of things: what should be done to generate an appropriate ongoing revenue stream for the Arizona Sports and Tourism Authority (ASTA), to ensure that all teams have adequate facilities? With pitchers and catchers due to report to the various teams around the state this week, it does seem like an appropriate time to look at the broader question.

After the jump, we'll look at the current state of the kitty as far as Arizona is concerned, and also provide the latest updates on the Mesa/Cubs situation.

First, some history. The ASTA was founded in April 2000, the result of Senate Bill 1220, and in November that year, Arizona voters narrowly (52-48%) passed Proposition 302, funding the authority with a 30-year agreement to tax hotel rooms (1%) and car rental (3.25% or $2.50, whichever is greater), as well as the income from the Cardinals' new stadium, which it helped to fund, and the state income tax paid by the team. The ASTA is also intended to "develop and improve youth and amateur sports facilities" In Maricopa County. Note the last part: because it means ASTA money could not be used to improve the parks in Tucson.

The amount available for the Cactus League over the entire period of the tax (running through 2031) was expected to be $203m, but that estimate seems to date from a kinder, gentler economic era. The ASTA's most recent budget report paints a bleak picture as far as financing goes:

As we close out the current fiscal year we continue to monitor and revise, as necessary, our financial projections. We began FY2009 with a lowered revenue forecast which, at the midpoint of the fiscal year, was lowered even further by 15% for the tourism revenues. The reality is that the decline has been even more significant and is projected to grow over fiscal years 2010 and 2011 by 5% per year.

The report also shows (p. 18) that expenditure for the last fiscal year was about 110% of revenue, forcing the ASTA to dip into its operating reserve to the tune of $3.4m and the long-term picture (p. 22) is even grimmer. Having about broken even through the first decade, with a cumulative deficit of only $2.3m, the shortfall is projected to rise, by the end of the tax in 2031 to more than $234m. This would be why there's no room for any new parks in the current budget. Where did the money go? Here's a list of the major projects in which the ASTA were involved:

Amount Park Teams
$32m Surprise Stadium Royals and Rangers
$4.3m Phoenix Muni Athletics
$12m Tempe Diablo Angels
$20m Scottsdale Stadium Giants
$55m Goodyear Ballpark Indians and Reds
$60m Camelback Ranch White Sox and Dodgers

That's a total of about $184m, so as you can see, the money available until 2031 to fund new parks, or even carry out more than basic maintenance, is very small indeed. Some of this is being taken care of privately: the A's owners spent $12m on work at Phoenix Muni (though they are expecting to get reimbursed by the city and/or ASTA). That move will keep the A's here through 2024. More worrying is the Brewers' situation: they are the only team without a long-term lease, though as we've seen, teams have no problems shipping out early. The Cubs lease in Hohokam actually lasts through 2016, but they can opt-out after 2011; similarly, the D-backs got out of Tucson because of a clause requiring there to be at least three teams there, and invoked this after the White Sox left.

The Brewers lease, however, ends in 2012, and one can imagine unhappiness in Milwaukee at the Cubs jumping the queue with a "pay up or we walk" approach. Actually, you don't need to imagine; the Journal Sentinel makes it clear: "If it passes and you're a Brewers fan who buys a Maryvale ticket, you're subsidizing the loathsome and moneyed rival because the Cubs are the Valley's spring cash cow." The same piece quotes Rick Schlesinger, Brewers' VP for business operations, as saying "The Brewers are willing to sign a long-term lease as part of a renovation of Maryvale Baseball Park and an understanding of the city's development plans for the Maryvale neighborhood."

Other suggestions include a new park, split with another team (perhaps the A's), but Maryvale is basically the same age as Hohokam, about a dozen years old. Renovation seems a likely approach, even if the park, with its capacity of 7,000, is much smaller than more recent stadia. Though given the Brewers are one of the worst-supported teams in the Cactus League - in 2009, their total crowd of 82,271 was ahead only of the Rockies, and was about 40% of the Cubs total -  they don't have as much leverage.

It has been said the Cactus League would have much less issue with letting the Brewers head to Florida; from a practical viewpoint, this would reduce the number of teams to an even number (after the Reds arrive this month, there will be 15). However, Brewers' owner Mark Attanasio lives in Los Angeles, and appears to prefer the short flight to Phoenix over a cross-country one. Other factors in Arizona's favor are the usual ones: "weather, proximity to other teams, closeness to...players' off-season digs in Phoenix, and a concentration of Brewers fans in the Valley." Likely even more so than with the Cubs, the Brewers need Arizona more than Arizona needs the Brewers.

However, it should be clear from the above information that something does need to be done, with the ASTA currently having little or no money to spend for the next twenty years. The existing system is broken, and action needs to be taken in order to fix it. Now, that may well involve increasing the existing taxes, adding new ones such as a surcharge on Cactus League tickets, or promoting private investment over state funding. But whatever the end result may be, the income that it generates certainly needs to be allocated on a much better basis than which team makes the loudest noise about moving to Florida.

And, speaking of which, if you're not interested in the latest Mesa developments, you can stop reading now!

The most notable news is the complete U-turn carried out by Mesa mayor Scott Smith, regarding a) the method by which the money would be raised, and b) where the money raised would go. The next two paragraphs compare the original press release - curiously, no longer accessible from the news section on the City of Mesa site - and Smith's 180-degree U-turn, after he realized the scale of the opposition to his demand that the fans of all the other teams in the Cactus League charge their fans to built a new park, for the benefit of Mesa and the Cubs.

The effort by Arizona and the City of Mesa to keep the Chicago Cubs in the state continues to move forward. State legislation has been introduced (HB 2736) that would provide the funding source for a new Cubs Spring Training facility. The legislation will propose to build upon the successful Arizona model of using tourist-related fees to bolster economic development. The bill will seek to increase rental car fees and implement a surcharge on Cactus League tickets.

I’d like to emphasize to everyone that what we are proposing is not just a Mesa project: it is a Cactus League project... From day one, I have advocated a solution that not only keeps the Cubs from moving to Florida, but provides a framework that will benefit all Cactus League teams... We hope the teams will take the time to meet with us this week to discuss the various proposals on the table, including a possible surcharge.

Smith speaks with a forked tongue. Bill HB 2736, as introduced, is perfectly clear, giving only a car-rental surcharge and spring-training ticket surcharge as sources of financing. While the amounts of these are left blank, there is no mention of the "various proposals" Smith claims are "on the table."  So one can hardly blame the other teams for taking up arms against the legislation. Still, it's a cunning move by Smith: he hopes to get all the other Cactus League teams on board, by suggesting that they can get their noses in the taxpayer- and fan-filled trough too - just as long as his Cubbies get to stuff their faces first.

Despite this, there's been backing for Derrick Hall's statement that all the other Cactus League teams are opposed to the surcharge - also questioned in some quarters. Texas VP John Blake said, "The Rangers join the other clubs in the Cactus League in being opposed to this proposed legislation. It would result in higher ticket prices for games in Surprise, which is certainly neither in our fans nor the Rangers’ best interest. We hope that the Cubs will stay in Arizona but not at the expense of Rangers’ fans." A's spokesman Bob Rose concurred: "We are opposed to a ticket surcharge on tickets for games played at Phoenix Muni." And John Kaites, an attorney who represents the Mariners said  "All 14 other Cactus League teams oppose House Bill 2736 as introduced."

There have also been false reports in some quarters that the new Rockies/D-backs spring-training facility will be funded in part by federal cash. These appear to be incorrect: "Instead of accepting the bonding authority, the tribe has decided to take advantage of new rules for tax-exempt financing that came as part of the stimulus act, a spokesman said. Those new rules will let the tribe apply for up to $30 million through a tax-exempt loan program with a bank... [The stimulus program] gives the tribe the ability to borrow that amount from a bank that gets tax incentives for making the loan. The bank can pass on the cheaper cost of borrowing." Which makes the money, in reality, a good deal less "federal" than the average home mortgage.

Hall pulled a trump card on Wednesday, saying "We even suggested to legislators yesterday that they put the surcharge to a vote. If the taxpayers say they are willing to pay for this increase on their tickets for the Cubs, naturally we are fine with that." Hall added that the current owners "would have preferred that public funding for the team’s regular season home in downtown Phoenix had been put to a public vote rather that getting approval from the Maricopa County Board of Supervisors." It's certainly a wise move, distancing himself from Jerry's fiscal shenanigans [Mary Rose Wilcox, the supervisor who cast the deciding vote to shove through Colangelo's sales-tax for BOB, now faces 42 criminal counts, including perjury, conflict of interest, forgery and false swearing.]

The same article quotes Mayor Smith as saying "he does not like the idea of a countywide vote." Pardon my French, but no shit. He knows that if this particular piece of pork barrel politics was ever put to voters outside Mesa i.e. those who will be paying for it while seeing little or no benefit, it would go down faster than Orlando Hudson's asking price. It doesn't help that the current memorandum of understanding between Mesa and the Cubs states that the legislation must be in place by July - adding any kind of ballot to the timetable would likely prove impossible. 

Nor does it help that the state funding requested for the new complex is far, far more than for any other Cactus League park on a per-team basis. The $84m required for a single-team facility like Wrigleyville West, compares to $60m and $55m for Camelback Ranch and Goodyear respectively - both stadia which serve two teams. So the Cubs are requesting almost three times as much as any other team has been given from the ASTA and local bonds. While they may be the "engine of the Cactus League", this appears mostly to mean that they're the ones who get all the grease. If the Cubs agreed to share the facility with, say, the Brewers, we'd be a lot more sympathetic.

One thing to keep an eye on, is what happens with regard to the recent CityNorth ruling, where the Arizona Supreme Court found Phoenix's agreement to rebate up to $97 million in sales tax likely violated the state Constitution. The conclusion by the five Supreme Court judges was that "indirect public benefits - like, apparently, beating out Scottsdale for the sales tax from Bloomingdale's - aren't enough to justify a giveaway to a private party." At the moment, it doesn't apply, because all Mesa and the Cubs have is that memorandum, which has little in the way of legal standing. But it seems likely this could apply if the plan goes much further. Another piece on the decision discusses its impact on the Coyotes, but this paragraph seems appropriate to Mesa's plans too:

What we do know now is that the state of Arizona makes a clear-cut delineation between "tangible" and "intangible" benefits. "A tangible benefit would be a public road, public infrastructure, utility lines ... Something the city gets to own or the public gets use of," [Goldwater Institute attorney Carrie Ann] Sitren said. As for intangible (or indirect) benefits, "The two biggest are claims of raising tax revenues and creating jobs. Across the state, we do see a lot of deals or attempted deals saying they’ll bring in revenues, and that’s where the court says no."

Give that's basically all Mesa has to offer, definitely stand by for the possibility of future lawsuits on this one. The director of Goldwater's Scharf-Norton Center for Constitutional Litigation said of Mesa's plans, "It looks like to us, to borrow an unfortunate baseball metaphor, to be a subsidy on steroids, and precisely the type of deal the Supreme Court was talking about when the Supreme Court described impermissible subsidies." Obviously, Florida is watching the situation, but the truth is, money isn't exactly flowing there either. Interesting quotes from Philip Porter, an economics professor at the University of South Florida:

Porter said the state and local communities are "spending more and more money" on spring training, even though he believes there’s "no economic punch to a spring training team." "I am so frustrated by the whole thing," he said. "The evidence of the lack of economic impact is so strong. The teams are simply playing one community against the other. [Nick] Gandy [spokesman for the Florida Sports Foundation] said he thinks more Florida communities will be looking at private funding sources when it comes to future spring training endeavors. "Public funding for stadiums is not a popular item any more," Gandy said.

The current Naples plan includes private capital as well as an increase in the local bed tax - though I note with interest the quote in that piece which says, "One study estimated that the Cubs would bring an extra $36 million a year to Collier County." That's barely one-quarter of the amount claimed currently by Mesa's pet accountants, who said "the Chicago Cubs contribute $138 million annually to Arizona." Where does the extra hundred million dollars evaporate to? Seems like Naples need to get themselves lackeys that are better at fudging the numbers...