TPC Scottsdale
Real Estate

Superior Court Dismisses Stuart TPC Scottsdale Allegations, Lawsuit

(Source: Scottsdale Independent): Terrance Thornton – Maricopa County Superior Court Judge Daniel J. Kiley has dismissed the case brought against the city of Scottsdale by resident Mark Stuart stemming from allegations the municipality violated both the state’s gift clause and the municipality’s anti-subsidy provisions with TPC Scottsdale.

The case was dismissed Wednesday, Nov. 1 at Maricopa County Superior Court, 201 W. Jefferson St., in downtown Phoenix.

“The city is pleased that the court, after hearing all the evidence, has determined that the city’s actions were well within its lawful authority,” said Scottsdale Public Affairs Director Kelly Corsette in a Nov. 14 statement.

Mark Stuart

In summer 2014, Mr. Stuart, along with resident John Washington, filed a lawsuit in Superior Court alleging financial arrangements surrounding TPC Scottsdale improvements made two years prior to the 2015 PGA Tour stop in Scottsdale was in violation of state statue, among other claims.

In that case, both Mr. Stuart and Mr. Washington filed suit against the city claiming the TPC Scottsdale arrangement violated the Arizona Constitution and Scottsdale City Charter.

However, Mr. Washington was no longer listed as a defendant in the Nov. 1 Superior Court ruling, records show.

TPC Scottsdale is at 17020 N. Hayden Road, and has been leased by the city of Scottsdale since 1986 through a land use agreement between the municipality and the United States Bureau of Reclamation, court records show.

TPC Scottsdale is home to the annual Waste Management Phoenix Open, which is widely regarded as one of the most well-attended golf events on planet Earth.

In 1984, the municipality entered into a longterm lease and management agreement with TPC Scottsdale, which is the Tournament Players Club network of golf courses operated by the PGA Tour.

Under the provisions of that agreement the city would construct two 18-hole public golf courses and related amenities and lease them to TPC, which was to “operate and oversee” the property “as a golf facility open to the general public” and to “maintain the golf facility in first-class operating condition,” the Superior Court ruling states.

Initial tenets of the lease agreement with TPC Scottsdale called for annual rent payments equal to 10 percent of “golf course income” and 2 percent of total sales income, the ruling states.

Several amendments have occurred to the original agreement between municipality and golf course operator spurring nearly $13 million in improvements done at the course site by TPC Scottsdale.The city of Scottsdale receives about $900,000 annually in rent payments and the original cost of golf course construction was about $14 million.

But a sixth amendment to the original lease and management agreement that occurred in December 2012, records show, required the city of Scottsdale to conduct up to $15 million worth of improvements at the golf course site.

Subsequent Scottsdale City Council approval of the capital improvements to be used with tax dollars stipulated, “the city will obtain an extended PGA tour event guarantee, a national television guarantee, and an increased percentage of golf revenue payments,” the ruling states.

In a report sponsored by the PGA, it was determined the national television coverage carried a value of $15.9 million, according to a study conducted by a company titled, “Repucom,” records show.

Through Scottsdale City Council approval, the municipality financed $15 million with a voter-approved bond issuance in 2015 with work completed sometime in 2015, court records show.

Mr. Stuart offered the testimony of Doug Terry, who testified as an expert on municipal land-use agreements, stating the city of Scottsdale is receiving “well below what the marketplace would bear” in terms of its agreement with TPC Scottsdale.

Furthermore, Mr. Terry contended to the court the city will lose over $49 million over the 50-year lease agreement with TPC Scottsdale.

Mr. Stuart alleged the city of Scottsdale was in violation of Article 9, Section 7 of the Arizona Constitution and Article I, Section 3 of the Scottsdale City Charter.
Judge Kiley disagrees.

“The plaintiff has offered no evidence, and does not contend, that the city has paid any money directly to TPC, Tour or the PGA,” he said in his ruling.

“Instead, the evidence establishes that the city paid $15 million to contractors to perform construction improvements to the city’s own property, a clubhouse on property the city owns, and improvements to a golf course, which is partly on land owned by (the Bureau of Reclamation) and licensed to the city. A municipality does not violate the gift clause when it makes improvements to it’s own property.”

It is not disputed, the ruling specifies, TPC Scottsdale is open to the public all but for two weeks out of the year when the facility is utilized by the PGA Tour.

“The court finds a ‘clearly identified public purpose’ in improvements made to city-owned golf facilities that are available for public use 50 weeks each year, particularly in the light of the fact that, in connection with expenditure, the city was able to secure a continuing commitment to hold and televise an annual PGA Tour event at TPC Scottsdale that provides millions of dollars of promotional value and economic impact to the city,” Judge Kiley said in his ruling.

Evidence suggests the return on investment for the city of Scottsdale’s expenditures in this matter are equal to, if not better, than the original amount vested, the court ruling suggests.

“Based on the undisputed evidence that the improvements to the city’s property were worth what the city paid for their construction, the court finds that the city received ‘direct consideration substantially equal to its expenditure,’ thus satisfying the second prong of the anti-subsidy clause,” Judge Kiley said.

“The additional revenue, in the amount of $3.4 million over 20 years, that the city will receive as a result of its increased share of golf course income further bolsters the conclusion that the city received consideration sufficient to satisfy the anti-subsidy clause.”