EDINBURG, RGV – Businessman Alonzo Cantu and colleagues in Cantu Construction and Viper Arena, LLC, appeared before an Edinburg City Council meeting on Tuesday evening to defend the $88 million Bert Ogden Arena project.
While acknowledging that the arena looks “beautiful,” Edinburg City Council member Gilbert Enriquez questioned the financing of the project and its upgrades, offsite infrastructure costs, and the length of time it has taken to complete.
Cantu, owner of the Vipers, an American professional basketball team of the NBA G League, predicted the arena will be the best in South Texas while Cantu Construction Controller Rene Borrego said without a tax increment reinvestment zone (TIRZ) agreement, the City of Edinburg would not have the arena.
The Bert Ogden Arena is a public-private partnership between the City of Edinburg and Viper Arena, LLC.
Before Cantu spoke to the council, an overview of the project was given by Yajaira Flores, the director of booking and marketing for Viper Arena, LLC. In her presentation, Flores showed a video with commentary from Robert C. Vackar, CEO of the Bert Ogden Motor Group.
Flores ran through a timeline for the project. A ribbon-cutting for the project was held in February 2015, but soon thereafter improvements to the design were made. In January 2016, Edinburg City Council approved the adjustments to the redesign, with construction beginning in April 2016. The arena is projected to open in late spring 2018, Flores told council members.
The project has been delayed, Flores told council members, due to 137 days of bad weather such as wind and rain, along with the loss of two weeks of construction when Hurricane Harvey hit Texas. This meant workers and equipment were in short supply. There were also 180 days of infrastructure delays.
The original design was for 7,672 seats, Flores explained. The new design has 9,304 seats. The original square footage was 125,799. Now it is 219,000. Points of sale have been doubled to 756. Upgrades totaling $23 million focused on comfort, technology, size, finishes and design, Flores told the council.
Through TIRZ funds, the City of Edinburg advanced $21 million for the project, with an additional $8.89 million to finish, for a total of $30 million. Loans to the city from Cantu have totaled $12.98 million. Viper Arena, LLC has advanced $32 million with $13 million to finish for a total of $45 million, council members were told.
Viper Arena, LLC points out that the City of Edinburg, through the TIRZ fund, is investing $30 million to the construction, at no cost to taxpayers and zero dollars from the general fund. The remaining $58 million is being funded by Viper Arena, LLC. This lease and development agreement was proposed by the City of Edinburg and modeled after the Toyota Center, the BBVA Compass Stadium and the Harris County Sports Authority, the council members were told.
Flores also referenced the economic impact of the Bert Ogden Arena. According to a study by UT-Rio Grande Valley, the immediate economic impact of the arena is $230 million, with a $76 million impact each year thereafter. The return on investment is 8-to-1, council members were told. The arena is slated to generate 2,773 jobs.
“The Bert Ogden Arena will meet the growing needs of South Texas and the community’s appetite for sporting and live music events. The arena is designed as an economic catalyst for the City of Edinburg and most of all its infrastructure is an investment in human interaction,” Flores said.
In his remarks, Cantu said: “The TIRZ is $30 million, and then we decided to go for some upgrades. The price went up by $3 million. The city was going to pay $8 million, and I was going to pay the difference. The city at the time told me they did not have the money, so I lent them the money, $8 million. They also didn’t have the money for infrastructure; so, I lent them the money, too.”
Cantu said $4.9 million spent on offsite infrastructure was not part of the $30 million.
Enriquez said: “My calculation, based off the information that I received, there’s a few million dollars that are missing. That are either miscalculated.”
Cantu responded: “Anything above and beyond the budget, I paid for. You go $30 million from the TIRZ, then the upgrades agreed by the city, $22 million, they are going to pay $8 million of that, and then $4.9 million of offsite improvements.
“They (the City of Edinburg) were trying to do phase two of the shopping center at Trenton. I lent them $3.5 million as a loan in order for them to get financing for the second phase of the Shoppes on Trenton. It had nothing to do with the arena. That money went to pay off the bonds. It had nothing to do with the arena.”
Enriquez responded: “In order for the bond issue to be sold, the TIRZ at the Shoppes had to be taken care of. They had to put the TIRZ for the Shoppes into the bond issue in order to repay that loan. So, that $3.5 million was paid so it could be free and clear, so all the sales tax generated from the Shoppes would go to pay the bonds for the arena.”
Cantu disagreed with that analysis.
Enriquez said: “You can debate it all you want, but the fact of the matter is the taxpayer is still responsible for paying that money.”
Cantu responded: “No, because that money did not go to the arena. I lent you, the City, $3.5 million and they paid me back. It did not go to arena.”
Enriquez countered: “But, indirectly it did.”
Cantu shot back: “No, it did not go to the arena.”
Enriquez then focused on delays to the project.
Cantu said the upgrade was needed so there is no need for a new arena for the next 30 years.
Enriquez responded: “It is a beautiful facility, but responsibility is to the taxpayer. Because the project has not been completed, we have incurred some payments. We’ve paid about $4.8 million in interest from 2015 to 9/1/2017. That is with no revenue coming in.”
Enriquez continued: “Our contract with the Vipers stipulates that there is an annual payment of $350,000, and out of that $350,000, $150,000 is going to capital improvements, either money market or a trust or whatever you want to call it. So, in reality, $200,000 revenue, the city is receiving for the next 30 years, which comes out to $6 million. There is no other revenue source that I am aware of that we are receiving, that the City of Edinburg is receiving from the arena.”
Cantu responded that the contract was modeled, through attorneys, on the Toyota Center in Houston.
Enriquez said: “We do not generate as much money as Houston does.”
Cantu responded: “Assuming there is no growth around the area, assuming there are no pad sites.”
Enriquez responded: “I understand it brings in development. The sales tax generated from there can only be used to pay for the bond. For the next 30 years we are not able to touch any of that sales tax generated.”
Edinburg City Council Member Homer Jasso Jr. defended construction of the arena and the financing of it. “There will be growth. This is big economic value-add that we wanted in the City of Edinburg to bring new business, to bring more quality-of-life. This is why we are doing this.”
Edinburg City Manager Richard Hinojosa pointed out that any revenue generated within the TIRZ has to be used to pay off the bonds.
Cantu responded: “You guys are putting $30 million. I am putting $60 million. Who is taking the bigger risk?”
Enriquez countered: “No, I think we are putting $46 million. It was $8 million of the $23 million, and then $5 million for the off-site, that is $13 million, plus the $33.5 million. That is $46.5 million. I am going based on the information provided.”
Cantu responded: “I think the bank that made the loan, Wells Fargo, would not have given you the money if they did not think you would get paid.”
Enriquez then sparred with Jasso. “Property and sales tax revenue is going to pay for an arena, a Santana Textiles, all these other investments,” he said.
Another question from Enriquez focused on the upgrades made to the project. “What upgrades are they (the City) paying for in the $8 million?” he asked.
Cantu said: “You are fixed at $8 million, I could go up more. To upgrade it so we will not have anyone competing against us, and it will be the best arena in South Texas. I wish you would take the time to go see it. I know you are busy. It is your arena. I am serious; you are should go see what you have. I know the Mayor has seen it. I saw your commercial when you were running for mayor. Thank you,” Cantu said to Mayor Richard Molina.
Jasso said he did not like this “Attack Alonzo.” Nobody is attacking him, Molina and Enriquez shot back.
“We were elected to look after the taxpayers. Four years from now, if they see different, then I won’t be here, and you can continue to do what you were doing before,” Enriquez told Jasso. “I am not going to allow you to say I am taking punches at anybody. What I am trying to do is get answers. If nobody can appreciate that, well I am sorry. No one is going to dictate to me what questions I can or cannot ask.”
Edinburg City Council Member David Torres said: “Mr. Cantu, we just need to finish the project so we can put these mechanisms in place. It has taken too long, Mr. Cantu. We have invested monies on behalf of our taxpayers, and they demand you finish it up – so we can start paying this debt back with all the mechanisms in place.”
Cantu responded: “I agree. It is not because we do not want to finish it. I have invested more than you, and I have got zero.”
Enriquez countered: “I do not see how you can keep saying you have more money invested. It is $88 million total, from your presentation. We are at, and I will take the $3.5 million out, and it is $43 million. So that is almost half of the $88 million.”
Cantu said through reinvestment contracts the city can get its money back. “I told the city manager. I told the previous administration. For some reason you do not want to do it.”
Enriquez responded: “Of the $13 million, we only get that if there is excess TIRZ. There is no guarantee we are going to get that money.”
Hinojosa then made the point he was not around when the contract was drawn up.
Borrego, for Cantu Construction, said the TIRZ was being mischaracterized. “This is not an investment by the city, this is an investment with some partners,” he said. “The whole program is to stimulate development. But, for the TIRZ there would not be any development. It would still be sitting vacant.”
Enriquez then asked another question of Cantu. “Have you been here, Mr. Alonzo, when it rains in our downtown area? Have you seen the flooding that happens here?”
Alonzo responded: “What does the TIRZ have to do with that?”
Enriquez said: “It has nothing to do with the TIRZ. It has to do with giving back to our citizens.”
Alonzo said: “And I support that. Look, I have invested over $100 million in the last year in the City of Edinburg.”
Enriquez responded: “And we appreciate that. Just like every other businessman has.”
Alonzo continued: “And the City of Edinburg, because they gave us $350,000 15 years ago for the hospital, we are the biggest taxpayer. We pay $12 million a year in taxes; we have almost 5,000 employees. Think about that. When Edinburg does something, we pay back.”
Molina acknowledged the City Council was “pumped up” when the groundbreaking for the arena took place.
“The concerns that have been brought to my attention is why has the arena not run as fast as H-E-B Park. That is a beautiful facility. Asides from all the numbers, Mr. Cantu, is this, I guess we just want to see this thing to fruition. We want to see it open; we want to see it making some money,” Molina said.
Cantu responded: “You will see it soon. Once the roof is done (on the arena), we will be working day and night.”
Cantu added: “I would like to take you on a tour of the arena, the sooner the better. I would like to help Edinburg out with its park and whatever else I could do for you.”
Power corrupts. Absolute power corrupts absolutely.