Open Range: Outrage on “Ball Street”

Welcome to Ball Street, Arizona, home to a massive sports entertainment industry that for most of America is a TV event. They watched a Super Bowl from “the toaster” as ESPN’s Chris Berman has dubbed University of Phoenix Stadium in Glendale. College football’s top teams slug it out in Glendale too in the Fiesta Bowl or a BCS Championship. Turn on WGN on an April afternoon and see the Cubs spring training game live from Mesa. This weekend you'll check out the NCAA Men's Basketball Tournament's Sweet 16 live from The U of Phoenix Stadium. Big teams and big sports are a pillar of Arizona’s now struggling economy.

You watch Ball Street at work on TV, but we see it as part of everyday life. Live here for any amount of time and you learn quickly that sports entertainment is a most sacred cow – that its backers have sold voters the idea that it’s a near bottomless well of money and prestige for a state that never met a tax it didn’t hate. The simplified pitch is, “Bring in the gladiators and their fans and we’ll be swimming in dollars that’ll make life better here and keep your taxes low. Build the stadiums on your dime and the returns are enormous” Turns out that might not be the whole story.

A state audit released this week cites the Arizona Sports and Tourism Authority (AZSTA)for business practices that if not corrected will have it operating at a deficit until 2014. AZSTA is the state agency whose biggest responsibilities are overseeing the state-of-the-art University of Phoenix Stadium and the growing Cactus League for Major League Baseball’s Spring Training while making sure Arizona’s Youth Sports facilities don’t get pushed out in favor of the big leagues. It was created in 2000 by the Legislature when the state voted to create a tourism tax to support the sports entertainment industry.

That AZSTA should have money problems flies in the face of the build-it-and-they-will-come-and –spend mantra. AZSTA’s been at the controls as Arizona hosted a Super Bowl, a BCS Championship, quite a few Fiesta Bowls, and wooed MLB’s icon franchises from Florida to the desert for their spring training. Supposedly, that’s translated into massive tourism dollars for the state – though one could argue that the dollars were concentrated in a few favored businesses and haven’t raised the quality of life for most Arizonans. Still, by the measurements of the Sports Industrial Complex, Arizona should be King of the World of host venues. The teams and leagues may be, but AZSTA and the state sure aren’t.

I encourage you read the full audit if for nothing more than to get a really good insight into how the sausage is made in the era of mega stadia and corporate sports. You think unraveling AIG is complex, wait until you see this. You think only AIG is getting fat at the taxpayer trough? Wait until you read these deal points. Outrage on Wall Street? You bet! And this is Outrage on Ball Street – only you aren’t hearing or reading much about it.

Look at the heart of the findings and you’ll see that AZSTA was asleep at the wheel in what is arguably its most important relationship. AZSTA must protect the public’s interests in dealing with the amazingly wealthy Arizona Cardinals of the obscenely wealthy and tax exempt National Football League (more on that in the post following this one) and with the “non-profit” Fiesta Bowl. Instead, the audit makes AZSTA appear less the people’s representative and more a wimpy junior partner in the sports and entertainment business, structuring its revenue with the industry first and Arizona’s citizens second. The audit’s big spotlight is on AZSTA’s operating structure, The terms the Cardinals, the NFL, and the Fiesta Bowl get for using a publicly funded stadium are exposed as very sweet deals:

Sweet for the Fiesta Bowl. In exchange for AZSTA paying its game day operating costs, the Fiesta Bowl agreed to pay for $5.6 million in stadium upgrades. Seemed like a good idea. It wasn’t. AZSTA is on the hook for $11.6 million through 2035.

Sweet for the Cardinals. AZSTA is helping retire $25 million in debt the team incurred building the stadium, that’s in addition to already being on the hook for most of the $370 million cost of the structure.

Sweeter for the Cardinals. AZSTA pays for all the Cardinals’ stadium operating expenses on game days, projected to be $2.9 million in 2009. For that privilege, the Cardinals pay rent at just $250,000 annually with a miniscule 2% increase each year. And, they keep all game day revenues. Taxpayers give $2.9 million. A wealthy NFL franchise gives $250,000. Is this new math?

Sweetest for the Cardinals. AZSTA gave the Cardinals stadium naming rights, which the team sold to The University of Phoenix for $154 million. Forbes Magazine says the deal is one of the best ever in professional sport. The Cards get the millions while AZSTA and Arizona get nothing.

Let’s not stop there. Besides these operating terms, the Cardinals – worth nearly a BILLION DOLLARS according to Forbes magazine– basically run the place, grabbing revenue from 88 luxury boxes and thousands of club seats while chumming up with the City of Glendale on plans to create a downtown-style commercial district next door to the stadium to compete with Phoenix. While the Fiesta Bowl gets only one stadium date a year in non-BCS years, it's quite a lucrative operation and capable of covering its game day expenses. Why should it? AZSTA and the taxpayers handle it.

Who did these deals? Who is responsible for all this? Primarily AZSTA. AZSTA designed its own failing rules of operation that the audit recommends it now change to get back in the black. I don’t have a lot of confidence that AZSTA will see the light. It failed to respond to our requests for interviews last week when we wanted them to explain all of this. And, just days before the audit was released, AZSTA announced that it was committing $4.4 million to the NFL for another Super Bowl bid.Board Chairman Jerry Walker told The Arizona Republic, “It's just part of having the Super Bowl. They (the NFL) are not strong-arming you, but that's the way it's set up."

AZSTA doesn’t sound like an agency in reform mode.

That being said, we’re all on the hook for this one. As a market and an industry, our reporting on this entire process has been very thin. The audit got “in other news” coverage last week except on KPNX. Media routinely miss AZSTA’s meetings. That’s how Ball Street operates. The league and political sell on building stadia is rarely critically questioned here.

With this audit, the questioning should start immediately. It’s time that we all – journalists and voters – started asking why billion-dollar sports enterprises should be getting millions in public dollars and what the political entities who are supposed to be governing them are getting in return. It’s a situation worthy of some AIG-level outrage. Call it “Outrage on Ball Street.”