TEMPE, AZ — Grand Canyon Institute, a nonprofit think tank, released a new fiscal impact analysis on the proposed Tempe Entertainment District.
The report lists five key findings, focusing on what the district could bring to the city, as well as its impact on surrounding businesses in Tempe and the other arenas in the Valley:
- The arena will "squeeze" the concert and show market in the Phoenix Metropolitan Area.
- For every $2.70 diverted from the city to the community facilities district (CFD), Tempe only receives $1 in new revenue.
- The study that Tempe paid for show net gains that are "highly speculative, fairly arbitrary numbers to evaluate the entire project."
- The Coyotes' position at the TED will have a negligible impact on the Valley's economy, as the team has played in the Phoenix area for more than 30 years.
- Tax revenue to the city is not likely to exceed alternative uses of the site that does not require a community facilities district.
Economist Dave Wells and seven other economists were not paid for the economic analysis and say they did it out of public interest.
"We look at things that might be of general public interest, and we simply pursue it, and this was something that we knew or is that was on the radar. And I know that a lot of economic impact studies tend to exaggerate benefits and we thought it would be in the public's interest, take a look at that to see if there are problems with it," said Wells.
The referenced community facilities district is a way for the TED to be "repaid through portions of sales tax, lodging (bed) tax and property tax revenues generated by the project and only by the project, and a surcharge on all sales within the project," according to the city of Tempe. The new report further explains the CFD, saying that the $208 million bond will be paid for over 30 years.
We also spoke with Xavier Gutierrez, president and CEO of the Arizona Coyotes, who explained the project would generate $800 million.
"When you think of the taxes, we're going to be creating the voluntary surcharge that we are taxing, not taxing, but we are imposing upon our own customers, that's and then all the community benefits, everything that we're directly paying to this community, including a free police substation that we're going to build and provide free rent for all of the traffic mitigation that we're going to invest in all the value of having Tempe's name in the district and on our ice and within the arena. Those are direct financial benefits of $800 million," Gutierrez explained.
However, the GCI analysis contradicts that.
"It's misleading. So the graphs go up, what we did is a thing called net present value, which essentially is how much money is worth, how much something is worth today. So using our calculation, for instance, $125,000.05 years from now is worth about $100,000 today. So that's the number we would put in our calculation, they would put in 100. And in their case, probably about $110,000, they would make it look bigger than we do," Wells told ABC15.
The GCI report only took into account the arena and concert venue.
"Why not look at the entire project as that is what we call the speculative and fairly arbitrary so. So a lot of that, like when you build a hotel, people don't come to Tempe because somebody built a hotel. And you don't open a business just because there's new office space there. So it requires some kind of a demand that some kind of a poll that brings people in, that's what the music venue in the arena does. And that's the only reason why we're talking about a community facilities district. All the other parts of the plan could be built without it," said Wells.
However, the Coyotes responded to the report by saying, "GCI Report ignores the economic and financial benefits of the entire district-in particular the retail, residential, office and practice facility."
What the GCI report did find was there is benefits to the Coyotes cleaning up the site prior to construction.
"They're also expecting 46 acres to get developed. And a developer might not do that. So they're only selling the land after it gets remediated for $25 a square foot. We looked at some comps and we think that the value of the land is twice that or more. So essentially a $50 million discount to the developer. But that is something that the city of Tempe would have to work on. They would have to figure out a way to finance the remediation that's necessary in order to have any kind of development on the site," Wells added.
The full analysis can be read below:
Can't see the document? Click here.
The future of the Tempe Entertainment District has been left in the hands of the voters. A special election will take place on May 16.
RELATED: NHL Commissioner supports Coyotes' push for new Tempe arena
More information on the election and an overview of the project can be found on the city of Tempe's website.
