Phoenix officials are worried that a provision imposed by the Legislature to ensure a return on its investment in the Phoenix Convention Center will cause the state to withhold sales tax revenue from the city.
The city persuaded the state to pay for half of the $600 million expansion project a decade ago and told legislators the center would fill state and local government coffers with sales tax dollars from visitors who would eat, shop and stay in hotels.
But skeptical lawmakers imposed a safeguard that said the state could withhold sales-tax revenue from the city to reimburse itself if Phoenix’s projections fell short.
Phoenix and tourism officials are fretting over the convention center’s performance, given a sharp drop in event bookings, The Arizona Republic reported on Monday.
Phoenix leaders said the bad economy and boycotts spurred by Arizona’s 2010 immigration enforcement law have hampered business at the convention center.
The Greater Phoenix Convention and Visitors Bureau lobbied the Legislature last session to remove requirements designed to ensure that the state sees a return on its investment.
Officials are particularly concerned about a provision requiring an economic-impact study next year to determine if the Phoenix Convention Center has generated enough revenue for the state to outweigh its annual debt payments.
If revenue tied to the expansion of the convention center does not exceed the state’s investment, the state could withhold sales tax distributions to the city until that loss is recouped.
A state budget bill initially included an amendment to remove the study and revenue-withholding provisions, and Arizona Senate President Andy Biggs tried unsuccessfully to block it. The amendment ended up being removed in the final days of the session when Gov. Jan Brewer succeeded in passing her budget.
Phoenix Mayor Greg Stanton said the center cannot be judged by its recession performance alone. “That wouldn’t be fair or productive,” Stanton said.
Republican state Rep. John Kavanagh of Fountain Hills said Phoenix should be held to the deal it made. He said lawmakers who objected to funding for the convention center did so because they knew there could be financial drawbacks, including the possibility of an economic downturn.
“If the critics were correct and it was risky, they (Phoenix officials) need to shoulder at least part of the downside,” Kavanagh said. “They can’t have their cake and eat it, too.”