Arizona Approves Ballpark Sales Tax to Fund Chase Field Renovation

·7 min read

The Arizona Diamondbacks will continue exploring new ballpark options around Maricopa County, but the National League ballclub intends to concentrate on plans for a $400 million to $500 million refurbishment of Chase Field now that the Arizona state legislature has approved a funding mechanism that will underwrite 80% of the cost.

The bill, HB2835, signed into law last week by Arizona governor Doug Ducey, will allow the D-backs to place up to a 9% tax on anything sold at the current ballpark—tickets, merchandise and concessions—to underwrite and pay off a publicly backed revenue bond issue for the improvements.

They would be liable for the other 20%, which at the base cost of as much as $500 million, would be $100 million up front.

The ballclub generated $73.4 million in such ballpark-oriented sales during the 2018 season, the most recent year for which public finance records are available.

“I’m not sure we’re going to [use the mechanism], but it’s sure nice to know we’re able to,” Derrick Hall, the club’s president said in an exclusive interview. “We were looking for possibilities of financing for renovation and development if we stayed downtown. I didn’t have too many options to stay here. We’re getting no public funding as you know.”

The bill designates the 20-acre Chase Field site, where the D-backs have played since their inaugural season in 1998, as a theme park district. Any bonds issued by the district board would tie the franchise to downtown Phoenix until that loan is retired, according to the law.

Historically, those type of public bond issues are set at a 30-year term, and at interest rates much lower than a private entity like a Major League Baseball club can obtain from a bank on its own.

“It allows a chance to excise a tax on anything, everything baseball,” Hall said. “On one hand it’s great because the general public and general taxpayer is not funding it. But we are going to be taxing our fans and our best customers. We’re granted the ability to finance at favorable rates, and pay off the debt based on taxes we would be applying to ourselves and our fans.

“We’ve been looking for a way to stay here. We love the history. We love the building. We love downtown. It’s just going to continue to grow.”

The D-backs have a lease at Chase Field through the 2027 season but earned the right to leave early through a 2018 settlement of a lawsuit against the county regarding which entity was liable to pay for necessary maintenance and upgrades to the facility. The D-backs have already identified about $200 million in projects and have updated some of those infrastructure items, Hall said.

In exchange, the D-backs took over operations of the stadium, and as Hall said, began “kicking the tires” elsewhere locally—even fielding inquiries from Las Vegas interests—seeking financing for a new retractable-roof stadium with a capacity of about 38,000. MLB said at the time the team wasn’t moving out of the county.

Even before the coronavirus hit and baseball was paused for four months on March 12, 2020, the D-backs were finding it hard to come up with investors and financing to build outside of what is called the Legends Entertainment District they share with the NBA’s Phoenix Suns. The ballpark is adjacent to what’s now called Phoenix Suns Arena, which just received $230 million worth of upgrades, $150 million of which were paid for by the city of Phoenix, which owns the building. The arena opened in 1992 at a cost of $89 million—equivalent to $168 million today.

Chase Field seats 48,519, one of the largest capacities in baseball, and is the fourth oldest ballpark in the NL behind Wrigley Field in Chicago, Dodger Stadium in Los Angeles, and Coors Field in Denver. It is the oldest facility with a retractable roof.

“We’ve talked about it for years,” Hall said. “One thing that would need to be addressed is the capacity. It’s way too large. We need to bring our ballpark into modern times.”

It’s owned by Maricopa County, which funded 68% of the original construction costs of $414 million, the D-backs paying the remaining 38%, plus substantial overruns. Those bonds were retired in 2019.

The new funding mechanism could only be used downtown, thus the D-backs will still need money if they intend to build anywhere else in Maricopa County, which includes such wealthy towns as Scottsdale and Tempe. A new ballpark with a roof would cost about $1 billion. Comparably, Globe Life Park with its retractable roof, opened last year in Arlington, Texas, at the cost of $1.3 billion. The Texas Rangers and the city of Arlington evenly split the cost of that project.

There’s no more public money coming from the Maricopa County to pay for improvements to Chase or a new facility.

The adapted law compensates for that. It was in existence but was about to sunset when the D-backs lobbied for language that would allow them to take advantage of it, Hall said.

“We really pushed for it,” he said. “I think that the lawmakers did get creative. So, now it’s there, and it is an option. When the pandemic hit, we put everything on hold. But now it gives us a chance to take a good, hard look at what it would take to stay here.”

The D-backs envision constructing a ballpark village around Chase Field to include a hotel and eating establishments. They could place user fees of up to 9% on hotel bills, bar tabs and restaurant bills to help pay back the debt. The users fees could essentially fund a “mixed use” approach, Hall said.

“We could essentially say, ‘OK, we’ll charge 7% on beer, 3% on general concessions and 5% on merchandise [at the ballpark],’” Hall said. “It allows you to finance what you borrowed and what has been bonded for at a much quicker pace.”

The D-backs already have control of a multi-tiered parking garage south of the ballpark where they could rebuild, plus other open space contiguous to the ballpark, but they’d try to purchase other parcels of land in the vicinity to expand the project, Hall said.

Though the D-backs constantly lose money, Sportico just valued them at $1.28 billion, 25th among the 30 MLB teams. They were purchased for $130 million in fees for the last expansion of 1998 under a similar structure to the current ownership group. Ken Kendrick, now 78, replaced Jerry Colangelo as managing general partner in 2004.

Sportico calculated the average MLB franchise value at $2.2 billion, and last week during a SporticoLive online discussion of MLB valuations commissioner Rob Manfred called that figure “the lodestar of where you would start in terms of expansion opportunities” if and when MLB decides to expand again.

Though there have been inquiries, the D-backs franchise isn’t currently for sale, Hall said.

According to public records, the team lost $44 million in 2018. Since the pandemic hit, abbreviating the 2020 season to 60 games without fans in the ballpark and limiting the number of spectators this year, the team has lost another $100 million, with little or no revenue generated within the ballpark.

How that loss of revenue will affect any bond issue is still in question.

Hall said the ballpark project will now explore parallel paths. While the D-backs will still talk to other potential partners in the county, they can begin the process of “looking at design plans and working with architects, and site engineers to make Chase Field look as new as possible.”

With the new tax arrangement, the team will take its time. “For me, with no rush, I would like to say that within the next year to two years I’d like to have a good understanding of where we’re going to be,” he said.

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