Following the failure of Legacy Sports Park/Bell Bank Park, a critical Auditor General’s report, three other projects in default and the possibility of a fifth project failing soon, Gov. Katie Hobbs is instituting new guidelines for projects bonded under the Arizona Industrial Development Authority.
AIDA came under scrutiny after it approved nearly $300M in funding for the failed sports park in Mesa with minimal discussion and little vetting or background investigation of Legacy Sports Park or its ownership. The park filed for bankruptcy in April, leaving contractors and other stakeholders with 10s of millions in unpaid bills.
In addition to Legacy, AIDA approved $36M in bonds for a parking garage in Ypsilanti, Mich., $31.2M for three senior living complexes in Illinois and Indiana, and $22M for a project to turn gold mine waste into plant food. All of these are in default and represent approximately 4% of AIDA’s portfolio.
Another AIDA-approved project, $402.3M to buy and manage eight senior living communities in Ohio and Indiana, has reported trouble to its investors and will bring the total to 9% of AIDA’s portfolio if it defaults as well.
An Auditor General’s report from last year criticized AIDA for lax oversight of funds and fee payments. The Authority agreed to bring a chief financial officer aboard and to put new policies and controls in place. The report said AIDA failed to adequately track fees it was owed by developers. Those fees go to the Arizona Commerce Authority and are listed by AIDA as one of its primary points of value to Arizona.
Hobbs asked AIDA to focus on specific types of projects, such as affordable housing and renewable energy, in a March memo. She also asked that the Authority explain how projects under consideration would benefit Arizona residents.
AIDA had been harshly criticized for failing to look into the histories and backgrounds of Legacy Park/Legacy Sports developer Randy Miller and of John Owen, the person behind the defaulted gold mine-related project. Even a cursory background examination would have raised potential concerns about the two. AIDA officials said at the time it was not their responsibility to conduct background checks. Rather, they said that fell to individual investors as part of their due diligence.
Patrick Ray, who ran the bond program for AIDA, said he hadn’t wanted to conduct background checks on developers so their experience could remain more “user friendly.”
Under the new guidelines, Hobbs has asked that AIDA prepare a background information statement that includes a potential developer’s experience and previous projects, financial history and status, and a project business plan before sending projects to her for sign-off, which is required for projects to maintain tax-exempt status.
AIDA has pledged to continue working with Governor’s Office and the Auditor General. (Source)