$100 million Mesa corporate welfare program for the Chicago Cubs
More on that $100 million Mesa corporate welfare program for the Chicago Cubs
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Mesa to weigh sports-district hotels
By Gary Nelson The Republic | azcentral.com Sun May 5, 2013 9:42 PM
First, some Mesa City Council members sparred with a hotel company over its refusal to offer alcohol in the heart of a sports entertainment district.
Now, with a Mesa-based developer jumping in with a proposal to build a full-service, 150-room resort with a water park, the race to build the first hotel in Mesa’s Wrigleyville West complex has taken another twist.
The City Council is scheduled to make its first formal decision on the hotel proposals Monday night.
The stakes are high, not just for the hotel companies, but for Mesa and the Chicago Cubs.
The city is spending more than $100 million for the Cubs on a Cactus League baseball stadium, training facilities and a vastly improved Riverview Park at Dobson Road and Loop 202. For Mesa, it’s about creating a signature gateway and laying the groundwork for further economic development.
The Cubs asked for a new complex not just because their existing Mesa facilities needed an upgrade, but because a new site would give them a chance to make money from associated business ventures. Cubs owner Tom Ricketts has said the new ballpark may help his perpetually losing team break a 105-year championship drought.
The hotel companies see the Wrigleyville West commercial complex as a potential moneymaker, but their visions are vastly different:
Sunridge Properties Inc. of Mesa was first out of the gate with a proposal to build a 100-room Marriott SpringHill Suites along the “paseo” leading from the park to the stadium. A memorandum of understanding, paving the way for a formal agreement with Mesa, is on Monday night’s council agenda.
Bob Yost, doing business as Power Hotels LLC, sent Mesa an offer last week to buy 10 acres northeast of the stadium for a full-service resort with poolside food and beverage service and a water park.
Sunridge and Marriott did not receive red-carpet treatment from the council when they rolled out their plans in April.
There was early concern over the design, after which Sunridge added exterior flourishes costing an additional $1 million, giving the hotel an “urban” feel that Mesa believes is the best fit for Wrigleyville West. But the biggest point of contention was liquor.
SpringHill Suites typically are limited-service hotels without bars and restaurants, although they do offer free hot breakfasts. Scott McAllister, a development executive for Marriott, told the council on April 15 that a hotel bar makes no economic sense in a development where the Cubs are actively courting other bars and restaurants.
But Councilman Dennis Kavanaugh, pointing out that the SpringHill would be the only business in Wrigleyville West for a while, told McAllister: “I don’t think it’s a foreign concept to have a bar as part of the amenities package when the hotel opens here.”
The hotel’s only concession on that point, however, has been an agreement to sell beer and wine in its lobby market. Councilwoman Dina Higgins, meanwhile, called Marc Pierce, a real-estate broker representing Yost, in hopes that Yost might be interested in developing a full-service hotel at Wrigleyville West.
Yost opened what is believed to be the first hotel in Gilbert history, the Best Western Legacy Inn & Suites, in 2009.
A year later, he opened the $21 million DoubleTree by Hilton Phoenix-Gilbert in the SanTan Village retail development. It was the first hotel in Gilbert to offer ballroom and large-scale conference space. Pierce sent Mesa City Manager Chris Brady a letter of intent last week offering to buy 10 acres near the new ballpark for about $1.1 million.
Pierce told The Arizona Republic that Yost believes a resort is the “highest and best use” for land now occupied by softball fields.
“The area needs a full-service hotel,” Pierce said, adding that Yost wants to be first out of the ground at Wrigleyville West.
The situation is complicated by a provision in Mesa’s proposed agreement with Sunridge that if the SpringHill Suites is built, Sunridge has a six-month window to start the next Wrigleyville West hotel, precluding other companies during that period.
Marc Garcia, president of Visit Mesa, the city’s tourism bureau, said SpringHill is a good fit for the site, especially because it carries the prestigious Marriott brand.
“I think it would be a great property for that area,” Garcia said.
Garcia declined to comment on Yost’s proposal, saying he hasn’t had a chance to evaluate it.
Gary Levine, general manager of the Hilton Phoenix East/Mesa, at U.S. 60 and Alma School Road in Mesa, also said SpringHill would work at the Cubs complex.
But the national market for resorts remains shaky, Levine said, because post-recession room rates have not recovered to the point where hoteliers want to make that kind of investment. “There’s no supply being built. The demand really isn’t there,” Levine said.
Yost’s water-park proposal evokes memories of Waveyard, a Scottsdale company that in 2007 won city approval to turn the entire Riverview complex, except for Riverview Park itself, into a giant, sports-themed resort.
The company never got financing, and, in 2010, Mesa agreed to convert Riverview Golf Course into the Cubs complex that is scheduled to open early next year.
Pensions - A government welfare program for cops and firemen???
In this article it sounds like Mesa Mayor Scott Smith has sold out the
taxpayers he pretends to represent and really works for the Mesa police and fire departments.
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Southeast Valley cities paying millions more to fund pensions
By Beth Duckett and Craig Harris The Republic | azcentral.com Tue May 7, 2013 11:10 AM
The price tag for Southeast Valley cities’ contributions to the pensions of police officers and firefighters has more than quadrupled as taxpayers have been forced to prop up the retirement system in the past decade.
Mesa and other cities are paying millions of dollars more to bankroll the retirements of employees in the Public Safety Personnel Retirement System, which has been damaged by crushing investment losses, guaranteed cost-of-living increases and fewer employees paying into the system, according to interviews and records obtained by The Arizona Republic.
Those pension contributions are a big part of the escalating costs that have made it harder for Southeast Valley cities to balance budgets as revenues plummeted in the Great Recession. To make ends meet, cities have resorted to cutting public services, raising taxes, and scaling back or not hiring as many employees — including police officers and firefighters.
Despite legislative efforts to reform the system, taxpayers have been on the hook to pump additional money into the retirement system, which is underfunded by $4.27 billion.
“It is very much a part of our budget discussions and we are very concerned about it,” Mesa Mayor Scott Smith said. “The reason we’re concerned is we’re having to pay greater costs to maintain staffing levels, and these are costs we have no control over.”
Cities predict increasing pension costs every year based on past trends and projections, with no definitive end in sight.
“There is no doubt we’re going to have to look to see how we can create a pension plan that is sustainable and therefore will be there for all of our officers,” Smith said.
Public-safety representatives note that police officers and firefighters also contribute toward their pensions, and are not at fault for the market losses that played a major role in the decline of PSPRS.
“We view ourselves as victims,” said Levi Bolton, executive director of the Arizona Police Association, which represents nearly 13,000 public-safety officers statewide.
The Arizona Legislature tried to change PSPRS by requiring public-safety officers to pay slightly more for their pensions and to temporarily stop cost-of-living increases for retirees in July 2012. As a result, a group of current and retired police officers sued the state, saying they want the cost-of-living increases restored and they shouldn’t have to pay more.
Legislators who have supported pension reform say there is little political resolve to make more changes until those lawsuits are resolved.
Public employees with pension plans “are in so much better shape than the taxpayers funding those plans,” said state Rep. John Kavanagh, R-Fountain Hills.
Kavanagh put forward a measure this session that he called an attempt to stabilize the state pension systems. It would ask voters to amend the Arizona Constitution, which protects public pensions by saying they cannot be diminished.
“It will either be the end of this session or next session when we’ll consider putting the constitutional amendment on the ballot for voters to approve,” Kavanagh said.
Cities’ costs spiral
Meanwhile, the costs for cities paying into the system continue to rise significantly.
Records obtained by The Republic show that, from fiscal 2003 to 2012, the PSPRS contributions paid by 12 major Valley cities, not including Phoenix, increased an average of 350 percent, often by millions of dollars.
In Mesa, Chandler, Gilbert and Tempe, the collective contributions made toward public-safety pensions totaled approximately $37 million in 2011-12, up from roughly $8 million in 2002-03.
Mesa saw the highest increase: $13.4 million.
“Most of the time we get the bill for these costs late in the city budget process, so at times it is a case of sticker shock,” Mesa Councilman Dennis Kavanaugh said.
Cities and taxpayers weren’t always on the hook to prop up the public-pension system.
Kavanaugh, who served on the City Council previously from 1996 to 2004, said cities were “rarely faced with increased charges such as we have seen in recent years.”
Before 2002, “as long as the fund balance was doing well, the employers didn’t have to contribute to the system,” said Bryan Jeffries, executive vice president of the Professional Fire Fighters of Arizona and a Mesa fire captain.
After the collapse of the dot-com bubble in 2000 and 2001, PSPRS fund investments, which were heavily concentrated in technology and telecommunications, took a hit and the trust funding fell below 100 percent, meaning the value of assets no longer met the pension cost calculated for all current and future retirees.
The current funded ratio is about 59 percent, the second worst of Arizona’s public-pension systems, meaning it has enough money to pay for only 59 percent of its current and future liabilities.
Meanwhile, the number of retirees continues to grow every year.
On average, cities and other government agencies are paying higher contribution rates than public-safety employees, who have experienced no losses because their pensions are guaranteed.
Statewide, the average annual pension benefit is $49,480, according to PSPRS.
‘DROP’ adds fiscal pressure
In addition, records show hundreds of local police and fire employees have received lump-sum payouts in excess of $100,000 from the Deferred Retirement Option Plan.
To encourage veteran police officers and firefighters to stay on the job longer, public-safety employees can work an extra five years before retiring as part of DROP.
Upon entering DROP, employees no longer accrue credits for their years of service. At the end of the five years, participants typically receive a six-figure lump sum when they finally begin collecting their pensions.
Officers who work longer than 20 years but don’t take part in DROP can accrue more credits for their longer years of service. Their monthly pension benefits may exceed the one-time DROP payout over time.
In Arizona, the average DROP payment in Arizona is $238,048.
Six public-safety retirees in Mesa, Chandler and Tempe each received DROP payments in excess of $500,000, in addition to annual pensions greater than $80,000, according to PSPRS records. The average DROP payment in Mesa was $251,024.
Approximately 10,000 individuals, including surviving spouses and children of deceased officers, receive PSPRS benefits. A majority do not contribute into the federal Social Security retirement system.
Each city and town within the system is responsible for the pension liabilities of its current and retired employees and has its own contribution rate. The rate is a set percentage applied to every employee’s wages to determine an amount that is sent to the pension trust.
Tempe has some of the Valley’s highest contribution rates. The city will pay rates of 37.41 percent toward fire pensions and 33.58 percent toward police pensions as of July 1, according to PSPRS.
Tempe’s tab for public-safety pensions rose $7.8 million — from 2002-03 to 2011-12 — and is the second highest after Mesa.
“It isn’t until recently that the cost has grown to the point where it has become cumbersome and overburdensome to our budget,” said Ken Jones, Tempe finance and technology director.
Tempe, like other cities, was forced to cut back on services and downgrade employee wages as pension and health-insurance costs continued to rise and revenues dipped during the economic downturn.
Chandler seeks ‘balance’
Chandler taxpayers contributed $6.7 million toward public-safety retirements in 2011-12, up from $1.9 million in 2002-03.
Since 2009, Chandler has reduced its spending as a result of diminished revenue and higher costs, including pensions, said Dawn Lang, Chandler management services director. The city expects pension costs to continue rising year after year.
Chandler City Councilman Rick Heumann said the city’s pension situation is not as bad as those in other cities including Phoenix, which paid $93.8 million toward public-safety pensions in 2011-12, up from $7.2 million in 2002-03.
Police officers and firefighters “risk their lives every day,” Heumann said. “It’s important they are treated fairly and, obviously, the taxpayers are treated fairly as well.”
Chandler has taken action to curb additional retirement costs borne by taxpayers, he said.
Before a policy change that took effect several years ago, income that Chandler police officers earned while working extra duty after hours was taken into account when setting officers’ retirement rates.
The policy change stopped the practice but it “does not stop officers from working extra duty,” Heumann said.
Gilbert’s pension situation appears to be in better shape than many other communities, Mayor John Lewis said, after an inquiry from The Republic led him to research the town’s pension costs.
“We’re not seeing the dramatic increase in costs,” Lewis said. “Therefore, it has not been on my radar to fix it.”
Retirements for Gilbert’s Fire and Police departments are funded at 93 percent and 74.5 percent, respectively, which is higher than many other law-enforcement agencies.
Still, Gilbert’s costs rose $3.1 million from fiscal 2003 to fiscal 2012, and budget forecasts show increases in costs for all pension funds, Management and Budget Manager Dawn Irvine said.
Fewer feet on the street
Records indicate many Valley municipalities have laid off or stopped hiring many public-safety employees during the recession, leading to fewer firefighters and officers patrolling the streets and leaving some cities vulnerable, said Bolton, a retired Phoenix police officer.
As of yet, Mesa has not stopped hiring public-safety officers as a result of pension costs but it is getting the point where it could, Smith said.
Overall personnel costs in the Mesa Police Department, including pensions, are set to rise again in the coming fiscal year, he said.
“We’re just having to spend more for the same benefit,” Smith said. “I’d much rather be able to hire a new police officer or pay the police officers more.”
Workers have also endured layoffs, salary freezes and furloughs as cities slashed their budgets to weather the financial hardship, exacerbated in part by rising pension costs. With stagnant salaries and fewer employees contributing financially to the PSPRS trust, cities and towns are forced to dip into their already-lean budgets to pick up the rest of the tab.
Despite fewer officers, records show that most cities have not experienced an increase in reported crimes, and some cities reported decreases in crime rates, which Jim Mann, executive director of the Fraternal Order of Police Arizona Labor Council, attributed to possible technological advances and fewer responding officers.
Bolton said the stress and continued criticism of the system have taken a toll on officers, who he said are also victims of poor investments and being unfairly blamed for the financial troubles of the PSPRS trust.
Long road to recovery
Public-safety officials estimate that it could be 10 to 15 years or longer before PSPRS reaches a healthy funding level and taxpayers aren’t on the hook to pour increasingly larger amounts of money into the system.
Jeffries said some legislators have used the troubled system as “an opportunity to try to make it out like the pension system is not sustainable and we should all go to defined-contribution plans,” such as 401(k)-type plans.
Jeffries said positive changes have been made to the PSPRS trust, including diversifying the system’s investment portfolio.
“Unfortunately, when you’re talking about a plan this size, a battleship can’t turn in a bathtub,” Jeffries said. “If there is any silver lining, we have learned never again will we allow employers to pay nothing. And we will never allow the fund to be so overweight in high-risk investments again.”
Reporter Gary Nelson contributed.
By the numbers
The median pension benefit for retired public-safety employees is $47,393, according to the Public Safety Personnel Retirement System.
In addition, some employees take part in the Deferred Retirement Option Plan. To encourage veteran police officers and firefighters to stay on the job longer, public-safety employees can work an extra five years before retiring.
Below are figures on pensions and DROP payments in the Southeast Valley. The figures are through this February.
Mesa
Retired employees in PSPRS: 558.
Average years of service: 20.
Average annual pension: $54,212.
Participants in DROP: 197.
Average DROP payment: $251,024.
Chandler
Retired employees in PSPRS: 118.
Average years of service: 22.
Average annual pension: $51,952.
Participants in DROP: 53.
Average DROP payment: $210,852.
Gilbert
Retired employees in PSPRS: 34.
Average years of service: 15.
Average annual pension: $46,492.
Participants in DROP: 3.
Average DROP payment: $143,743.
Tempe
Retired employees in PSPRS: 284.
Average years of service: 22.
Average annual pension: $52,871.
Participants in DROP: 91.
Average DROP payment: $206,133.
Source: PSPRS.
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