PHOENIX (CN) – Allstate Insurance says the Town of Prescott Valley inflated the profits it could expect from building an entertainment venue to induce the insurer to buy $35 million in excise tax revenue bonds. The center, initially estimated to cost $22 million, will never generate enough sales tax and operating revenue to be “economically feasible,” Allstate claims in Federal Court.
According to the complaint, a 2001 study prepared for the City of Prescott estimated that an event center would attract about 78 events per year with an annual attendance of about 202,500 and a net operating income of about $370,000. That study estimated the cost of the center would be $22 million; Prescott abandoned the idea.
Allstate claims that Prescott Valley reviewed the city’s 2001 study, and “fraudulently inflated” the projected number of events to 133 and the expected attendance to 458,000. “As a result, projected sales taxes from the Event Center and Entertainment District were also inflated because they are directly impacted by Event Center revenues and attendance,” Allstate says.
The insurer says the 5,000-seat event center failed to break even, failed to host more than 70 events per year and did not draw audiences even “close to the inflated projections.”
Allstate claims the center was never worth $35 million, the bonds “were misrepresented to be A- rated, investment grade,” and the center “is expected to never generate any meaningful net operating revenues.”
Here are the defendants: The Industrial Development Authority of the County of Yavapai; Prescott Valley Event Center; Robert W. Baird & Co.; M.L. Stern & Co.; Edward Jones LP; Prescott Valley Signature Entertainment; Global Entertainment Corp.; Fain Signature Group; Kutak Rock; Stinson, Morrison, Hecker; TL Hocking & Associates; Thomas L. Hocking; W. James Treliving, and Richard Kozuback are also named as defendants.
Allstate is represented by Michael P. Cillo and Patrick J. Kanouff with Davis & Ceriani in Denver.