Citizens, protesters and fans came together Wednesday to fill the Phoenix City Council Chamber in anticipation of a vote that would dictate the future of the Phoenix Suns. When the decision came, the Phoenix City Council voted six to two in favor of a $230 million plan to renovate Talking Stick Resort Arena downtown.
“We made a contract,” Interim Mayor Thelda Williams said at the time of the vote, “and I feel very strongly that the city of Phoenix honor its contracts.”
The cost estimate of the approved renovation is around $230 million. The city’s share of the renovation is capped at $150 million, and the Suns will pay the remaining $80 million plus any additional expenses.
According to a city cost breakdown of the renovation expenses, the projected total cost is closer to $235 million.
During the city council meeting, City of Phoenix Community and Economic Development Director Chris Mackay reiterated the city’s presentation and justification for the proposal, and emphasized the economic importance and impact of the downtown facility.
“Downtown is moving in the right direction,” Mackay said. “The arena has been key.”
As part of the agreement, the Suns also agreed to pay for the construction of a new practice facility to be located in Phoenix and estimated to cost $25-50 million.
“The Phoenix Suns are a community asset,” Suns President and CEO Jason Rowley said at the meeting before the vote. “It’s a building that’s owned by the city but utilized by the community.”
The public money used to pay for the arena renovations will come from the Phoenix Sports Facilities Fund, a tax fund comprised of tourism tax revenue. The fund accumulates a 1 percent tax on hotel stays and a 2 percent tax on car rentals within the state.
“This is a ‘screw you citizens of Phoenix deal,’ ” said Greta Rogers, 90, whose protest of the proposed arena deal during a Dec. 12 city council meeting went viral, before the start of the meeting.
“This was never brought to our attention when they started talking in November, December,” Rogers said. “Never.”
Many citizens lined up to speak for and against the proposal prior to the vote. Interim Mayor Williams stopped the procession of speakers after the item had been discussed for over two hours and with 29 people, she said, still in queue.
Under the new agreement, the Suns will continue to share profits and pay rent to the city. The rent and profit share to the city is estimated to be $60 million dollars over the upcoming 15-year agreement, from 2022-2037. The Suns will also continue to fully pay for operations and maintenance costs, according to the city. Major renovations are not covered under maintenance costs, as the city owns the building and operates as the team’s landlord.
The city will pay $2 million and the Suns will pay $1 million annually towards a new Renewal and Replacement account for costs of future infrastructure needs, according to the city.
Work began on the arena in 1989 and it officially opened in 1992. Now, the Suns are nearing the end of their 30-year operating agreement with the city of Phoenix, and this proposal will keep the team in downtown for an additional 15 years.
The agreement will replace eroding infrastructure in the arena, including plumbing, electrical, roofing and structural issues, while also updating fan amenities such as the seating bowls, suite levels and the main concourse.
The new agreement keeps the Suns in the arena through 2037, with an option to extend their lease until 2042. The Suns would face a $200 million fine if they break their new agreement and leave Phoenix before 2037.
Without an approved plan, the Suns could have had the ability to leave Phoenix when their agreement with the city ends in 2022.
Failure to reach a new agreement with the city could have triggered the obsolescence clause in their current operating agreement as soon as July 1, 2019. The obsolescence clause in the Assurance Agreement between the city of Phoenix and the Suns calls for an independent arbitration group to evaluate the building, determine whether the building and its functionality is obsolete and if so, how much money it would cost the city to make the arena suitable for its tenant, the Suns.
If the obsolescence clause had been enacted, Phoenix would have to fully pay the evaluated price without funding from the Suns, or else the Suns could be free to leave Phoenix upon the expiration of their current agreement in 2022. It is possible that the evaluation reached by the obsolescence process could have exceeded the $150 million proposed by the city.
The Phoenix City Council postponed its initial vote scheduled for Dec. 12 after public dispute and a call for more information and time to educate citizens. The city held five public meetings throughout Phoenix to explain the proposed renovation plan more thoroughly and open a dialogue about the proposal with residents.
The downtown arena hosts approximately 130 ticketed events such as concerts, professional sports, conventions and community events. It is also home to the WNBA’s Phoenix Mercury and the Indoor Football League’s Arizona Rattlers. Suns events make up 33 percent of the arena’s events, according to the city.
Renovations are scheduled to occur from 2019-2021.
Story by JAKE GOODRICK, Cronkite News