Audit flags lavish spending by Arizona to woo business executives. State leaders defend it

Corrections & Clarifications: The source of 2023 Super Bowl tickets used by Governor’s Office staff was incorrect in a previous version of the article. The tickets were part of a sponsorship paid for by the Arizona Office of Tourism.

Arizona political and economic development leaders' use of major events such as the Super Bowl to woo company executives to bring business to the state have cost more than $2.4 million in six years, according to a new audit.

That money has paid for luxurious perks. Hotel stays at the four-star Arizona Biltmore. Suites at the Super Bowl and on the 17th hole of the Waste Management Open, complete with alcohol and breakfast and lunch buffets. Gifts of red wine, theater and concert tickets, sunglasses and sunscreen — and more.

What the state got in return, according to a report released by Arizona Auditor General Lindsey Perry on Friday, was proposals from 23 companies to do business in the state and a referral asking the attorney general to probe whether the program violated the gift clause of the state constitution.

Arizona Attorney General Kris Mayes' spokesperson Richie Taylor confirmed the office was investigating the matter. He declined to comment further.

The auditor general made the referral to Mayes' office as part of "standard practice" for assessing whether public money was spent in line with the gift clause, which requires a balancing test when public funds are spent on private interests. The value received by the public cannot be far exceeded by the amount of money paid, according to the auditor general.

Dubbed the CEO Forum, the business recruiting events tied to high-profile sporting events were a favorite way for former Gov. Doug Ducey, a Republican, to tout the perks of the Grand Canyon State as part of his broader effort to be business friendly. They are a partnership between the governor and Arizona Commerce Authority, the state's economic development body and the focus of the auditor general's review.

Democratic Gov. Katie Hobbs, who took office in January, continued the tradition, participating in the forum in February at the Super Bowl in Glendale. At the same time, her office offered its own perks connected to the game that have separately raised scrutiny about whether they were a legal use of resources.

Spokespeople for Hobbs and Ducey did not respond to requests for comment on the audit.

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Super Bowl tickets provided free to governor's staff

The Governor's Office received a dozen tickets to the game at State Farm Stadium, half of which it gave to staff, as part of an Arizona Office of Tourism sponsorship of the Super Bowl Host Committee. Pairs of tickets also went to educators and the leader of a veterans' assistance organization. That marked a departure from 2015, the last time the game was hosted in Arizona, when Ducey donated all of the state's share of tickets to veterans.

The Arizona Republic sought a list of attendees from Hobbs' office on Feb. 6 by submitting a request under Arizona Public Records Law, which allows the public access to government documents. The Governor's Office did not provide the list until Sept. 15, a day after releasing it to other news organizations including AZ Family, which was first to report who used the tickets and that they may run afoul of state law.

The list shows that Hobbs' top staffers attended the game with those free tickets, including former chief of staff Allie Bones and former communications director Murphy Hebert. Other attendees were:

• Jennifer Loredo, director of policy, legislative and intergovernmental affairs

• Tracy Lopez, director of community and constituent engagement

• Jason Chavez, director of tribal affairs

• Janelle Pedregon, executive assistant

Hobbs and her husband attended the game in Cardinals owner Michael Bidwill's loft, her office said in February.

Christian Slater, Hobbs' spokesperson, disputed a concern that accepting the tickets may have violated state law, which says state officials and employees cannot accept entertainment expenditures from lobbyists or another "public body." Slater said the tickets were given to the state as part of the governor's role on the Super Bowl host committee, and did not come from a lobbyist.

It appears there won't be any immediate repercussions related to those tickets. A spokesperson for Secretary of State Adrian Fontes, whose office oversees lobbyists and campaign finance laws, said it had not received a complaint about the issue. Richie Taylor, a spokesperson for Mayes, said he "can't comment on the issue at this time."

Hobbs on Tuesday defended her staff's use of the tickets.

"Those tickets were part of our sponsorship package, just like other sponsors of the Super Bowl, which was put in place before I got here," Hobbs said. "We had discretion of how those tickets were used. They were used for teacher of the year, other folks in nonprofit organizations, and some were used for staff appreciation."

The governor repeatedly declined to say whether she saw an issue with spending public dollars on those perks.

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CEO event planning for 2023 game started by Ducey administration

By the time Hobbs took office, Arizona's agreement to host the Super Bowl was already locked in and the Arizona Commerce Authority's planning for the CEO events well underway.

The game fell on the same weekend as the Waste Management Open, bringing floods of tourists to the Phoenix area.

It also drew business leaders, who participate in the CEO Forum in exchange for attending educational events in the morning touting the state's economy, according to the auditor general. Yet the amount spent on Waste Management-related entertainment events from 2018 to 2023 and the Super Bowl in 2023 pales in comparison to how much was spent on those educational programs.

The authority spent $1.85 million on a sponsorship package so the authority would be advertised as a partner on the Super Bowl Host Committee's website and to market the authority's small business and entrepreneurship programs. That sponsorship included 140 tickets to the game.

It spent $288,000 on viewing suites at the Waste Management Open, $193,000 on lodging, resort fees and transportation, $38,000 on tickets or suites for the music festivals and concerts affiliated with both events, and $9,000 on food and alcohol, according to the auditor general's report.

A 2023 schedule attached to the auditor general's report says events also included organized hikes up the Echo Canyon trail at Camelback Mountain, yoga sessions and tickets to see Jason Aldean and Gwen Stefani.

Educational events, which accounted for five hours over the course of a weekend and included a workforce development panel and update on the state's economy, rang in at $65,000, according to the report.

The Arizona Commerce Authority, which was created in 2011, told the auditor general and The Republic that the benefit to the state from those events outweighed the cost.

Sandra Watson has led the authority under Govs. Ducey and Hobbs, and her leadership has been recognized nationally. This week, she was named co-chair of the federal government's Investment Advisory Council, which advises U.S. Secretary of Commerce Gina Raimondo on issues related to foreign investment in the United States.

'The CEO Forum has led to substantial economic benefits for Arizonans, resulting in thousands of projected new jobs and billions in new investment in communities statewide, far outweighing the costs associated with hosting these events," authority spokesperson Alyssa Tufts said in an email.

Since 2018, the period of the audit, 23 companies have proposed investments in Arizona that create just under 15,000 new jobs and over $3 billion in capital projects.

That's less than one-quarter of the 118 companies whose representatives have participated in CEO events, according to the audit, and at least two companies participated after already being awarded a grant or tax incentive.

Tufts said the authority has consulted with "both internal and external" legal counsel since the forums began to ensure they comply with state law, including the gift clause.

Audit questions incentive programs

The audit of the Arizona Commerce Authority was done as part of a sunset review, which is required by law and will assist state lawmakers in deciding whether to allow the authority to continue operating. Lawmakers extended the authority in 2018 for five years.

The audit was wide-ranging in scope and made several other recommendations to improve accountability connected with the state's tax incentive and grants programs.

The review found the authority lacked documentation that it verified businesses met certain job creation and investment goals before approving nearly $11 million in state incentives, "and is at increased risk of fraud and waste of public monies."

It also found the authority lacked some documentation required by law related to the administration of $100 million in the Arizona Broadband Development Grant program, "increasing risk for misuse" and inaccurate reporting. That program is federally funded and aims to expand the reach of high-speed internet access across the state.

As a whole, the authority agreed with the findings and outlined various ways to improve or better document its administrative processes. It said no instances of fraud or abuse were found.

Reach reporter Stacey Barchenger at stacey.barchenger@arizonarepublic.com or 480-416-5669.

This article originally appeared on Arizona Republic: Audit flags lavish spending by Arizona Commerce Authority to lure CEOs