Downtown Arena Plan Moves Forward
City can walk away from partnership if private funding fails
The prospect of big bucks and flying balls delighted a T-shirt-wearing crowd at the June 28 special meeting of the City Council. The freebie T-shirts, reading "Albuquerque Arena Route 66—Let's get it started," were passed out by the Downtown Action Team, one of several civic and business groups avidly supporting a proposed Downtown arena.
After adding certain "deal-breaker" provisions, councilors, on an 8-0 vote, gave Arena Management and Construction company the go-ahead to begin work on financing and designing the arena.
AMC, a Phoenix firm, teamed up with Global Spectrum, a subsidiary of Comcast-Spectacor, Hunt Construction Group and Albuquerque's Historic District Improvement Company to pursue the project.
The actual arena contract will be between Hunt Construction and a newly formed, nonprofit corporation, Albuquerque Sports & Entertainment Development Agency (ASEDA). ASEDA will be the arena's owner of record for about 40 years until debt is repaid, and then ownership will transfer to the city. The proposed 60-foot-tall, 10,000-seat arena, expected to open in 2006, will compete with the slightly larger Tingley Coliseum at Expo New Mexico.
The city currently owns about half of the proposed 6.5-acre site, bounded by Central Avenue, Second Street, Martin Luther King Jr. Avenue and the railroad tracks. Gulfstream Worldwide owns the southwest corner of the site. The Gulfstream purchase price is estimated at between $5.5 and $10 million.
According to a January article in SportsBusiness Journal, the AMC team formed in 2002 specifically to solicit contracts for 10,000-seat arenas in Albuquerque, Toledo, Ohio, and Tucson, Ariz. Recently, AMC and local supporters have pushed for speedy approval of the project, citing an expected rise in interest rates.
And while AMC was urging Albuquerque to hurry, the company was prodding Tucson to keep up with the Duke City. A January article in the Arizona Daily Star quoted AMC principal Zev Buffman: "Albuquerque makes decisions more rapidly. Albuquerque is a bit of a gunslinging group, and God bless them for it. They seized the moment."
According to AMC, such facilities need to attract about 120 events a year. A Toledo Blade article listed the desired lineup for Ohio: 36 Toledo Storm hockey games, 19 arena football games, 17 concerts, 14 circuses, eight Broadway shows, eight ice shows, five wrestling events, four rodeos, four speakers and three trade shows. Councilor Brad Winter said AMC had presented a similar list for Albuquerque.
Representing AMC, Albuquerque attorney Charles Price reviewed changes in the latest version of the memorandum of understanding between the city and AMC. Price said the city had no obligation to pledge any revenues and would have no financial liability for construction. Price said the construction would be financed by private equity, industrial revenue bonds and surcharge proceeds. He added that AMC would soon present a feasibility study, and the city has the right to terminate the memorandum 14 days after that presentation.
Ron Wildermuth of Hunt Construction said Hunt will produce a guaranteed price for the project at some point between the design development stage and the construction drawings stage.
The city's obligations will be to acquire the necessary land, upgrade infrastructure and make the site "construction ready."
Council President Michael Cadigan asked about naming rights for the facility, saying he wanted to avoid, for example, "Enron Arena." Bill Dutton, AMC director of development, said naming rights "will go to market," but the Council could reject any name they considered inappropriate.
Councilors were concerned about the nonprofit status of ASEDA, formed by AMC and the Historic District Improvement Company. While the 501(c)(3) tax-filing classification gives the project some tax breaks, it also limits city oversight of the project.
An underwriter's representative said their legal counsel thought ASEDA would qualify for nonprofit status from the Internal Revenue Service. Councilor Eric Griego asked what was "the charitable purpose that qualified ASEDA for non-profit status—the economic development of Albuquerque?"
Dutton said that was a very appropriate purpose.
Griego proposed an amendment allowing the city to audit the books of all entities involved in the project, not just the books of ASEDA. Chief Financial Officer Gail Reese said the administration supported the amendment, because it addressed the city's concerns about documentation of entities that were connected with the project but not contracted with the city.
Price said AMC was not in support and such a request would impose a "substantial burden and disincentive" and the applicants "were not going to be happy about it." Winter asked Wildemuth why the ASEDA subcontractors were objecting. Wildemuth said, "I guess I would say our business is private." After Cadigan called for more limited language, the amendment passed.
Price said the city would have a seat on ASEDA's board of directors, which will have five members, one each appointed by the governor, the mayor, the Greater Albuquerque Chamber of Commerce, the Albuquerque Convention and Visitors Bureau and the Downtown Action Team.
Saying that a seat on the ASEDA board did not provide the city enough oversight, Griego proposed appointing an agent to act as the owner's representative.
Price said ASEDA was the owner of the project and would designate a representative, and the city had the right of review but not the right of approval. A revised amendment passed, giving the city some right to review the construction budget.
Ten people spoke in support of the arena. Dale Lockett, head of the Albuquerque Convention and Visitors Bureau, said the arena would draw conventions because visitors liked a vibrant downtown with full streets. Lockett said groups like the Baptists could set up their marketing and sales activities in the convention center and then use the arena for their large general assemblies.
Downtown resident Ramsey Rose opposed the facility, saying local residents needed services, not more traffic and noise.
The Council unanimously passed a 10 percent surcharge on arena receipts, including parking. The revenue will go to repay the debt. Because the project will not include new parking facilities, the surcharge will be levied on cars using the city's existing, money-losing, downtown garages. The Council decided that the surcharge also applied to arena goods sold off-site, such as clothing with arena-based team logos.
The bill authorizing industrial revenue bonds for the arena also passed unanimously.
Councilor Debbie O'Malley proposed an amendment to the memorandum of understanding allowing the city to continue or terminate the agreement within a certain time. Deal-breaker situations would include ASEDA's failure to secure nonprofit status or adequate private financing, indication that the arena will not pull in enough revenue, or the city's failure to buy the needed land at a reasonable price.
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