‘If You Build it, They Will Come’: A Business Plan That Only Works in Hollywood
By AZFPI
Arizona faces more than a billion dollars in financial deficits over the next few years.1 Yep, you read that correctly. Yet our state representatives from LD-1 remain undeterred in their mission to give Prescott Frontier Days (PFD) $15.3 million of our tax dollars.2 There are 26 rodeo venues throughout Arizona.3 Why was PFD the only rodeo selected by the State to receive taxpayer money with no strings attached?4
It’s been one year since PFD unveiled its grandiose Master Plan5 to build a mini-me version of Scottsdale’s WestWorld, yet not one private donor has stepped forward to pledge money. Never mind that PFD said the Master Plan would be built entirely with donations.5 Numerous other hurdles also exist: land use issues, questionable financials, a non-existent business plan, neighborhood opposition, an unresolved lawsuit, and escalating transparency issues with the Prescott City Council and the public.
First, PFD wants to construct facilities on land it doesn’t even own. To remedy that property law obstacle, PFD wants to replace its 25-year token lease6 of city property valued at $8 million,7 with a 139-year lease.8 But if you’re PFD seeking such an outlandish term, why stop there? Why not ask the City of Prescott for a 239-year lease, or heck, one for 500 years? PFD’s claim that only a lengthy lease will attract lucrative sponsors for naming rights rings hollow as well. It is important to note the Arizona Cardinals have only a 30-year lease for the State Farm Stadium, which includes naming rights.9
According to PFD Business Development Manager Greg Mengarelli, another reason for the grandiose Master Plan is so the rodeo “attracts the best competitors.”10 Unfortunately, the old real estate adage, “location, location, location” comes to bear. The PFD Rodeo is well off the beaten horse trail and not readily accessible for contestants or livestock vendors—and it never will be.11 PFD’s General Manager Jim Dewey Brown also concedes that PFD competes with multiple western rodeos over the 4th of July weekend, all within easy driving distance to one another.12 This means contestants can increase the odds of winning prize money by competing at different rodeos; or make the decision to travel to Prescott and compete in only one. As one rodeo contestant aptly stated, “The cowboys only get paid if they win.” Bottom line, given the logistics involved and the topography constraints of the rodeo grounds itself, The World’s Oldest Rodeo will never be the top-tier event PFD envisions13—no matter how much money it spends on its Master Plan.
Second, PFD failed to present any plan for needed repairs to existing facilities, opting instead to create what they call a Master Plan to build entirely new facilities—at a cost of $40 to $70 million. Although the Prescott City Council never took action to approve this Master Plan, PFD behaves “as if.” Case in point, PFD obtained a letter in 2023 from former City Manager Katie Gregory designating PFD and Lyon Engineering as the city’s property agents for this project.14 Gregory issued this letter without council knowledge or approval. (Imagine having a tenant attempt to redesign and rezone your property without your permission). How would Gregory (or any city manager) have the authority to designate a property agent for rezoning city property in the first place? But perhaps more incredible is that PFD submitted Gregory’s letter with its rezoning application on February 9, 2024, long after Gregory departed the city and after she was an authorized signer for any official city documents. This lack of transparency and communication makes it difficult for the city council (and neighbors) to believe PFD will be a trustworthy partner.
Third, the city property PFD leases rent-free stands in the middle of a single-family residential neighborhood, accessed by a two-lane road. The neighbors and the small rodeo of years past, run by scores of dedicated volunteers, got along just fine for over a hundred years. THAT rodeo is welcomed and must be protected as part of Prescott’s storied heritage. Not so with PFD’s grandiose Master Plan. Concerned Prescott residents oppose THIS large project, which will bring more traffic, noise, light, parking, pollution, and horsefly issues to their quiet rural oasis.15 Unfortunately, LD-1 Representatives Bennett, Bliss and Nguyen have yet to meet with concerned residents and neighbors impacted by this project. So much for constituent services.
Fourth, despite PFD’s claims of eight sell-out crowds in 2021 and 2022, the rodeo has lost money in both years.16 PFD’s IRS filings show it lost over $137,000 in 2021 and over $994,000 the following year. What’s also mind-boggling is that in just 11 years, PFD’s expenditures rose 128%.17 Some of the losses were offset by contributions, but notably, PFD has no requirement to reimburse the city for public works, pollution control from animal and kitchen waste, police, or fire services for events during rodeo week.18 This calls into question the validity of PFD’s 2023 Economic Impact Study. Similar economic impact claims—of an increase in city sales tax due to the rodeo—were debunked in an earlier study as well.19
And yet another question arises as to PFD’s finances. On September 22, 2010, PFD’s request to become a 501(c)(3) charitable organization was denied by the IRS.20 Given this IRS Determination Letter,20 are donors aware that their contributions are not tax deductible?21 In any event, before PFD receives any taxpayer money, a new lease, Master Plan approval, etc., a full and independent forensic audit of existing finances must be conducted.
Fifth, no business plan exists for how PFD will pay to operate and maintain the facilities it wants to construct. Nor is there a plan for environmental remediation of animal and kitchen waste to protect the creek system.18 Exactly how is PFD going to pay for ongoing costs given its track record of barely breaking even, or worse, losing money? One need only look to the neighboring Prescott Valley’s Findlay Center, or the City of Scottsdale’s WestWorld to see significant taxpayer subsidies are required to keep these types of event venues operating.22
Sixth, the $15.3 million dollar rodeo appropriation snagged the State a lawsuit alleging the rodeo appropriation violates both the gift clause and the appropriations clause of the Arizona Constitution.23 This is what happens when an appropriation can be used for anything: salaries, advertising, political activities, consultants, increased prize money for contestants, and more. At yet another cost to taxpayers, this lawsuit has been churning through the legal system since June, 2023. And it’s anyone’s guess whether it will be resolved before this year’s state budget is finalized.
Finally, PFD and LD-1 Representatives Nyguen and Bliss purposely excluded Prescott Mayor Phil Goode from the budget negotiations for the $15.3 million in state taxpayer money.24 This deliberate tactic prevented the City Council from possibly directing these same funds for projects that would benefit all city residents—such as sorely needed public safety improvements.25 The lack of transparency persists with PFD’s (the tenant) continued refusal to allow the City of Prescott (the landlord) to act as fiscal agent to oversee how the $15.3 million is spent. How can the City of Prescott comply with its competitive bidding requirements for multi-million-dollar construction projects if it does not serve as the fiscal agent?
Taxpayers deserve to know why the state wants to gift $15.3 million to a private entity with no business plan, no viable funding plan, questionable financial performance, opposition from neighbors, no oversight from the landowner, and significant transparency issues with residents and elected officials alike. And if the grandiose Master Plan should fail financially, does the state really wish to sentence Prescott residents to be the payor of last resort for something they didn’t want in the first place?
The Governor’s Office is on the right track with its proposal to claw back the $15.3 million giveaway to the Prescott Rodeo. Building a field of dreams (or a rodeo arena of schemes) is a discretionary expenditure Arizona taxpayers simply cannot afford.
NOTES
1https://www.azjlbc.gov/budget/revenueandbudgetupdate012524.pdf
The three big drivers in the state’s financial problems are significantly lower individual income tax collections, anemic corporate income tax growth, and slower than anticipated sales tax growth.
2“Governor’s budget proposal to eliminate $15.3 for Rodeo Grounds raises concerns among local officials.” “…But District-1 State Sen. Ken Bennett, R-Prescott, calls Hobbs’ proposed budget ‘the first shot over the bow,’ and he said he intends to work to protect the $15.3 million allocation.” January 17, 2024, Cindy Barks, Prescott Daily Courier. https://www.dcourier.com/news/2024/jan/17/governors-budget-proposal-eliminate-153m-rodeo-gro/
3Rodeos in Arizona: Prescott, Scottsdale (and Scottsdale’s 386-acre Westworld equestrian and events complex), Cave Creek, Apache Junction, Benson, Camp Verde, Lake Havasu, Payson, Queen Creek, Tucson, Wickenburg, Williams, Flagstaff, Gilbert, Buckeye, Pima County, Verde Valley (Cottonwood), Sonoita, Holbrook, Duncan, Kingman, Wilcox, Marana, Safford, Window Rock, and Yuma. Tucson holds the largest rodeo. (Sources: Turquoise Circuit Pro-Rodeo and Grand Canyon Professional Rodeo Association). Additionally, private developer Mike Lafferty is building a private full-size rodeo arena on his property at 3910 SR 69 and plans to offer horse racing events. October 23, 2023, Angela Gonzales, Phoenix Business Journal. https://www.bizjournals.com/phoenix/news/2023/10/30/lafferty-to-develop-25-acre-ranch.html
4Arizona House of Representatives HB 2810 general appropriations act 2023-2024, item #86 (j) on page 23, “Appropriates the following amounts from the GF in FY 2024 to the State Treasurer for distribution to nonprofit organizations: $15,300,000 for a nonprofit volunteer organization that operates a rodeo at the Yavapai county fairgrounds.”
5The Prescott City Council received a briefing from PFD at a March 28, 2023, a public study session that included a discussion of the proposed capital improvements to the fairgrounds. PFD assured the City Council and the public, that funding for the improvements would come from private donations. PFD representatives made this same statement to residents at a May 13, 2023 neighborhood meeting. One concern among many is that PFD proposes to construct a 7,480-square-foot under-roof private, members-only club on city property. How does this align with the city’s vision of this property that it identifies as one of its five regional parks? More information about the Master Plan can be found in the July 2023 AZFPI blog post here: https://azfpi.org/2023/07/ or https://1888buckle.club/plans-reports-and-documents/.
6Not all that long ago, the Fair Association paid Yavapai County $250,000 per year to lease the fairgrounds. The Association then sublet the grounds to PFD for the rodeo, for an unknown amount. In 2002, the County began to lease the property directly to PFD at no cost. The City of Prescott assumed the County/PFD lease when it acquired the fairgrounds. When that lease was about to expire in 2017, Prescott continued the rent-free gift to PFD which is the lease in place today. How is it that the Fairgrounds property commanded an annual rental payment of $250,000 in 1996, while PFD leases the same property for nothing in 2024? Lease Agreement Prescott Rodeo Grounds City Contract No. 2017-020: https://yavapaicountyazeb.tylerhost.net/web/document/DOC428S19554?search=DOCSEARCH464S1 1996 Yavapai County Fairgrounds Base Lease: https://yavapaicountyaz-web.tylerhost.net/web/document/DOCC2050295?search=DOCSEARCH464S1
7The Yavapai County Tax Assessor’s Office shows a full cash value of more than $8.3 million for the property known as the “fairgrounds.” https://gis.yavapaiaz.gov/v4/map.aspx?search=111-11-148N
8At the March 2023 Study Session presentation, PFD requested the City of Prescott approve a 99-year lease with two 20-year extensions.
9 https://az-sta.com/agreements.php Arizona Cardinals Facility Use Agreement with the Arizona Sports and Tourism Authority. Arizona Cardinals announce 18-year stadium naming rights deal with State Farm. https://www.sportspromedia.com/news/arizona-cardinals-stadium-naming-rights-state-farm/#:~:text=The%20National%20Football%20League’s%20(NFL,Farm%20Stadium%20with%20immediate%20effect.
10Link to Western Values Coalition Tele-Town Hall, July 10, 2023. See minute 1:08:40 for Greg Mengarelli’s explanation for the Master Plan. https://www.westernvaluescoalition.org/july-10th-tth/
11 Despite PFD’s claims it would lose the status as “The World’s Oldest Rodeo” if it relocates from the fairgrounds, neither the application(s) nor the trademark registration is linked to the present-day location. Instead, the trademark registration is linked to the words, “World’s Oldest Rodeo.” The U.S. Department of Commerce attorney for the Patent and Trademark Office initially rejected PFD’s trademark application citing: “[Because the application does] not demonstrate the fact the words [“World’s Oldest Rodeo”] have taken on a secondary meaning … the claim of distinctiveness cannot be accepted. If you believe that the mark has acquired a secondary meaning or become distinctive when applied to goods/services… I will further consider the application upon submission of evidence to support this belief.” Subsequent correspondence never mentions location. https://tsdr.uspto.gov/#caseNumber=73449678&caseSearchType=US_APPLICATION&caseType=DEFAULT&searchType=statusSearch/ Link to Western Values Coalition Tele-Town Hall, July 10, 2023. See minute 22:30 where Greg Mengarelli states, “It’s good to hear the neighbors want to keep the rodeo on that site…”If the rodeo moves from its current site, we would then jeopardize our brand, The World’s Oldest Rodeo.” https://www.westernvaluescoalition.org/july-10th-tth/
12Link to Jim Dewey Brown’s YouTube Interview with Greg Mengarelli. See minute 20:25 for the beginning of the discussion with Jim Dewey Brown about the competition Prescott faces with other rodeos to the north for the 4th of July weekend. Brown cites the examples of the Cody Stampede, Greeley Stampede, Red Lodge, and “a whole bunch of others to the north.” He then says that a contestant can stay in one place and enter multiple northern rodeos over “those four days” (meaning the 4th of July) rather than travel further south to compete ONLY in Prescott. https://www.youtube.com/watch?v=swtQ81PGedo. A check of the Professional Rodeo Cowboys Association (PRCA—of which PFD is a member), shows a total of 650 sanctioned rodeos in 44 states annually. PRCA’s current schedule lists 13 sanctioned rodeos over the Fourth of July weekend. https://www.prorodeo.com/prorodeo/rodeo/about-the-prca.
13Link to Western Values Coalition Tele-Town Hall, July 10, 2023, See minute 32:55 in which Travis Bard, a Prescott native who has competed in rodeos across the country and in Canada, states the Prescott Rodeo is in the second-tier of competition. See minute 31:30 where Karen Fann, moderator of the Town Hall also reveals, “We were short a couple of bronc riders this year. And not just bronc riders, other contestants as well.” https://www.westernvaluescoalition.org/july-10th-tth/
14On March 19, 2024, the City of Prescott posted the zoning application and associated materials it has received from PFD. There are several items of note. First, former City Manager Gregory authorized PFD and its agent, Lyon Engineering BOTH to serve as the city’s property agent in August. https://prescott-az.gov/wp-content/uploads/2024/03/City-of-Prescott-Agent-Authorization-Letter.pdf. This was done without the knowledge or approval of the Prescott City Council. The authors can find no city regulation (City Code or Charter) allowing Gregory (or any city manager) to make such a designation. What’s even more confusing is Gregory essentially designated two parties to serve as the city’s property agent. Secondly, Lyon Engineering in its rezoning submittal map shows the property as the “Prescott Frontier Days Rodeo Grounds,” and identifies Prescott Frontier Days, Inc. as the property owner of this city-owned land. https://prescott-az.gov/wp-content/uploads/2024/03/Rodeo-Master-Plan-Round-1-Received-by-the-City-2.12.24.pdf
15https://www.dcourier.com/news/2023/jul/08/petitions-prescott-rodeo-grounds-city-council-revi/
16SUMMARY OF PFD, INC. IRS 990 REPORTING 2012 – 2022. A comparison of 11 years of revenue, expenditures and contributions are available in Footnote 7 of this blog post published by AZFPI in February, 2024. https://azfpi.org/growth/the-rodeo-and-the-recall/
17A 128% increase in business expenditures over an 11-year period would not be sustainable, but for government subsidies—especially given that the average inflation rate for years 2012-2022 is 2.43%. https://www.statista.com/statistics/191077/inflation-rate-in-the-usa-since-1990/
18First round staff comments on PFD’s rezoning application provide an example of the costs the city is incurring with the following statement: “The proposed development extends into areas not covered by the existing Lease [sic] with COP (most of the open dirt lot). When will the lease be revised? When it does, the Rodeo Bio Basin and the underground detention chambers (if not abandoned) should be the maintenance responsibility of the Rodeo Group, to the satisfaction of the City/PW Department. The City is currently taking on the maintenance responsibility for pollution solely created by Rodeo activities. The continual regrading of the dirt parking lot has caused damaged infrastructure and significantly accelerated erosion that compromises the bio basin and puts an additional workload on City staff. This site is a hot spot for the pollutants of greatest concern in the watershed, namely Nitrogen, Phosphorus and E. coli [emphasis added].” https://prescott-az.gov/wp-content/uploads/2024/03/Rodeo-Rezone-Master-Plan-City-Pre-Application-Conference-Staff-Comment-Letter.pdf. The original Rodeo Bio Basin was constructed by the Prescott Creeks organization. Their report shows the extent of the rodeo’s impact on the creek system. https://prescottcreeks.org/programs/watershed/
19In 2022, Jim Rounds prepared an Economic Impact Study for the Rodeo Master Plan. This study failed to offset the projected city sales tax revenue increases and the significant subsidies the City of Prescott provides to PFD. Subsidies include: free rent and city services for maintenance, pollution mitigation, public works, police, and fire services. The rent alone would have a conservative value today of over $330,000/year, using the base rent in 1996 (paid by the Fair Association) and increasing that rent by a mere 1 percent/year—and that’s without additional improvements to the property. The Jim Rounds report can be found here: https://1888buckle.club/plans-reports-and-documents/. Furthermore, the City debunked an earlier economic impact analysis by a different firm (Lovell). A January 31, 2001 Council Agenda Memorandum to Mayor and City Council from Larry Asaro, City Manager critiqued the 2001 Lovell Rodeo Economic Impact Report and the use of economic multipliers. This report states, in part, “Based on this adjusted calculation, the revenues received may be about one-fourth of what the Rodeo report indicates.” The report further discusses impacts in July from the rodeo itself: “Unfortunately, while July is a high sales tax return month it does not show any increase in taxes at the level suggested in the Rodeo report.”
20PFD Inc. submitted a request to the IRS in 2021 to change its status to a charitable tax-exempt organization. The IRS issued a determination letter stating, in part, “You do not meet the operational test under Tres. Reg. 1.501(c)(3)-I(c)(I) because your activities further a substantial non-exempt purpose. Your primary activity is the planning and conducting [of] a rodeo for the community. The facts show you are not operated exclusively for charitable and educational purposes….” https://www.irs.gov/pub/irs-wd/1050033.pdf
21PFD’s 2022 IRS 990 Schedule B shows a total of $630,932 in cash and non-cash donations from 61 individuals and one company. Cash donations make up the majority of the $630,932 itemized on Schedule B, with cash donations ranging in amounts from $5,000 to $50,000 per donation. In addition to Schedule B donations, PFD received an additional $229,766 in grants and contributions for a total of $860,698 (Line 8, “Grants and Contributions” 2022 IRS 990). The $860,698 includes Schedule B donations and additional items such as membership dues and the city’s annual $40,000 contribution.
22Unlike the City of Scottsdale or Prescott Valley, the City of Prescott has no idea of the full “in-kind” costs it contributes to make PFD’s rodeo week events successful. Costs such as overtime, equipment use and maintenance. If Prescott has quantified these costs, the City has not made them public. https://www.scottsdale.org/city_news/westworld-costs-far-higher-than-expected/article_0e7ac44e-6759-11ed-97d2-4ffa2eec8c30.html
https://www.prescottvalley-az.gov/259/Annual-Budget
23The Arizona Center for Law in the Public Interest filed this lawsuit on behalf of two concerned Prescott residents alleging the violation of the gift and appropriations clauses of the Arizona Constitution. The Goldwater Institute will file an amicus curiae brief in support of the plaintiffs’ (Prescott residents) position by early April. https://www.superiorcourt.maricopa.gov/docket/CivilCourtCases/caseInfo.asp?caseNumber=CV2023-009364
24Arizona Central May 23, 2023 article by Ray Sterns, “Ron Owsley, the nonprofit’s president, acknowledged that the mayor was ‘pretty upset’ over being kept in the dark about the state money, but also said the rodeo officials ‘certainly kept it quiet’ when they began working with legislators on it. That was a business decision to prevent anyone else from ‘cutting up the pie,’ he said.” Prescott Daily Courier May 15, 2023 article by Debra Winters, “Despite the city being a stakeholder, I wasn’t even consulted by anyone from the state regarding funding, especially not having any kind of agreement with the rodeo,” Goode said late last week. “Especially being a long-term plan [sic], they just assumed the city would be on board with this. There was no decency to double-check with us. I was very disturbed by the way it happened.”
25“$100M needed in improvements for Prescott Police and Fire City: Additional tax revenue source would be required to cover cost,” February 28, 2024, Cindy Barks, Prescott Daily Courier. https://www.dcourier.com/news/2024/feb/28/100m-needed-improvements-prescott-police-and-fire/