Suburban Glendale is less a community with professional sports facilities than a sports enterprise with a community held hostage to previous improvident decisions. Now Glendale's government may multiply its follies, unless Arizona's Constitution saves the city from itself.
Taxes provided $346 million of the $455 million cost of the huge (up to 72,200 seats) retractable-roof NFL stadium where the Arizona Cardinals will play 10 times this season, if there is a season. (The NFL is having labor problems.) But Glendale (population 253,000) has a more immediate problem with its hockey team, the NHL's Phoenix Coyotes.
After the team entered bankruptcy in 2009, the NHL bought it for $140 million and has lost at least $30 million operating it. It might decamp to Winnipeg, Manitoba. This would enable Glendale, which spent $180 million on the hockey arena, to cut its losses.
Glendale, however, not wanting its eight-year-old arena to sit vacant, wants to sell up to $116 million of municipal bonds so that it can give $100 million to a wealthy Chicago businessman to help him buy the team.
With the $100 million, the city would supposedly purchase the right to charge parking fees at the arena the city owns, with the fees going to pay off the bonds. But the city already owns the right it is purchasing: It already imposes a ticket surcharge for parking.
If future fees are insufficient, Glendale's taxpayers will have to make up the shortfall. Furthermore, Glendale would pay the new owner an additional $97 million under a contract, awarded without competitive bidding, to manage the arena through the 2014 season.
Fortunately, this folly may be illegal. The Arizona Constitution's "gift clause" may block Glendale's booster socialism — the ruinous pursuit of derivative grandeur from sports. The clause was written to prevent crony capitalism — to provide a wall of separation between corporations and government by forbidding government to give corporations gifts, loans, grants or subsidies.
The Goldwater Institute, a think tank and advocacy organization dedicated to the limited-government principles of its namesake, plans to sue, if necessary, to see that Arizona's Constitution is respected. So the city, which has been dilatory regarding documents sought by the institute, is threatening to sue the institute, which warned bond rating agencies and others about its possible constitutional suit. Glendale correctly says that the suit will add a risk premium to its cost of borrowing.
But before the institute announced its intentions, Moody's, the credit rating agency, responded to Glendale's idea of taking on another $116 million in debt by lowering the city's rating.
Its debt is already triple the median for comparable cities. Darcy Olsen, the institute's president and CEO, notes that if questioning a government's behavior can generate "a retaliatory lawsuit by a legion of government attorneys, then journalists, bloggers, and regular citizens across the state are all at risk."
John McCain, who holds the Senate seat once occupied by Barry Goldwater but does not hold Goldwater's views about governmental minimalism, calls the institute's actions "disgraceful" and "basically blackmailing": "It's not their role to decide whether the Coyotes should stay [here] or not." Well.
Constitutions do not impress the co-author of the McCain-Feingold assault on the First Amendment (his law restricts political speech). But the institute's job — actually, it is every Arizonan's job — is to protect the public interest.
A virtuoso of indignation, McCain is scandalized that the institute, "a non-elected organization," is going to cause the loss of "a thousand jobs." McCain's jobs number is preposterous, as is his intimation — he has been in elective office for 28 years — that non-elected people should not intervene in civic life.
NHL Commissioner Gary Bettman agrees with McCain that the world is out of joint when people can second-guess the political class: "It fascinates me that whoever is running the Goldwater Institute can substitute their judgment for that of the Glendale City Council."
He will learn not to provoke Olsen, who says, "It happens to fascinate me greatly that the commissioner thinks a handful of politicians can substitute their judgment for the rule of law."
Warren Meyer of Forbes.com calculates that Glendale's new plan would bring the city's spending to almost $400 million on a team valued at $134 million — a team that has lost money in each of its 15 years here. Glendale's rejoinder to the Goldwater Institute is an attempt at intimidation by lawsuit, which speaks volumes.
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