BILL ANALYSIS AND FISCAL IMPACT REPORT	Page 1 of  4

DATE:  February 26, 2001	Submitted by: TAXATION AND REVENUE DEPT.
	T. GLENN ELLINGTON, SECRETARY
BILL NUMBER: HB - 907

SPONSOR: Representative Taylor

BILL SHORT TITLE: Minor League Baseball Stadium Funding Act

DESCRIPTION: This bill proposes a number of provisions that may result in the funding and building of a minor league baseball stadium within the municipal boundaries of Albuquerque. There are a number of substantive provisions in the bill, but the important ones are: (1) It creates a new gross receipts tax specifically on the commercial revenues attributed to the new stadium. This is designated in the bill as the stadium surcharge; (2) It exempts these revenues from the state and local regular gross receipts tax ; (3) The New Mexico Finance Authority is directed to loan money to Albuquerque for this purpose from the public project revolving fund using the “stadium surcharge” as a revenue source to retire the loan. The Authority is allowed to entail other gross receipts tax distributions to the municipality sufficient to ensure payment.; (4) The bill sets a very short statute of limitations (30 days) on lawsuits challenging the legality of any of the financial provisions of this bill. In addition, the bill contains a “liberal interpretation clause” and a severability clause. Hence  if any provision of the bill is held invalid, the other parts of the bill hold. Commercial revenues subject to the stadium surcharge include receipts from selling tickets, parking, souvenirs, concessions, programs, advertising, merchandise, corporate suites or boxes, broadcast revenues and all other products, services or activities sold at, related to or occurring at a minor league baseball stadium on which a stadium surcharge is imposed.

EFFECTIVE DATE: The measure contains emergency clause and would be effective immediately on signing.

FISCAL IMPACT (Thousands of dollars):  		Note: Parenthesis ( ) indicate a revenue loss:
		Recurring or		
Estimated Impact on Revenues	Nonrecurring	Funds 	
 FY 2002 	FY 2003	FY 2004   	     Impact     t     	             Affected          .	
 61	 918	 (195)	Recurring	General Fund	
 43	(310)*	 (136)	Recurring	Albuquerque General Fund	
 5	 70	 (15)	Recurring	Bernalillo County	

Note: the positive impact on government general funds derives from the construction phase gross receipts. It is assumed the full $35 million proposed is taxable. The negative amounts that persist for 30 years represents the siphoning of gross receipts tax from vendors.

Portland Family Entertainment expects to draw 6,270 fans a game when the Dukes come to town. The Dukes, when in Albuquerque, averaged around 4,000 in 1999. Assume the new stadium will draw at the 6,270 level, and can be leased for about $1.07 million. Further assume the voters of Albuquerque and/or Bernalillo County approve about $744,000 in property tax levies a year  (.088 mills on the Bernalillo County base). Then a 10% stadium surcharge on $5.95 million in annual revenues (unadjusted for lease fees) will generate about $595,000 a year. Assume a new team occupies the existing stadium for one season beginning in May 2002 prior to when the new stadium is built and subsequently opens in May of 2003. While these time frames may be overly optimistic, their purpose is to exhibit approximate fiscal impacts and  the timing of these impacts.

* With the timing as exhibited, a payment is due on the bond prior to when operating revenues become fully available (assume May 2003 payment date). This payment amount creates an Albuquerque general fund liability of about $951 thousand.

ADMINISTRATIVE IMPACT: Minimal administrative impacts would result from the proposed measure. The exemption from gross receipts tax will essentially be administered through the vendor contract. The stadium surcharge will be collected directly by the City of Albuquerque without any involvement of the Department.

TECHNICAL ISSUES:
1.	Suit could be brought based the prohibition of Article IV, Section 24 of the New Mexico Constitution: “the legislature shall not pass local or special laws … [relating to] the assessment or collection of taxes; … [or] exempting property from taxation. In every other case where a general law can be made applicable, no special law shall be enacted.” This bill may only be employed in Albuquerque. Thus, it clearly violates the constitutional prohibition on local or special legislation. In this case, however, the bill can be made quite general. 

2.	The bill is written in a way that the vendor surcharge may be imposed on sales by vendors prior to the renovation or building of a new park.

OTHER IMPACTS AND ISSUES:
1.	Illustration: Revenues from Proposed Measure

All amounts are in $1,000s	FY 2002	FY 2003	FY 2004	FY 2005	
Bond Proceeds	 35,000				
Bond Repayment		 2,408	 2,408	 2,408	
					
GRT Construction Phase					
    State General Fund	 96	 1,051			
    Albuquerque	 67	 734			
    Bernalillo County	 7	 80			
GRT Operating Impact					
    State General Fund	 (34)	 (133)	 (195)	 (195)	
    Albuquerque	 (24)	 (93)	 (136)	 (136)	
    Bernalillo County	 (3)	 (10)	 (15)	 (15)	
Stadium Surcharge Impact (10%)					
    Albuquerque		 119	 357	 357	
GO Bond Impact					
    Albuquerque		 790	 790	 790	
    Bernalillo County		 192	 192	 192	
Assumed Lease Fees					
    Albuquerque		 357	 1,070	 1,070	
					
Net Impact					
    Bond Proceeds	 35,000	 0	 0	 0	
    Bond Sinking Fund	 0	 (951)	 0	 0	
    State General Fund	 61	 918	 (195)	 (195)	
    Albuquerque General Fund	 43	 641	 (136)	 (136)	
    Bernalillo County	 5	 70	 (15)	 (15)	

2.	Note that under this deal and timing, the General Fund is ahead until the end of FY 2008. After that, the General Fund loss is $195 thousand per year for the full assumed life of the 30-year bond. Without adjusting for time value of money, the total General Fund loss is $4.7 million.

3.	The primary source of financing will be lease payments imposed on the user of the facility. The innovative mechanism of the stadium surcharge represents about 15% of the total revenue for repayment. Chiefly, it is a mechanism for spreading some of the costs to state-wide taxpayers.  Albuquerque has found a way to indirectly bond state revenue.  

4.	Some of the measure's proponents have argued that the General Fund will sustain no loss under this proposal, since without the surcharge, the project will not be built. And if the stadium is not built, there will be no gross receipts. First, only 15% of the total revenue is derived from the innovative surcharge, exempt from the gross receipts. Economic characteristics of this form of entertainment are that it is not particularly price sensitive. The project would still be viable with both the regular gross receipts tax and the surcharge. Secondly, this is not a proposal that would expand the region's economic base as would, for example, a manufacturing plant. All the revenue at the proposed ballpark, virtually without exception, will be obtained from New Mexicans. This will not be a tourist draw to any extent. Thus, money not spent in the new ballpark would be spent in other entertainment and sales venues. This creates a loss to the General Fund indirectly if this proposal siphons off otherwise taxable spending. Third, the General Fund revenue estimate assumes growth, primarily driven by national economic growth variables. This estimate does not name particular projects, but it does assume that economic growth will occur. For this project, the growth is in the estimate. This proposal siphons off General Fund dollars through an exemption and therefore limits General Fund growth.

5.	This act imposes the stadium surcharge.  No action is required by the Albuquerque City Council.  The voters are not to be consulted.

6.	Background (note – all the following information was obtained from a website produced by Robert Smathers http://www.nmia.com/~roberts/dukesend.html): in a copyrighted story March 13, 2000, Albuquerque Journal sports staff writer Dennis Latta reported that Dukes owner Bob Lozinak sold the Albuquerque Dukes – the Dodger’s AAA farm team -- to Marshall Glickman and Mike Higgins from Portland, Oregon. The estimated price of the sale was $10 million to $12 million. The Portland Business Journal set the price in a March 20, 2000 story at $11.5 million. The franchise will transfer from Lozinak's Albuquerque Processional Baseball Inc. to Glickman/Higgins' Portland Family Entertainment. Immediately in wake of this announcement, Albuquerque mayor Jim Baca convened a committee to recruit a replacement team using a promise to build or renovate a suitable minor league baseball stadium as the major draw. At least three ownership groups have shown some interest, including one group that would not demand any renovations to the existing ball park at Cesar Chavez and University. However, the best guess of the price to renovate the existing sports stadium is about $32 million, whereas the price to buy land at Lomas and Broadway (in close proximity to both I-25 and I-40) and build and equip a modern sports stadium is in the range of $35 million. Of interest, the Portland group that purchased the Albuquerque Dukes -- Portland Family Entertainment -- will work with the city of Portland to renovate and operate the 74‑year-old Civic Stadium. The Oregonian, Portland's newspaper, reports that  it will cost $37 million to renovate Civic Stadium, and the city will finance 90 percent of that. A major part of the renovation will be to remove the left-field bleachers and add 32 luxury boxes. There will be sound reducing measures and traffic management measures done, part of an agreement with the city, Portland Family Entertainment, and residents near Civic Stadium. Portland Family Entertainment will pay $908,000 a year to rent Civic Stadium and will split profits from other operational activities with the city. The city will finance their part of it with a bond issue.

7.	The Dodgers, during the 1999-2000 offseason, had made it known they didn't like the Albuquerque Sports Stadium. It didn't have the modern luxuries and space that a AAA-level ballpark in this day and age should have, such as batting cages, larger locker rooms, more spacious weight rooms. The Dukes have been the Dodgers AAA Farm Club since 1972. PCL President Branch Rickey III told the JOURNAL that average attendance seems to correlate to the age of the Stadium. The Sports Stadium was built in 1969; the Dukes' 1999 average attendance was 22nd out of 30 total AAA teams. In terms of ballpark ages, there were only three ballparks older than the Sports Stadium in the PCL in 2000. One of the newest stadiums will be the stadium in Sacramento, California. Vancouver's franchise moved after the 1999 season to Sacramento. New stadiums are also in Memphis and Louisville. Rickey III also went on to say the PCL is committed to bringing a franchise back to Albuquerque, but added that just because a stadium is built doesn't guarantee that there will be AAA-level baseball in Albuquerque. The Sports Stadium was built in 1969 for $1.5 million. Bob Lozinak purchased the Dukes for around $330,000 in 1978 from the Dodgers and sold the team to Portland Family Entertainment for an estimated $10-12 million in 2000. When the Sports Stadium was built in 1969, UNM owned the land and gave the city the right to use the land for free to build a stadium. If Albuquerque is not able to gain a new franchise to temporarily play in the Sports Stadium while a new stadium is built, UNM will take over ownership of the land and the Lobo baseball team may end up playing their home games there under the lights and could attract regional tournaments.