Coyotes $2.1B stadium district voter referendum includes public tax abatements, infrastructure costs

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Arizona Coyotes right wing Clayton Keller (9) handles the puck against Minnesota Wild center Joel Eriksson Ek (14) during the second period of an NHL hockey game Sunday, Nov. 27, 2022, in St. Paul, Minn. (AP Photo/Stacy Bengs) Stacy Bengs / AP Photo

Tempe’s City Council unanimously voted to bring a new $2.1 billion Arizona Coyotes arena and entertainment district to a May 16 voter referendum.

While $1.9 billion of the project is said to be privately funded by the Coyotes’ ownership group, the city has agreed to pay as much as $229 million for infrastructure at the site, along with agreeing to a 30-year abatement of property taxes on the arena, music venue and Coyotes practice facility along with an eight-year abatement for the district’s hotels, residential units, retail, and office spaces.

The abatements are on the Government Property Lease Excise Tax for the property, which is essentially property taxes for spaces leased from the government.

Neil DeMause, who covers stadium public financing on his website Field of Schemes, believes those property tax abatements could have a $300 million present-day value.

“A chunk of that tax money would be collected by the city even without a new arena district, if Tempe area residents spent their entertainment dollars elsewhere in the city,” DeMause wrote. “How big a chunk, we don’t know, but it’s undeniably more than zero.”

Tempe Deputy City Manager Tom Duensing gave a presentation on the deal at Tuesday night’s meeting, telling council members that the taxes abated will be similar to other Arizona professional sports arenas, which are publicly owned and do not collect property taxes.

After leaving an arena deal in Glendale after the city opted out of its agreement with the team there, the Coyotes have been playing at Arizona State’s 5,000-seat Mullett Arena, which NHL Commissioner Gary Bettman said the team put nearly $30 million into improving.

“My perspective really is that what has been put together here is the best entertainment/arena deal that’s been put together in the history of the state,” Tempe Mayor Corey Woods said.

The project will include a 16,000-seat arena, practice facility, 50,000-square-foot music venue, two hotels, nearly 1,700 residences, and both retail and office space.

The city will start by spending $75 million to remove waste and repair the landfill site, with a $20 million overage allowance. It will bond $229 million for the infrastructure, with an estimate of $213.6 million in debt service interest, meaning $442 million will be spent on the principal and interest for the bonds.

Those bonds can be paid for through a fund that, as DeMause explained, includes “0.9% in city sales taxes on every dollar spent at the site, 3.75% in city hotel taxes, and 22.8% of future payments in lieu of property taxes collected by the city.”

Tuesday’s meeting included public comment from developers, business groups, residents, corporations, and Bettman, who explained that “this club wants to be here and, frankly, the NHL wants the club to be here.”

The deal includes a 30-year agreement that the Coyotes will not relocate. The city will have the right to sell naming rights for the district.

“The impact of projects like this we’ve seen all over North America,” Bettman said. “Yes, they’re economic engines. But arenas and entertainment districts change the quality of life in a community, creates a win-win.”

Economists, however, have shown that professional sports stadiums do not bring in promised additional economic benefits but instead lead to diverted spending in a city or region.

“The Tempe Entertainment District will be a huge win for this community, and we have no doubt that Tempe voters will agree,” Coyotes President and CEO Xavier A. Gutierrez said in a statement. “Our project will turn a landfill into a landmark – and one that not only provides a wonderful home for the Coyotes but also serves as a vibrant town square for Tempe, generating thousands of sustainable jobs and millions of dollars in tax revenue for the City.”

Republished with the permission of The Center Square.