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5/4/2013 9:55:00 PM
Unpaid debt adds up for Prescott Valley Event Center
The Daily Courier, file
It seemed like blue skies ahead during construction of the Timís Toyota Center in Prescott Valley June 10, 2006. The looming recession would soon cast a shadow over the event centerís future.
The Daily Courier, file
It seemed like blue skies ahead during construction of the Timís Toyota Center in Prescott Valley June 10, 2006. The looming recession would soon cast a shadow over the event centerís future.
Events center agreement details
The 2005 four-party development agreement that set the stage for the Prescott Valley Events Center consists of 83 pages of background, legal descriptions, maps, and legal requirements.

Among the agreement's basic points:

• The developer shall be responsible for obtaining financing for 100 percent of the cost of constructing the PVCEC (Prescott Valley Convention and Events Center), potentially including initial reserves for operating expenses...and debt service during construction and potentially during other portions of the PVCEC financing period.

• The developer (through Global Entertainment or one of its subsidiaries) will define and collect contractually obligated income.

• Operating revenue of the PVCEC shall be applied: first, to pay the center's operating expenses; second, to pay the base amount of Global Entertainment's management fee; third, to pay all current debt service on the PVCEC financing.

The agreement adds: "If the resulting net operating revenue is inadequate to pay all current debt service on the PVCEC financing, then any shortfall shall be paid first out of the funds held in the Fain Escrow Account, then from the Lockbox Account, and then from the Town Escrow Account."

• "The town shall establish a separate account, segregated from its other accounts, called the 'Town Escrow Account.' The town shall credit quarterly to the Town Escrow Account (the sales tax from the events center building, and the sales tax from the surrounding entertainment district, amounting to 2 percent of the town's 2.33 percent sales tax)."

The agreement adds: "The funds in the Town Escrow Account shall be used to pay debt service on the PVCEC financing if the net operating revenues from the PVCEC, any funds from the Fain Escrow Account, and any funds in the Lockbox Account are insufficient to provide funds to pay the debt service in any month..."

• If the funds in the Town Escrow Account equal or exceed the town's obligated reimbursement and debt service amounts, "the town may discontinue its credits to the Town Escrow Account and use the (obligated sales tax revenue) for any other lawful purpose."







Cindy Barks
The Daily Courier


This is the first installment in a series of articles on the financial status of the Tim's Toyota Center in Prescott Valley.



PRESCOTT VALLEY - As they contemplated plans for a multi-purpose events center back in the mid-2000s, Prescott Valley officials envisioned having a new source of sales tax revenue that would one day supplement the town's general fund.

It hasn't worked out that way, however.

Since the Tim's Toyota Center opened in the Prescott Valley Entertainment District in November 2006, the town has put about $10.4 million of its sales tax proceeds into paying off debt for the center, according to information from Prescott Valley Management Services Director Bill Kauppi.

At about $1.5 million this past year, the payment for the center amounted to nearly 14 percent of the town's overall sales tax revenue of $10,883,569 during the past fiscal year.

The payments have absorbed much of the sales tax money generated from three basic sources: sales from inside the arena, sales from the adjacent entertainment district, and sales from a "secondary credit area" along a section of Highway 69.

Although a 2005 multi-party development agreement stipulated that the debt would be paid by a combination of revenue from the events center (managed by Global Entertainment) and the town's designated sales tax, the center has failed to generate any net revenue in recent years.

That has left the town as the sole entity paying toward the $84 million in principal and interest on the center, including $35 million in principal and $49 million in interest (less about $3.3 million in capitalized interest).

Without the anticipated revenue stream from the center, the involved parties have consistently come up short in covering the debt service.

To date, the center is about $3 million behind in its debt payments. A notice that the town received on April 3 from Wells Fargo Bank indicated past due principal and interest amounts for 2010, 2011, and 2012. In all, the cumulative past due debt service totals $2,967,508.

And records show that the loan's heaviest years are still to come.

According to the amortization schedule that came with the 25-year bond issue, the debt requirements will gradually rise over the next 18 years - from $2.7 million in 2013, to a high of $3.8 million in 2030. Depending on the status of capitalized interest and reserve earnings, the bond will end in 2031 with a required payment of between $2.9 million and $6.2 million.

All of the remaining yearly bond requirements significantly exceed the $1.5 million or so that the town has been generating annually through its dedicated sales tax areas.



Hopes vs. reality

In 2004 and 2005, Prescott Valley was riding a wave of growth. New residential subdivisions were multiplying, and long-term plans for a downtown entertainment district were coming to fruition.

It was in that heady atmosphere that the town looked ahead to a multi-purpose arena.

Town officials viewed the arena as an anchor that would lead to exponential sales tax growth.

Along with the additional sales from concessions and tickets inside the building, the town was anticipating that the center would draw new businesses, which, in turn, would attract new customers.

"If there's a hockey team playing 33 times in the arena, there would be thousands of people in the downtown," Economic Development Manager Greg Fister said, referring to the projections relating to the center's home team, the Arizona Sundogs.

To some degree, he and others say the predictions were accurate. Fister says sales in the entertainment district have increased by about 32 percent since the events center opened. In addition, the center has helped to attract new businesses, such as Hampton Inn.

In the early days of the center, Fister said, the crowds materialized. "Back in 2006 or 2007, try getting into a downtown restaurant before a Willie Nelson concert. You couldn't," he said.

But no one disputes that the center and the surrounding businesses have fallen short of revenue expectations. And virtually everyone involved points to one major factor: the faltering economy.

"What we did not anticipate is the biggest recession since the 1930s," Town Manager Larry Tarkowski said.

Brad Fain, managing partner of Fain Signature Group, offered a similar view. "What nobody could predict was this thing we all call the Great Recession," he said.

Using projections from a 2005 feasibility study, the town had anticipated that the center would raise enough net revenue (income after expenses) to make up the bulk of the debt payments, with Prescott Valley's sales tax covering any shortfall.

Tarkowski said the town viewed the arena as a source of new sales tax revenue that it could put aside, and eventually dedicate to other projects in its general fund.

"We thought there would be a surplus, and (the bonds) would not be reliant on the town's sales tax," he said.

Rick Kozuback, president and CEO of Global Entertainment, agrees that revenue from the center was expected to make up a portion of the debt payments.

"There were certain buckets of money that were supposed to pay the debt service on the bonds," Kozuback said, adding that the net income from the center itself "was a revenue stream, for sure."

But, because the center "hasn't performed," Kozuback said, there has been virtually no revenue - only losses. He said the company has taken no profits or commission and estimates that Global has put more than $2 million into the center's operations to cover those losses. "We have to; otherwise the building would have shut down," he said.





Multi-faceted agreement

The basis for the center was a complex development agreement that involved four major parties: the Town of Prescott Valley; Global Entertainment Corporation; the Prescott Valley Event Center LLC; and Fain Signature Group.

The 83-page document, along with an 11-page amendment, goes into minute detail on the various responsibilities of the involved parties.

The gist of it makes the developer (through Global) responsible for acquiring the loan for the center, while the debt would be paid back through an intricate system that tapped into various sources.

The first source going toward the debt, said Kauppi, was the net income from the center.

Then came a "lockbox" account, a Fain escrow account, and a town escrow account. Kauppi said the lockbox was initially intended to hold the sales tax money generated through the construction of the center, while the Fain and town escrow accounts were intended to contain the sales tax generated from the entertainment district.

"At the very beginning, that was supposed to be enough," Kauppi said of the entertainment-district sales tax money, in combination with the income from the center. Ultimately, the agreement added a "secondary credit" area, which Kauppi said was included to get a better interest rate for the bond.

Fister describes the secondary credit area as the retail along a portion of Highway 69 in the area of Tim's Used Cars.

The town was adamant right from the beginning that it would not take on responsibility for the bond, Tarkowski said.

To that end, he said, the town's response to initial proposals on the arena was: "If you are looking for the Town of Prescott Valley to do a traditional arena deal, the answer is 'no.' We were not willing to sell bonds to build an arena, bottom line."

The result of all of the negotiations and agreements was limited exposure for the town, Tarkowski maintains.

"Those bonds are not our debt," he said. "We have done a good job of quantifying and limiting our exposure."

Since 2009, the finances for the center have been the topic of a multi-party lawsuit that Allstate Life Insurance Company filed in U.S. District Court, claiming that the involved parties inflated the center's revenue projections in order to get a better rating for the bond.

To date, the lawsuit has generated nearly 800 filings, and is still ongoing. Until resolution of the suit, the question on the unpaid debt service remains unanswered. Meanwhile, the town's sales tax money is failing to cover even the interest on the debt.



Community asset?

Despite the problems the center has experienced, officials say it has done its part in molding a desirable downtown.

"It's helped shape the identity of the community," Tarkowski said, adding that he often poses a question to groups he speaks to: "What would Prescott Valley be like without (the center)?"

Fain says the center has been an effective anchor in the entertainment district.

"I truly believe it's a community asset," Fain said, adding that the center has been important in efforts to attract new business and industry to the Prescott Valley area, along with providing previously unavailable leisure opportunities. "You can be in a small town and still have all of that level of entertainment."

Fister, who came on board just as the town was firming up its events center plans, said the town had a number of goals for the center. Prominent among them was the enhancement of recreational and cultural activities in the area.

"We look at it as cities and towns are more than roads and water and sewer," Fister said, maintaining that the center is "an area amenity that enhances the quality of life."







HSE - Yavapai Reentry Project -UVSplash
Related Stories:
• PV Event Center: Lawsuit pits investors against town, developers
• CENTER OF ATTENTION: CFD is official owner of PV Events Center
• Prescott Valley Events Center seeks formula to increase profits


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Reader Comments

Posted: Monday, May 13, 2013
Article comment by: We live here

When is it going to stop? Lived her more than a decade and anything nice Prescott Valley has, the Courier tries to tear down. Everything is a chance to make headlines and pit Prescott vs. Prescott Valley. Guess what, PV will be much bigger than Prescott in no time if it hasn't surpassed it already. The Professional Bull Riding and June three-day Christian concert are huge events that the region attracted because of Tim's. Looks like the economy dragged Tim's Toyota Center down like it did every other business, and things are starting to recover. As for me, I'll keep going to these events -- much easier on my wallet than going to Phoenix. Perhaps if the Courier supported regional cooperation instead of supporting regional infighting, we'd be even further ahead.

Posted: Tuesday, May 07, 2013
Article comment by: God Send

@FYI@ Are You Kidding Me: The Metallica tickets that go for $50 are for stadiums that seat 65,000 people. The $150 are for premium seats at venues that seat 15,000, Metallica gets in the neighborhood of $1 million GUARANTEED per booking. You just illustrated beautifully the fact that many people here think they know how the entertainment business works with regard to marketing and booking and the like... yet, they do not.

Posted: Monday, May 06, 2013
Article comment by: @ Concerned Citizen

PV's on the hook to repay the bonds whether or not the Center closes. Selling it to a flea market, for example, does not make the bond obligation go away. PV will pay for this no matter what or declare bankruptcy like some of the California towns.

Posted: Monday, May 06, 2013
Article comment by: Concerned Citizen

The time has come to consider whether we need such a white elephant in our town. The arena has the worst person running the organization and nothing will get better with Gary Spiker in charge. He has not shown an ability to increase revenue and why should our town cover the arena losses with hard earned tax dollars. Also, If Mr. Fain feels the need to have his ego boosted by having a losing hockey team and an empty arena please step up and cover the losses with your own money. Lets face it, the town of Prescott Valley enters into these deals to benefit a small few. We do not need this arena nor do we need to continue to cover the losses with tax revenue that can be used for other important issues. Especially, when the losses are going to become even worse with an escalating payment schedule. Close the arena or sell it to someone else and move on. It is time for this town to wake up and stop trying to become something it is not. Wondering why we are giving such huge tax incentives for Walmart? Ask Mr. Fain!

Posted: Monday, May 06, 2013
Article comment by: Reality Check

PV needs to raise taxes, fees and traffic fines.

It has worked in the past.



Posted: Monday, May 06, 2013
Article comment by: Hooty Hoo

In the other article it said that depending on ticket sales they lose between $20-40k per concert. I went to Miranda Lambert. If they lost money on that somebody needs serious business help. She had just won Country Artist of the Year like 2 weeks before. It was easily the biggest name show they've ever had there, and they lose twenty grand? What's next, a bad minor league hockey team?

Posted: Monday, May 06, 2013
Article comment by: Mr Maverick

Sounds like Tim's got a nice handout from PV over a statium everyone should have known would never be filled. Too bad it is now just an eye sore of debt.

Posted: Monday, May 06, 2013
Article comment by: Jack May

Louie Lizza tried to tell everyone who attended the "meet the candidates" gatherings prior to the election. He tried to tell voters about the financial chaos taking place with the event center. Mayor Skoog poo poo'd Lizza's comments and never did address any of the issues. Few listened to Lizza. Most people voted for the name on the ballot that they recognized which was Skoog. No one invested the time to understand the issues, they voted for name recognition, and this is the result. The public only finds out about these things after the election. The Courier only reports on these things after the election. Gee Whiz I wonder why? Wake up people. Never, ever vote for an incumbent. Never, ever rely on media with a political agenda to keep you informed.

Posted: Monday, May 06, 2013
Article comment by: Hooty Hoo

"If there's a hockey team playing 33 times in the arena, there would be thousands of people in the downtown," Economic Development Manager Greg Fister said, referring to the projections relating to the center's home team, the Arizona Sundogs."

And there you have the basic reason for the problem: HOCKEY IS NOT A MONEY MAKING SPORT IN ARIZONA. Look at Glendale, how they screwed up to get a stinking hockey team. Build a huge arena and the team goes belly up, and next they threw $25 million a year just to operate the arena. That team's never gonna make it. They are so messed up over the stinking Coyotes, they probably wish they never heard of them. At least PV isn't upside down like that. They were riding the boom years like everybody else. The people bought too much house, they bought too much arena.


Posted: Monday, May 06, 2013
Article comment by: Well Written Story, Ms. Barks!

This is the best piece of reporting I have read in the Daily Courier. The sidebar helped, too. In her reporting Ms. Barks neatly summarized the past, present, and future of TCC, which is a very complicated story.

Well done, Cindy Barks!


Posted: Monday, May 06, 2013
Article comment by: jack kretzer

global 'snake oil' came to yuma and a city council vote of 4-3 global didn't have to build an arena, the city couldn't wait to get started.

exercising my constitutional right to refer the vote to the qualified electors i obtained a serial number and 40 folks couldn't wait to help.

one of the four votes now wants to be mayor of yuma.

the business community jumped to help the city to pass a revised version that the city spent about $100,000 to place on the ballot. they, also, have a candidate for mayor.

the voters said no.

who would you pick for mayor?


Posted: Monday, May 06, 2013
Article comment by: @are you

It's not a question of "support". It's a question of whether the track and PV Center have anything I want. Generally, no. I've gone to a couple of things at the Center and, like many others, find the acoustics to be dreadful. It will take more than a garage sale to get me back. I have no reason to watch horses run around a track. If I want to see horses run, I'll ride one of my own. I do go to the movies in PV but, if the old place ever opens up again, I'll probably go there because it is closer and it has more direct parking (and doesn't force people to walk past the entire building to get to the door). It looks like the PV Entertainment District may be heading the way of the Gateway Mall. A shame the taxpayers of PV have to pay for the Center.

Posted: Monday, May 06, 2013
Article comment by: FYI @ Are you kidding me.

Metallica tickets generally go from 50 to 150 depending on venue and seating. The fact that you are missing is....we need other venues then just Hockey and PBR. Metallica was just an example. Music venues draw crowds, as well as other sports venues. Also, I agree with another post that there needs to be better advertisement of events that are coming not just to Tim's, but to the quad cities. Venues and events come and go and you don't hear about it until after it has gone. It isn't rocket science people. Advertising, Marketing, Production and Events Managers should be a big part of making this work.

Posted: Monday, May 06, 2013
Article comment by: Mtn Girl

*buckets of money*......they don't call it jack a$$ flats for nothing......sorry, hope the town can figure out the root cause and repair the damage.

Posted: Monday, May 06, 2013
Article comment by: Prescott Gal Tillman

I took my grandsons to one hockey game in the dead of winter and it took me 5 seconds to know I would never do that again....why would I want to do that again...
I then took them to the fair....are you kidding me...that was a horrible joke....if you can't get a decent fair don't do one at all.... a sad sad place....

Site administrator's note Ė This comment has been edited to conform with dCourier's Terms of Use.


Posted: Monday, May 06, 2013
Article comment by: Truly Amazed

I am truly amazed that anyone is sticking up for the Fain Group, the Mayor and Council, the Global entertainment group,or the Tim's Center. It was an ill conceived money pit that is doing nothing but costing us millions. ... How can you read the facts as told in the courier, and some how contort and twist this to be just some little mistake. This is a major mess that will follow us for the next 20 years. .... To all the P.V. Buffs who are suggesting methods to "turn the Arena around",good luck with that. It does not and will not ever pencil out. The Mayor , Council and Fain group made this foolish decision and we are just here as a revenue source to bail this mess out for the next 20 years. "Harvey Harvey, He's our man if he can't do it no one can". How is that one working out for you.

Posted: Monday, May 06, 2013
Article comment by: Areyou Kiddingme

You people amaze me! The area has a population of over 100,000 residents. Having ammenities like the Toyota Center and the horse track are amazing. Take advantage of what they offer..support them. It seems Prescott residents feel slighted because PV is attracting theses venues and as such, refuses to support them. Our economy grows strong by supporting each other. Lets have rivalries with our athletics but not our businesses!

Posted: Monday, May 06, 2013
Article comment by: Revisit why you're here .

Not much happening at the Tim's Toyota Center that I care to see. I went to a few hockey games since they opened but the hype isn't there. I never see anything else worthwhile in the venue. I like what Flagstaff has done with their outdoor amphitheater. Here's a link: http://pepsiamp.com

I like how they bring in some big events along with some city shows and festivals. It's an easy sell when the Northern Arizona weather is way better than Phoenix.


Posted: Monday, May 06, 2013
Article comment by: Should have voted for Louie Lizza

PV residents, don't complain too loud, you all voted back in Mayor Skoog, who is Tartowski's puppet. Too bad Louie Lizza wasn't elected. VOTE! and tartowski does not care about any of us!!!!!!! he's laughing all the way to the bank.

Posted: Monday, May 06, 2013
Article comment by: Dear Your Lies

It appears you consider yourself someone to whom people listened and you became very bitter when you learned they didn't.

The "House" is not falling, nor will it. P.V. will be here long after we are all gone.

It seems you're not so much flailing from behind but rather from under a rock.

I've lived in communities from east to west coasts and points in between. I've never lived in any community that did not have high and low points. And P.V. is no different.

I gather when you say the BEST in your mind that is the worst.

Sad.


Posted: Sunday, May 05, 2013
Article comment by: local guy

"We have done a good job of quantifying and limiting our exposure." Says Larry T. I say that we have (apparently) been exposed to $10.4 million of payments since 2006 and have another 17-18 years to go. Total sounds like about $30-$40 million giveaway to private developers. How does this sound like a good deal to anyone ...? Oh, the brainy ones were the developers on the receiving end. Sorry, my mistake.

Posted: Sunday, May 05, 2013
Article comment by: H B

I am originally from Pittsburgh,In 1995 they proposed building 2 new stadiums next to each other,to be paid for with tax money.THE VOTERS SAID NO ! In 2001 they blew up the 30 year old 3 Rivers Stadium where the Steelers and Pirates played ball,AND BUILT 2 NEW STADIUMS .The city went bankrupt for 10 years ! The caused a lot of pain and suffering for the residents and city employees.I left when they built the 3rd arena for hockey . Lesson learned,they do what they want with your money ! Next time watch very carefully !


Posted: Sunday, May 05, 2013
Article comment by: Lee S

Maybe it's just me.
Anytime I have been to an event @ TTC, I come away wondering why they have never done anything to address the acoustics in the building.
It seems way too loud for concerts to where you can't hear yourself think let alone enjoy the music.
It would help to either hang sound panels or some type of curtains from the ceiling to absorb some of the decibles making a more enjoyable atmosphere.
This is just one of many observations your readers can contribute.
Pricing is a big factor in attracting the crowds to fill the center up. More specials regarding tickets, food, etc. to make it more family friendly.
Just some thoughts!
Thanks


Posted: Sunday, May 05, 2013
Article comment by: It is a good live music venue

I saw Pat Benatar with REO Speedwagon and it was a great show. I also saw the Doobie Brothers and it was good. The Mgmt group needs to book more acts. We will go if the shows are there.

Posted: Sunday, May 05, 2013
Article comment by: Michael in Prescott

Now I understand the reason for the red light camera's and radar enforcement vans, got to have some steady revenue


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