how do you spell corporate welfare???
Sports agency money tied up Legislators argue over state funding
Pat Flannery The Arizona Republic Jan. 13, 2006 12:00 AM
For the third year in a row, the governor and Republican lawmakers are fighting over funding for a tiny agency that has a huge say in the development of everything from the $370.6 million Cardinals Stadium to Valley youth soccer fields.
Lawmakers want to cut the Arizona Sports and Tourism Authority's annual state allotment, which this year is just over $1 million, but Gov. Janet Napolitano says it would damage the authority's financial stability.
That, in turn, could downgrade the authority's bond ratings, cost it more to repay its bond debt and leave less money for what it was intended to do: promote Arizona tourism, build new youth and amateur sports facilities, improve local Cactus League facilities and help host events at Cardinals Stadium like the Fiesta and Super bowls.
This week, the House and Senate passed a measure to end the automatic transfer of state money to the sports authority, saying that the state should not be paying for any authority activities.
Rep. Russell Pearce, R-Mesa, House Appropriations chairman and a longtime opponent of public funding for sports projects, is again one of the measure's prime sponsors. He believes that when Maricopa County voters approved a countywide hotel-bed tax and rental-car surcharge in 2000 to pay for the new stadium and the authority's activities, residents were promised that state money would not be used.
"They said it was not going to cost the (state) taxpayers one penny," Pearce said.
But the authority says voters were told in publicity materials that state income taxes paid by Cardinals players and certain other NFL employees would be earmarked and sent to the authority to use along with other sources of money.
The authority was guaranteed that the income-tax revenues it received would be at least $3.5 million in its first year, growing by 8 percent a year thereafter. However, if the taxes actually paid by the team and players were less than that, the balance would be made up by state General Fund money.
This year, that amount is $1.1 million, authority spokesman Brad Parker said.
John Benton, a Tempe developer who is chairman of the authority's board of directors, said the authority considers the guaranteed minimum from the state vital to its various functions.
For example, the authority has issued $305 million in bonds over the past several years to build a football stadium and surrounding infrastructure and to build or improve Cactus League facilities.
If lawmakers cut $1 million-plus in annual funding, Benton said, financial advisers fear the change in the authority's fiscal outlook would trigger a downgrade in its bond rating even though the state money cannot be used to secure any of the bond debt.
Because the bonds are periodically remarketed, if the authority's bond ratings slide, "that means our borrowing costs are increased, and there's then less money to do all the other things associated with the authority."
"It clearly has a detrimental effect to the Sports and Tourism Authority, and it's ability to do what it's supposed to do," Benton said.
The elevation of a relatively small piece of the state's $10 billion budget to a political feudmaker is rooted less in its cost to the state and more in the legislative unpopularity of the Arizona Cardinals' publicly financed stadium.
Pearce also is furious because the General Fund's obligation to the sports authority depends on how much or how little the team pays its players. If player income, and therefore NFL income taxes, does not increase by 8 percent a year, then the state must come up with the rest.
"They should quit reaching into the taxpayers' pockets," Pearce said. "They're refusing to pay the salaries they'd promised . . . (and) this is bad public policy."
Nonetheless, the Democratic governor hinted strongly in an interview Thursday that she would react exactly as she did last year when the measure landed on her desk: veto it.
"The ultimate issue is that (repeal) effectively changes the formula for funding that impacts the mission and work of the authority on all kinds of things, not just the stadium, but youth sports and everything, in a way that's unacceptable," Napolitano said.
The governor stopped short of promising a veto. But she defended the sports authority in what has become an annual political tussle, and suggested that the feud was wasting valuable political energy.
Building Cardinals Stadium is just one of the authority's duties. This year, it is expected to spend nearly $5 million on state tourism promotion activities, and an additional $1.4 million on Valley youth and amateur sports facilities.
The authority already has spent millions of dollars helping build a new two-team Cactus League stadium in Surprise and refurbishing others throughout the metro area.
"There is no question that expanding the Cactus League has been a boon to tourism," said Barry Aarons, lobbyist for the Arizona Tourism Alliance, which opposes cutting state funding for the authority. "Last year, we had the best Cactus League year ever."
But Pearce is intent on shutting the door on the state's financial guarantee, and he is ready to go to the mat with Napolitano this year.
If she vetoes it again, he said, he would consider it a final act of bad faith that would set the tone for the rest of the new legislative session.
"Why would you give her another chance to slap you in the face?" Pearce asked.
If there is a veto, lawmakers might discuss other options to assure that the state funds are only used when necessary by the authority.
The state auditor general offered several proposals last year. One would have the authority return money to the state in any year when Cardinals income tax collections exceed the minimum in the law.
Or, those same excess revenues, if there are any, could be set aside in a reserve fund to cover future shortfalls.
"If there are other remedies, we'd be willing to discuss them," Benton said.
Reach the reporter at (602) 444-8629.