Economic impact of Tempe hockey arena development debated as vote looms

Ahead of a May 16 special election on a $2.1 billion entertainment district that includes an arena for the National Hockey League's Arizona Coyotes, Tempe voters are being hit with dueling views on the project's economic impact.

The nonpartisan Grand Canyon Institute, which cited the arena and a music venue as the mixed-use development's primary economic drivers, concluded revenue generation will fall short of the amount of tax dollars Tempe would allocate to the project through a bond-issuing community facilities district (CFD).

Arizona Coyotes

"For every $2.70 diverted from the city to the CFD, the city only receives $1 in new revenue as a consequence of new spending drawn by the arena and music venue and its recirculation within Tempe," the study said, adding the shortfall will impact growth of the city's general fund.

Tempe Wins, a group sponsored by the project's developer, countered Monday with a review that showed previous analyses commissioned by team and the city underestimated revenue that would be generated by the Tempe Entertainment District.

The review, by Arizona State University's Seidman Research Institute, found net new sales tax revenue should be $34 million higher than a prior projection of $244 million and that no Tempe general funds would be used to pay for any part of the project, according to a statement from Tempe Wins.

Bluebird Development LLC, an affiliate of Meruelo Group and the Coyotes, plans to build a 16,000-seat arena, a practice facility, two hotels, 350,000 square feet of office space, up to 1,995 residential units, a 3,000-seat music venue, and 300,000 square feet of retail space if Tempe voters, who are receiving mail-in ballots this week, approve zoning changes and a development agreement for 46 acres of city-owned land.

To initiate the site's transformation from a "landfill into a landmark," the agreement calls for Tempe to create a CFD to issue $210 million to $230 million of 30-year bonds to fund the removal of 1.5 million tons of garbage and hazardous waste, and to pay for public infrastructure.

The bonds would be paid with a portion of sales, property, and hotel tax revenue generated by the development, as well as a surcharge the developer would impose on all sales and taxable activities within the project.

To enhance security on the bonds, they would be backed by a priority lien on the development's privately owned land and improvements. In return for paying at least half of debt service and making other contributions to the city, Bluebird would receive tax abatements.

Measured on an overall gross tax revenue impact, tax revenue for the city from the project is not likely to exceed alternative uses of the site that do not require a CFD, according to the Grand Canyon Institute. 

Meanwhile, the project's residential component is being challenged by the city of Phoenix, which filed a lawsuit last month in Maricopa County Superior Court, claiming Tempe reneged on a promise not to permit housing development under a Sky Harbor International Airport flight path.

Bluebird, which filed a motion to intervene in the lawsuit, served Phoenix with a formal notice of claim earlier this month that seeks $2.3 billion in damages, citing the city's attempt to prevent it from developing the project.

The Phoenix Aviation Department said the developer's claim "restates the same arguments that the airport, and more importantly, the (Federal Aviation Administration) has already debunked."