Under Ducey, Arizona issued bonds that got bigger, riskier, farther-flung. Now some of them are in trouble


By Richard Ruelas and Andrew Ford

University of Texas-Austin journalism students Margaret Wirick, Mai-Ann Nguyen and Mckenzie Bentley contributed to this report. 

Eastern Michigan University renovated a parking garage. A charter school in Vineyard, Utah, wants to expand. There’s a new Hilton Garden Inn in Harlingen, Texas. 

And Arizonans better hope each one of these developments succeeds. 

Arizona is quietly tied to the fate of these and other far-flung projects because their financings were run through an arm of state government — the Arizona Industrial Development Authority — so that each could be built more cheaply.

Some of these projects are risky. Seven have shown signs of financial trouble, including the parking garage in Michigan.

Since its inception in 2016, the Arizona Industrial Development Authority has issued more than $8 billion in bonds — long-term loans sold to investors — with more than half of that money flowing to projects or entities outside the state. 

The Arizona authority’s appetite for projects was even greater. Its board green-lit more than $12 billion in deals, some of which never came to fruition and never received investor funding.

Patrick Ray, a private contractor who runs the bonding program, says the board issues exotic bonds to fulfill a mission: generate revenue for the state that doesn’t come from taxpayers. 

According to figures provided by Ray, the bonding program has brought in $19.1 million over the past three fiscal years. Put in perspective, that amounts to a 0.05% rounding error in state budgets totaling nearly $37 billion over the same period.

But not all that money is accounted for. A spokesperson for the Arizona Commerce Authority, the agency that state statute says is the destination for the funds, said it had only received $14.5 million from the Industrial Development Authority. The fate of the remaining funds could not be determined.

Meanwhile, others involved in the program collect substantial revenues from the issuances of the bonds.

At least $110 million has been paid out to a rotating cadre of middlemen — the investment bankers who set up and peddle the investments and the lawyers who iron out the details, according to documents available on the Electronic Municipal Market Access website. 

In order to keep the money flowing, the Arizona Industrial Development Authority, under Ray’s direction, has taken on increasingly larger and more complex deals. And put the state’s reputation on the line should the bonds fail.

Two of the authority’s bonds are in default, a financial black eye for Arizona. Five more have warned investors of trouble, according to the research firm Municipal Market Analytics.

In one of the defaults, the borrower stopped making interest payments on $22 million used to finance the conversion of mine waste to fertilizer in Congress, Arizona. Another worked out an agreement to postpone part of its interest payments on nearly $400 million used to purchase senior living complexes in the Midwest. 

The portfolio of the Arizona Industrial Development Authority is sprinkled with colorful and exciting projects with eye-watering dollar amounts.

But, there is a reason the bond world is typically devoid of excitement, said Alan Maguire, former chief deputy to the Arizona treasurer and former president of Maricopa County’s Industrial Development Authority. The market prizes stability and rock-solid investments, even if they seem repetitive.

“There’s a boredom factor,” Maguire said, speaking generally. That might lead some in the bond world to tiptoe toward greater risk in order to make slightly more money. “But soon,” Maguire said, “you’re hanging off the edge of the Grand Canyon.”

Reporters from The Arizona Republic, assisted by three journalism students from the University of Texas, reviewed thousands of pages of financial documents and lawsuits connected to more than 100 bond offerings across the United States. Reporters also interviewed dozens of sources, including financial experts, lawyers, politicians, bond investors and others affected by the Arizona Industrial Development Authority’s deals.

Among the findings: 

  • The Arizona Industrial Development Authority has supported an increasing number of risky projects. It has issued bonds as a favor to major banks so they could move assets between divisions or get loans off their books. It involved itself in a complicated swap transaction reminiscent of deals that led to the Great Recession. And it supported two bonds that — based on documents provided to the board in advance of their approvals — don’t contain enough information about the underlying projects to enable the authority or bond investors to scrutinize what’s really going on.
  • During its five-year history, the authority’s board of directors — hand-picked by the governor — has approved deals quickly, unanimously and with little debate. One of the board meetings, in September 2019, in which members approved $1 billion in bonds, wrapped up in 14 minutes.
  • The Arizona Industrial Development Authority has shifted away from the types of rural projects that were supported by its predecessors — public projects like jails, medical facilities and fire trucks — in places like Three Points, Cobre Valley and Nogales. 
  • While the authority’s objective is to raise money for the state, it’s not clear what that money is being used for. The fees earned by the authority are squirreled away in a fund at the Arizona Commerce Authority. One year can’t be accounted for. In another year, none of it was spent. A spokesman for the Commerce Authority said a portion of the money was tagged for “research and marketing efforts.”
  • As the state affixes its financial reputation to ever-riskier borrowers, its name will be associated with each failure. Because of its lack of due diligence, the authority issued bonds for Harvest Gold Silica, run by John Owen, a businessman with Texas ties whose companies faced allegations of fraud in filings by state securities regulators. Now Harvest Gold’s $22 million in bonds are in default, and the authority’s name is on the second line of a federal lawsuit in which investors claim the company committed fraud and used the authority to give it a sheen of credibility. (Owen denies these claims, and the authority is not a defendant in the case.)

While Ray laments having anything to do with financing Owen’s company, he said the Arizona Industrial Development Authority is still in good shape.

“At some point, everybody expects there’s going to be a default on conduit revenue bonds,” Ray told The Republic in October. “With 110 borrowers, one of them is going to be either dishonest or incompetent or stuff happens. And so I think the industry fully expects an occasional default.”

Taxpayers are not financially liable should its deals go south. Bond documents say in capital letters that the state of Arizona will not pay off investors should a project go bust. 

But a string of defaults would be seen as a lack of good governance, as Arizona’s governor, by state and federal statutes, serves as the overseer of the authority’s doings. 

He personally signs off on many of the deals.

Ducey’s office did not return requests for comment on the Arizona authority’s bonding program.

Board approval can be used as a first step, allowing a project to let other investors know the project could enjoy the advantage of being funded by tax-free bonds. Some of the projects — a prison in Honolulu, Hawaii, a baseball complex in Hutto, Texas — never got off the ground.

Byron Schlomach, head of the free-market 1889 Institute in Oklahoma, said that Arizona has placed a “stamp of approval” on the projects, some of which he reviewed at the request of The Republic. It makes them seem like surer bets for bond buyers. He said that could come back to bite the authority if a deal fails.  

“I have a hard time believing that if one of these things goes belly up that some people aren’t going to come along and sue the state at least for deceptive practices,” Schlomach said.

‘No harm, no foul’

The bond market, at its most basic, functions like this: A developer seeks a loan to finance some project. For example, an affordable housing complex or a charter school. Investors front the money, agreeing to be paid a specified sum of interest each year as, essentially, the price of renting out their money. After a negotiated period of time — possibly 10 years, 20 years, or 30 years — the investor is paid back the initial investment.

The interest rate that determines those annual payments is typically low. But it’s stable. And that is what most bond buyers are seeking: a steady income with minimal risk.

It’s completely different from the stock market.

Think of the stock market like a casino, where some knowledge of the games and some luck can turn risks into rewards.

The bond buyer would not be interested in any of the games. They would instead be interested in the money to be made in the parking garage, bar, or the lease on the building — the real sure bets.

The stock market is a place where investors hope to make money. The bond market is a place where someone with money stores it for safekeeping, albeit while earning a small annual interest payment, trusting they will get it all back in 10 or 20 years.

Government bonds, those issued by cities or school districts, backed by the ability to tax residents, are generally considered safe investments. Unlike a business, which might lose all of its money and shut down, a government entity can keep collecting taxes to pay its debts.

Bonds issued by industrial development authorities — such as the Arizona Industrial Development Authority — are different. They are backed solely by the revenue generated by the project — the rents paid by apartment dwellers or the hourly rates paid by those who frequent a parking garage.

And having an industrial development authority issue the bonds allows them to be tax-free, making them more attractive to investors who are willing to make a little less money, knowing that they won’t have to pay taxes on their earnings.

But because these bonds are issued by a development authority created and overseen by the government, they are still considered “muni bonds” in the parlance of bond investors, safer than those in the purely private market.

Most states restrict their government-created development authorities to issuing bonds within their own jurisdiction, typically keeping it within the authority’s own city or county, said Toby Rittner, president of a national association of development authorities.

A handful of states, he said, allow out-of-state projects, but only if there is a substantial nexus with the home state, like maybe a charter school or medical facility putting a location in a neighboring state.

Only one other state, Wisconsin, allows its authority to fund projects out-of-state without restriction, Rittner said.

Congress tightened up the rules around development authority bonds fearing they were being used for private enterprises, like fast-food restaurants or department stores, Rittner said. The new rules required that projects be placed on an agenda and approved in a meeting open to the public. The tax-exempt deals also need to be approved by an elected official in the issuing jurisdiction.

The aim, Rittner said, was for the deal to not just be scrutinized to see that it made financial sense, but also that it had a dose of political or common sense.

“Someone who was beholden to the public interest saying, ‘I have to present this to the citizenry,’” Rittner said.

The Phoenix City Council approves projects approved by the board of the Industrial Development Authority of the city of Phoenix. The Maricopa County Board of Supervisors approves those passed by the board of the Maricopa County Industrial Development Authority.

The Arizona Industrial Development Authority also has a public approval process. But it runs differently, and much more quickly than it does in either Phoenix or Maricopa County.

After the deals get approved by the Arizona Industrial Development Authority board, its members vote to adjourn, then the same people convene as the board of the Arizona Finance Authority. That board, as defined in state statute, oversees the actions of the Arizona Industrial Development Authority.

The same people, now meeting as the Arizona Finance Authority board, approve the actions they took just minutes earlier.

The process, Ray said, was intentionally designed to be quick. While Phoenix or Maricopa County might have to place an approved project on a meeting agenda, the Arizona authority can move much faster, shaving two weeks or 30 days from the approval process, he said. 

Maricopa County’s IDA has watched the projects approved by the Arizona IDA, but its executive director, Shelby Scharbach, said it has not changed what projects the county entertains.

“Our board is focused on Arizona,” Scharbach said. “They didn’t have an appetite to do out-of-state transactions.” 

Scharbach said the county’s IDA was focused on economic development in the Phoenix region. It intentionally caps the amount of fees it charges, she said, so those don’t serve as barriers to any worthy project.

Bryant Barber, an attorney with Lewis Roca who provides legal advice to Phoenix’s industrial development authority, said that body will entertain the occasional out-of-state project if it finds it has merit. 

The city’s authority earns higher fees on those projects, Barber said, charging developers for its expertise. He said it puts those funds back into charities, targeting smaller ones that don’t have a ready flow of donors.

Development authorities in general are a tool, Barber said. They can be used to provide a direct benefit — an affordable housing complex or senior living facility in the community — or the indirect benefit of money made in the transaction going to charities.

But, Barber said, in either case, the benefit should be apparent. “This is a significant set of powers,” he said of the ability to issue tax-exempt bonds. “What are you doing with that tool?”

It is not clear what Arizona does with the money earned by its development authority.

By statute, any excess funds go not to charitable organizations but to a specific economic development fund.

That fund, overseen by the Arizona Commerce Authority, had $9 million in July, according to budget documents. It spent no money the prior fiscal year, which ended in July, according to the documents.

In its budget request, the Arizona Commerce Authority said it planned to spend $2.4 million in the coming year in the category of professional and outside services.

Those services involved “research and marketing efforts,” as described by a spokesman for the Arizona Commerce Authority in an email. Those efforts, the spokesman said, included “prospective client identification and outreach” that ensured the state’s competitive position.

The spokesman, Patrick Ptak, did not respond to a request for more specifics, such as which professionals were hired, or what outside services were received, or any tangible benefits the state commerce department could point to.

‘Mission to give money to the state’

The Arizona Industrial Development Authority was created through legislation pushed by Ducey during his first term, part of an overall restructuring of the Arizona Commerce Authority, itself designed to promote economic development within Arizona.

The freshly minted authority subsumed the work of three other IDAs that focused on projects in Arizona, like a hospital in Cobre Valley, a business incubator in Flagstaff or a court complex in Nogales.

An early plan had the authority also subsuming the Water Infrastructure Facilities Board, but lobbying convinced lawmakers to allow it to remain independent. The worry was that the long-standing board, which funds water and wastewater projects throughout the state, would have its sterling AAA bond rating tarnished if it were lumped in with the expanded authority.

The other boards were created with specific missions.

The International Development Authority was launched to work on infrastructure near Arizona’s border with Mexico, with the aim of fostering trade. It never got past the launch phase. The Health Facilities Authority, as its name implied, concentrated on health facilities. The Greater Arizona Development Authority worked on economic development in rural Arizona.

Mignonne D. Hollis, who served on the Greater Arizona Development Authority board, said it was a highlight of a career spent serving smaller state communities.

“I loved it,” said Hollis, executive director of the Arizona Regional Economic Development Foundation. “It really made a difference in these rural communities.”

A review of the Arizona Industrial Development Authority’s meeting minutes show that it originally issued bonds for Arizona entities: a charter school in south Phoenix, an assisted living facility in Yuma.

But, in December 2018, after Ray was named the manager of the bonding program and had his name placed on the authority’s banking account, the entity adopted a new strategic plan. 

No longer would it be content with its mission of promoting economic development and boosting the “prosperity and health for residents of the State.”

Rather, it would work to raise revenue — both to fund itself and to transfer monies to the state, meeting minutes show. The authority would work to “maximize the payment of unrestricted revenues” to Arizona “by expanding the scope and volume of our revenue-generating activities.”

Ray said the board did so because the statute that allowed the state authority’s creation specifically said that any excess funds at the end of the year need to be returned to Arizona. 

“Because by statute we’re required to do it,” Ray said, “we figured that must be part of our mission to give money to the state of Arizona.”

At its next meeting, the authority approved a $130 million deal funding a student housing complex at North Carolina Central University and a $32 million deal allowing the construction of the Hilton Garden Inn in Harlingen, Texas.

Over the next few years, the authority would also approve the issuance of bonds tied to the construction of a highway south of Lincoln, Nebraska, and a power center anchored by a WinCo in Meridian, Idaho.

Then, there was a convention center and hotel on the north coast of Puerto Rico, a $300 million development that came before the Arizona Industrial Development Authority three times, gaining approval at each meeting. From there, it went to Ducey for his signature, which he granted.

Not all of the Authority’s projects, however, have been welcomed in the places where they were proposed to be built.

In Hutto, Texas, a city manager and two council members resigned after a multimillion-dollar youth baseball boondoggle, the bonds for which were approved by Arizona.

Hutto wanted to create a splashy development that would make the town something other than a bedroom community to Austin. Leaders were pitched on a project called Perfect Game: a set of 24 baseball fields intended to draw aspiring pro athletes, their parents, and their money.

Arizona approved $60 million in financing for the project. And though the bonds were never issued and the ballfields were never built, Arizona’s involvement arguably created its own cottage legal industry and tore the city apart.

A finance company filed a lawsuit against Hutto in federal court. The city manager sued claiming racial discrimination. The city denied that accusation and has refused to settle.

Hutto Mayor Mike Snyder, a councilman when the project was proposed, said problems with the city manager really began when he refused to share relevant information about the Perfect Game development. 

Odis Jones, Hutto’s former city manager, could not be reached for comment.

Snyder told The Republic he was initially skeptical of the project’s promised economic benefit, which he said kept increasing every time the development was pitched.

“Every time the city manager talked about it, it got bigger and bigger. And so it’s gonna lower your taxes, it’s gonna be great for the city. Everything’s great,” he said, He compared the pitches to a carnival barker leading people into a sideshow at the circus. 

“When you open up the tent, you expect to see things,”  Snyder said. “Well, Perfect Game, we weren’t even allowed to go into the tent.”

In Utah, treasury officials told The Republic they thought that a charter school in that state — Franklin Discovery Academy in Vineyard — overpaid the professionals involved in its deal. 

Kirt Slaugh, Utah’s chief deputy treasurer, said the school paid what in his view were an unusual number and amount of fees. He also said it appeared too many attorneys were brought on board, above what was normal for a charter school bond financing.

Slaugh said Utah would have done the deal, but would have questioned the fees the school was paying.

“We suspect that going to Arizona was really a way of avoiding scrutiny by some of the professionals that were involved here in Utah because we do scrutinize things really heavily,” Slaugh said. Even so, Slaugh stressed he didn’t think Arizona did anything wrong. 

Jennifer Price, chair of the Franklin Discovery Academy’s school board, said the school was happy with its bond and claims made by the Treasurer’s Office are inaccurate. She declined to explain why. 

“I don’t need to provide you with anything,” she said.

Some deals the authority has approved are impossible to scrutinize in any meaningful way because they involve the purchase of dozens of entities. In some cases, exact locations  were not listed in documents that were given to board members ahead of meetings.  

Consider a $250 million deal involving a solar energy company with at least 50 locations, including the training facility of the New York Jets, a winery in Napa, California, and a Jack in the Box restaurant in San Diego. Documents made available to the board do not detail what’s going on at these locations, nor how the listed company, FP Small Balance Solar Finance, intends to make money.

Another deal, approved in January, involved White Oak, a Maryland investment company looking to purchase 32 health facilities to the tune of $496 million. The list of facilities includes the states where they’re located, but not exact addresses, nor even cities. None are in Arizona.

Six months later, the authority was asked to approve the purchase of even more health care facilities. The price of the requested bonds more than doubled, ballooning to $1.2 billion. The additional facilities to be purchased with that money were not listed.

The $1.2 billion in bonds were expected to be purchased by Mizuho Capital Markets, a financial institution that, according to its website, has $1 trillion in assets. It would be the seventh deal Mizuho had done with the Arizona Industrial Development Authority, totaling more than $2.6 billion.

Despite the lack of details, the authority’s board approved the expanded deal unanimously. 

The board has also supported deals of increasing complexity. At least two financing structures were described to the board as “innovative” or “proprietary.”

In one, the holding company involved would become an agent of the Arizona Industrial Development Authority board, “for accounting purposes,” a project summary said. It was not clear exactly why this was necessary, but the summary explicitly noted this involved no more risk than the normal practice.

In February 2020, the board adopted a policy on how it would handle derivatives, allowing it to enter the higher risk world of interest rate swaps and credit default swaps, the obscure financial instruments that played a role in the downfall of titanic firms like AIG and Lehman Brothers and tanked the global economy in 2008.

The policy on derivatives was adopted in order to enter a potential deal that would ease a “difficulty” that Principal Global Financial, an investment firm, was having in building a certain customized portfolio, board documents show. The complicated default swap deal would solve that problem, the summary said, by increasing its exposure to the municipal bond market. 

The summary said there was a risk that the Arizona Industrial Development Authority might need to write a check to one of the parties involved. The size of that potential payment wasn’t discussed in the authority’s meeting minutes. The summary listed ways to mitigate that possibility, but noted the risk could not be completely eliminated.

At least five more deals approved by the authority involved restructuring transactions or purchasing special certificates that benefited a bank or financial institution. One deal was done, according to minutes of the meeting that approved it, because Citigroup found it “beneficial” to move $150 million in assets from one of its divisions to another.

Ray said he thought the deal provided an expansion of funds in the market in general. Doing so, he said, could help small businesses get loans. “You’re trying to get liquidity into the market,” he said.

That Citigroup deal was one that Schlomach reviewed at the request of The Republic.

“Why is the state of Arizona involved in helping Citigroup liquidate assets?” he asked.

Schlomach said he was puzzled about the deals the authority pursued in general.

Most, he said, would have likely gone through anyway on the private bond market, with no need for the government’s intervention.

“Why are you playing a game that gives them that extra little favor?” he said. 

Schlomach said the arrangement is a “cronyism facilitator.” The money being made is likely not life-changing, he said, but was enough to keep the arrangement going. ‘It’s highly concentrated benefits to only a few people,” he said.

‘Lessening the burdens of government’ 

Unlike other bonding authorities in the state, the Arizona Industrial Development Authority has no staff. Instead, the deals are scrutinized by attorneys at Kutak Rock, which was Ray’s former firm.

At the time Ray started having the authority entertain more complex, risky and non-Arizona projects, it had no executive director.

The authority filled the position, which had been vacant since mid-2017, with Dirk Swift, a man who had long run a program that helped low-income homebuyers. He was appointed by the board in May 2021, a few months after The Republic made initial inquiries into the program.

The board, by statute, required five members. But, for more than a year, it had run with four.

The seat of Doug Yonko, a former liquor executive and college friend of Ducey, was left vacant after his September 2020 death. In November, Ducey appointed a new board member, Paulina Vazquez Morris, to take the seat.

Another board member, Lea Marquez Peterson, served on Ducey’s transition team. In 2019, he appointed her to the Arizona Corporation Commission after her failed bid for a congressional seat. She won election to the Corporation Commission seat outright in 2020.

Other board members include Mike Godbehere, president of GCON construction company, and Jim Keeley, founding partner of Colliers International’s Scottsdale office. Keeley often has to recuse himself from votes because someone in his office is involved in an Arizona project.

Godbehere did not respond to requests for comment. Marquez Peterson said by email she would defer to Ray to comment. 

Keeley also deferred to Ray as to why the board was doing projects out of state, but argued that while fees are useful, they aren’t the board’s sole focus.  

“It’s generating revenue for the state,” he said. “That’s not a bad thing.” 

Until this year, the board president was Victor Riches, who had served as deputy chief of staff to Ducey during the first two years of his administration. Riches then moved to helm the Goldwater Institute, the longtime free market think tank, based in Phoenix, which traditionally served as a thorn in the side of Arizona politicians of both stripes.

People who had previously worked with Riches at the Goldwater Institute, when contacted by The Republic, were so incredulous that he would chair a government board that was inserting itself into what appear to be private business transactions that they conjured up other possibilities. One thought it might be someone with a similar-sounding name. Another thought it might be his son.

Riches, in a phone interview in April, acknowledged the seeming incongruity. He said that if he were looking at the authority while wearing his Goldwater Institute hat, he might argue that the government has no role in these projects.

“I think in a perfect world, there could be ways of accomplishing this where you don’t need to go through the IDA process,” he said.

But Riches also said that many of the authority’s projects, like those that fund affordable housing or help charter schools, aid institutions that have limited access to capital. 

Riches said he particularly favors projects that boost economic activity in rural parts of the state, including a saw mill in the northern Arizona town of Bellemont.

“These loans make sense for those types of projects,” he said, “probably more so than other types of projects.”

That other type of project, he said, might include the planned resort at Costa Isabela, Puerto Rico.

Riches said that might raise eyebrows at first blush, but said the board wished to aid the hurricane-ravaged island.

If that was the motivation, the authority did not tout what it saw as an act of goodwill.

Neither the Puerto Rico project nor any other approved by the authority, in state or out of state, has received so much as a press release.

Although the Industrial Development Authority is part of the Arizona Commerce Authority, when that agency released a splashy video and series of press releases touting its achievements over the past decade, the projects funded through the bonds didn’t merit any mention.

Riches said he wasn’t sure why the board’s work hadn’t drawn attention before and mused that it might be the obscurity of the subject. “When you’re getting into the bond world, it’s just sort of esoteric to a lot of folks,” he said. “I just think those things are not that interesting to folks for whatever reason.”

Sometime in 2021 — it was not clear exactly when — Riches requested to step down from the board. An interim president, Gary Naquin, a senior vice president at MidFirst Bank, was appointed at an emergency meeting called on Nov. 19. 

Ray told board members at that meeting that Riches had decided to step down some months ago, but had agreed to stay on until Ducey appointed a replacement.

Riches did not respond to follow-up questions from The Republic as to why he decided to leave the agency he helmed since its inception. He still remains as the leader of the Goldwater Institute.

Beginning in August, after months of questions and requests for documents from The Republic, the authority seemed to not entertain nearly as many out-of-state projects.

In its August, September and October meetings, the Arizona Industrial Development Authority had 11 new projects on its agenda, all of which were in Arizona. Most were affordable housing apartment complexes. One involved equipment from the hospital in Kingman, a restructuring of a deal approved years ago by the now-defunct hospital facilities board. 

Those agendas resembled more the agendas from 2016, the authority’s initial months, when it had a singular focus on Arizona.

The trend continued through the December meeting held on Thursday. There were 19 items on the agenda, 18 of which were apartment complexes for seniors or low-income residents throughout Arizona. The board considered just one out-of-state project: $600 million in bonds for behavioral health facilities in Las Vegas, Nevada and San Antonio, Texas.

Ray could not be asked to explain the board’s shift. After a lengthy interview with The Republic in October, during which the findings of this story were detailed to him, he sent an email saying he was done answering questions from The Republic.

The $300 million in bonds for the resort in Puerto Rico had been approved in some fashion by the Arizona Industrial Development Authority in at least three meetings. In May 2021, Ducey signed the public approval certificate for the Puerto Rico resort.

But that wasn’t the final word.

The Puerto Rico resort needed $50 million of additional funding. And it would seek it in October, not from Arizona’s Industrial Development Authority, but from Phoenix’s.

Ray said that Provident wanted the higher dollar amount of bonds approved before the Federal Reserve hiked interest rates.

Ray said he told the head of Provident, who was a former partner at Kutak Rock in New Orleans, that because of board member schedules, he could not convene a special meeting of the Arizona authority. Ray said he suggested that Provident move the financing to the Phoenix IDA.

Ray also passed along two other projects to Phoenix: a hotel near the Air Force Academy in Colorado Springs and a sports complex in Connecticut.

The attorney for the Phoenix IDA, Barber, said the projects came as a bit of a surprise. The staff decided to entertain them, he said, simply because Ray asked if they could.

Juan Salgado, executive director of the Phoenix IDA, said staff vetted the projects as they would any others and decided they were worth considering. Barber, for example, said he called the mayor of the Connecticut city to ask details about the sports complex.

The Phoenix IDA board passed the measures unanimously.

But, as the Puerto Rico deal went before the Phoenix City Council for approval in early November, it faced hurdles that it didn’t when it was an Arizona deal.

One council member flexed her oversight power, as was envisioned by Congress when it created regulations around industrial development authorities.

Council member Laura Pastor, during the meeting, said after scrutinizing the deal and asking questions, she was surprised that the nonprofit mentioned as benefiting from the bonds was not based in Puerto Rico, but in Louisiana. 

Indeed, the nonprofit that would receive the funding was Provident, which has as part of its mission “lessening the burdens of government.”

Pastor questioned whether the project would actually benefit residents of Puerto Rico. She said she wanted the resort to include an apprenticeship program for people wishing to break into the hospitality industry.

The resort should be positioned “not just to create jobs,” she said, “but really to create careers within Puerto Rico.” 

Salgado told Pastor that, at her request, he had spoken to the developer and received assurances there would be a meeting with Phoenix officials to talk about such commitments.

Pastor said that commitment earned her vote. “I’m glad to hear that conversation took place,” she said.

The council approved the issuance of the bonds, 8-1, but not without a closing comment from Mayor Kate Gallego about what projects the Phoenix IDA should pursue in the future.

“I personally,” she said, “have a preference for ones we have in Phoenix.”