By Brandon Brown  –  Reporter, Phoenix Business Journal37 minutes ago

The Arizona Diamondbacks are lobbying the state’s Legislature to pass a last-minute bill that could create a whole new mechanism for the team’s owner – and the owners of any professional sports team – to finance costly renovations to its stadium.

The Diamondbacks say the legislation will make it so the team can borrow the money to make $500 million-worth of renovations, but it won’t come at the general taxpayer’s expense — just those who attend games at Chase Field.

It wasn’t too long ago that cities, counties and states forked over money to help build stadiums and arenas for professional sports teams. In fact, all four of Arizona’s pro sports venues are owned by public bodies: Maricopa County owns Chase Field, the city of Phoenix owns Phoenix Suns Arena, the city of Glendale owns Gila River Arena and the Arizona Sports and Tourism Authority owns State Farm Stadium in Glendale. That doesn’t include the handful of city-owned spring training ballparks around the Valley. Most of these venues were paid for by an increase in some sort of tax.

But using taxpayer money to pay to build or renovate facilities for pro teams has become politically toxic. The Phoenix Suns were able to convince Phoenix City Council to put up $150 million in 2019, but even though it didn’t involve adding a new tax, it still resulted in some Council members losing their next elections.

Theme park districts

With a knowledge of the political landscape, Arizona Diamondbacks CEO Derrick Hall reached out to Valley attorney Nick Woods, who is known for finding unique and creative maneuvers to let private businesses operate on government-owned land, to see if he had any ideas.

“Derrick Hall was looking for a mechanism to give them the option of infusing $500 million of improvements into Chase Field without using taxpayer money,” Woods told the Business Journal.

Woods’ idea was to use a law passed more than a decade ago to help finance a rock ’n’ roll-themed amusement park called Decades, which would have been built in Eloy, a small town about halfway between Phoenix and Tucson. Decades was planned to be a 270-acre park that included rides named after rockstars such as John Fogerty and Jerry Lee Lewis.

The theme park never came to fruition, but the legislation that could have helped fund the $750 million idea was still around and was never used.

How the bill was born

Woods and the Diamondbacks got Rep. Regina Cobb, a Republican from Kingman, to sponsor House Bill 2835, which would extend the life of that legislation until 2031 and add in a few new details.

The gist of the bill is that it allows for the creation of theme park districts, which would be able to issue government bonds to pay for construction.

If the bill is signed into law, the Diamondbacks would propose to have a theme park district created around Chase Field. The district’s board of directors would include someone from the Diamondback’s organization, a Phoenix City Council member, a Maricopa County supervisor and county and tribal residents appointed by the state Legislature.

The district would then be able to present a plan and if approved it could issue government bonds, which would be used to pay for the renovations of Chase Field. The bonds would be paid back by a tax – up to 9% – that will be included on the sale of all goods and services in the theme park district, or at Chase Field.

While technically it is a tax, Woods said he likes to think of it more like a “user fee” because only fans paying to go to Diamondback games would fund it.

“Finally we have a mechanism that addresses building and renovating stadiums and arenas that avoids the use of taxpayer money,” Woods said.

Woods said this type of funding structure has never been used at professional sports venues, but is a vehicle to raise funds through government bonds — which have more favorable terms — but would not raise taxes on the entire population, just those who actually visit the facilities.

Woods said he has actually already been contacted by another professional sports organization to look into adding this type of law in another state. If the bill becomes law, it will not just apply to the Diamondbacks, but could be used other teams and even actual theme parks.

Stadium solution

For years the Diamondbacks have been looking at finding a new place to play or finding a way to afford a facelift for Chase Field. The organization even issued an RFP looking at possibilities of building a stadium somewhere else. But if this measure is approved and signed into law, Hall said it helps the Diamondbacks’ chances of staying in downtown Phoenix.

“The more we looked into it, we thought this is a good option for us if, indeed, we wanted to stay downtown,” Hall said. “We’ve put hundreds of millions of dollars into this building so obviously it is important to us to kick the tires on staying here.”

Hall has a long list of things that could be updated in Chase Field including reducing overall general seating capacity, adding new premium areas and suites, new audio and video systems, new concession stands and more technology throughout the stadium.

The team would also like to change up the area outside of Chase Field.

“The model that works today [in Major League Baseball] is a mixed-use with retail, hotels and restaurants around the building so you can have 365 days of activation,” Hall said. “For us to do that and renovate the building we needed to find that mechanism, and [this bill] is what would really allow us to do that in a way where it doesn’t hit the general taxpayer.”

Tax/user fee

Hall said the repairs and renovations to Chase Field would cost up to $500 million, but team owner Ken Kendrick and his partners would pitch in 20% or $100 million.

Borrowing money through government bonds rather than a private lender is easier to stomach for the Diamondbacks because interest rates are lower and the amount of time the money needs to be paid back is longer. Even though the team would have to add a tax or fee to all purchases in the stadium – and the potential hotel, restaurants and retail stores surrounding the park – Hall said the price increase would be cheaper than if the organization was borrowing the money from a private lender.

While the tax could be up to 9%, the district has the ability to control how much it charges and could set rates to vary based on what is being purchased. For example, Hall said the amount charged to tickets could be different than food, which in turn could be different than T-shirt sales.

For more than a decade, the Diamondbacks have been at the bottom of MLB’s Fan Cost Index, which shows how much it costs a family of four to attend a game. Being the most affordable stadium experience in Major League Baseballs is something Hall and Kendrick are very proud of. Hall said the team would pay close attention to how much the fee would be raising overall prices, to make sure it doesn’t make costs unreasonable.

The tax was a sticking point for a few members of the Legislature. Sen. Michelle Ugenti-Rita, a Scottsdale Republican, pointed out in a hearing that fans are still taxpayers. Woods countered that by saying more than just Maricopa County residents attend Diamondbacks games, so it would be a wide swath of people picking up the tab.

Both bodies of the Arizona Legislature have approved the measure, though it has to go back through the House this week after an amendment was added in the Senate. Assuming it passes there, it will head to Gov. Doug Ducey’s desk.

While the Diamondbacks are in support of HB2835, it isn’t a guarantee that the team will even use it if it passes.

“We would still have to make the decision whether we want to utilize it and if we are going to stay here,” Hall said. “That decision is far from being made. The pandemic put a stop to everything. We had to take pause. But we’ll get back into the process and figure out what makes the most sense.”