Two conflicting reports released this week examine the potential economic impact of Tempe’s entertainment district — one saying there will be economic hardship in the community after the project ends, while the other says it will create billions of dollars for the city.
The assessments, conducted by the Grand Canyon Institute and ASU’s WP Carey School of Business L. William Seidman Research Institute, differ widely in predicting the potential economic and employment impacts as well as the longevity of the entertainment district.
The proposed Tempe entertainment district would include nearly 2,000 apartments and a new hockey arena for the Arizona Coyotes with 16,000 seats on about 46 acres of land along with other businesses and retail. location at the northeast corner of Priest Drive and Rio Salado Parkway.
The three ballot propositions for the May 16 special election regarding the proposed entertainment district address land use and the city of Tempe entering into an agreement with a development company to create the entertainment district.
Ballots will be mailed to residents on Wednesday, April 19 and must be returned by May 9. Replacement ballots may be cast in person from May 8 to 16 if the mailed ballot is lost, damaged, destroyed or undelivered.
READ MORE: Tempe special election for Arizona Coyotes arena and entertainment district, explained
Seidman Research Institute report
The Seidman Institute is a consulting wing of the WP Carey School established to serve as a resource for private and public enterprises, according to its website. The Institute was contracted to produce a report commissioned and paid for by the Arizona Coyotes development team.
Longtime ASU professor of economics and director of the Seidman Institute, Dennis Hoffman, said his role in the report was largely in an auditing capacity, rather than a lead author.
The report was produced in a relatively short window compared to the time required to conduct a thorough study. In just 10 days, the team reviewed the reports previously made by Conventions, Sports & Leisure International, which was also commissioned by the Coyotes, and Hunden Strategic Partners, which was commissioned by the city of Tempe.
The CSL report concluded that the arena and entertainment district would generate a total of $12.5 billion in total output during its construction and the 30 years that followed.
“We only do these projects with the understanding that we have complete freedom in terms of reaching the conclusions of our review,” Hoffman said.
The Seidman report concluded that the entertainment district would generate millions of dollars for Tempe and because most of the construction was privately financed, earlier Hunden and CSL reports underestimated revenue projections. The Seidman report is not yet available to the public.
The Seidman report determined that CSL “took a comprehensive approach to estimating economic impacts,” but it underestimated revenues per new job by 36.5% and net sales tax tallies by $34 million. The CSL analysis said the development would create 6,900 jobs, and the Seidman report said both reports were consistent with that number.
In a media alert from Mike Scerbo, a spokesperson for the Tempe Wins campaign in favor of the three propositions, it was said that Seidman’s review confirmed that “there is no cost to the City of Tempe and the project is privately funded unlike any other sports facility in Arizona. …Tempe’s general fund dollars were not used to pay for any part of the project, nor did the development require the imposition of new taxes – whenever.”
Hoffman, who created the report, said his only experience with the entertainment district prior to creating the report was analyzing it as a Tempe resident and voter. He said he was moved by the part of the proposal that said the entertainment district would be privately funded.
The Grand Canyon Institute report
According to the GCI report, the addition of a third arena in the Valley will create challenges for the effective utilization rates of two other sports venues – Footprint Center in Phoenix and Desert Diamond Arena in Glendale (formerly known as Gila River Arena). The three tend to compete, giving each a slight advantage in negotiations for booking live events.
Envisioning 45 events and hockey games for the arena may be optimistic, the report said, adding that the loss of events for other, long-standing venues could deter those. positive results from adding the entertainment district to the mix.
In a press release, Dawn Penich-Thacker, a spokeswoman for Tempe 1st, the grassroots campaign opposing the entertainment district proposals, said the group was grateful to see an “unbiased economic analysis ” which is in line with the group’s beliefs.
“This proposed development is a financial drain on Tempe that is unlikely to meet the developer’s expectations,” the statement said. “Tempe residents better reject this plan so our city can start fresh and invite better, more responsible and profitable projects for our land.”
The report, which took two months to complete, found that the town would experience a “net drain, not a net gain” from the project. The study says for every $2.70 that goes from the city to arenas and music venues, the city receives only $1 on average in return. The report says that this will hinder the growth of the city’s general fund.
“We found that it’s not enough revenue to pay for it, so it’s a net loss to the city, which means the city doesn’t miss out on general funding,” said Dave Wells, GCI’s director of research. .
The GCI report also addressed earlier reports from CSL and Hunden that the Coyotes and the city had used months before and called their numbers “arbitrary.” GCI said the two previous reports failed to account for the losses Tempe businesses could experience as a result of the new development.
It also said the impact would be more localized, saying the impact in the greater Phoenix Metropolitan Statistical Area would be negligible because the Coyotes had been established for 30 years. The report uses a multiplier effect that represents the sales tax in Tempe rather than the greater metropolitan area.
Wells said that inside the entertainment district there is a sales tax of 10-11% for the city to break even.
“People who come will pay for it,” Wells said.
GCI called the Seidman report a “pie in the sky.” GCI’s response said the Seidman report used a multiplier greater than what would represent Tempe, instead using one that represents the entire Phoenix MSA. According to Wells, the Seidman report also double-counted taxes for hotels instead of counting them correctly at one time.
“Nobody’s going to visit Tempe because they’re building any hotels and businesses aren’t starting up because somebody’s going to the office,” Wells said. “Actually, the Seidman Institute actually has this fantastic economic return, I think a poor use of economic impact, so that’s one of the main reasons why our results are lower than to others because other things can happen.”
Edward Pascual, Coyotes senior real estate consultant, said there are options to develop a significant part of the site where the entertainment district is and they have been there since 1996.
“The site is a brownfield and the site needs a lot of upfront capital to remediate and put in public infrastructure,” Pascual said. “Once they do that, the land is worth less than the investment they put in. So when we look at these hypothetical scenarios … city, and they haven’t been there yet.”
Wells said that for voters struggling to know which report to look at, it’s difficult to gauge the future, but he believes the GCI study is more accurate.
“Everyone should take all these numbers with a grain of salt, meaning none of them are necessarily as accurate as they appear,” Wells said.
Senior sports reporter Alex Wakefield contributed reporting to this article.
Edited by Reagan Priest, Greta Forslund and Anusha Natarajan.
Reach reporters at pjhanse1@asu.edu and sbrenna5@asu.edu and follow @piperjhansen and @shanebrennan36 on Twitter.
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Piper HansenDigital Editor-in-Chief
Piper Hansen is the digital editor-in-chief of The State Press, overseeing all digital content. When joining SP in Spring 2020, he covered student government, housing and COVID-19. He previously wrote about state politics for The Arizona Republic and the Arizona Capitol Times and covered social justice for Cronkite News.
Shane BrennanPolitical Reporter
Shane Brennan is a political reporter for the State Press. He also worked for Cronkite News and Blaze Radio.
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