Glendale holds firm on Coyotes concessions

by James Mirtle on Aug 29, 2009 12:00 PM CDT Comment 43 comments

Glendale leaders are holding fast to their commitment to keeping the Phoenix Coyotes in town without costing the city money, even as the most high-profile local bidder for the team pulled out this week, citing difficulty negotiating a deal.

The sticking point remains the NHL team's lease at Jobing.com Arena, which the city built and owns. City Council members say they won't budge on the lease if it means giving taxpayer money to the bankrupt hockey franchise.

"We have a contract and we want our contract fulfilled. That's the ultimate thing we're looking at," Councilwoman Yvonne Knaack said. "We're going to hold hard on those issues. . . . We're there to protect our investment."

— The Arizona Republic

Another councillor goes onto say the city doesn't have anything to give, asking "How in the world can we come up with millions?"

Good question.

The city's vice mayor adds that he won't support either a special taxing district or an escape clause, saying he wants to do what's best for the city without giving any money away.

In other words, there hasn't been all that much movement on reworking the lease agreement to this point, even with the situation seemingly dire, but it's certainly possible the city feels they aren't in danger of losing the team given the way the lease is structured. That said, you better believe the NHL has no intention of footing the bill for this team on a horrible lease for very long, and if Glendale council can't agree on some modifications that will help the Coyotes become somewhat attractive for a buyer, they're going to break it via bankruptcy and leave them with a white elephant.

Glendale doesn't have an easy decision to make, but at the moment, it doesn't look like they're making one at all.

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Concessions

Good for them. That part of the country has enough problems without cleaning up what is fast becoming Gary’s Waterloo.

by Gardy92 on Aug 29, 2009 12:19 PM CDT reply actions 0 recs

Keeping the Coyotes in Glendale would keep jobs and money coming into the town so you’d think they would be more invested in keeping the team. Unless the town’s leaders are not even considering a Balsillie win Sept. 10, I can’t see why they are backing away even from the special taxing district that Reinsdorf wanted.

by Masha on Aug 29, 2009 12:24 PM CDT reply actions 0 recs

You can’t get blood out of a turnip. If the retailers in the area lose business because of the higher taxes in a special district to stores that are outside of that region, then their bottom line suffers and they might have to cut hours and reduce staff. And if I remember correctly, if that doesn’t give enough money to the Coyotes to meet the parameters that Reinsdorf set, he can still relocate to another (more likely to be profitable) location and still leave Glendale with nothing.

In better economic times, this would be less of an issue – but at a time when all municipalities are not only dealing with reduced revenues from taxes and their own investments, as well as increased needs for food aid, homeless shelters, unemployment, etc. they don’t have the extra money sitting around to give to the Coyotes. If the option is subsidizing the hockey team or laying off fewer employees, they can’t justify spending money on a team that so many residents of the area seem to care little for. The city doesn’t have the money to do everything they would like to do if their finances were not so limited.

"Be kind, for everyone you meet is fighting a great battle." -- Philo of Alexandria
(Currently, and sadly, on a self-imposed team-specific puck sabbatical.)

by Baroque on Aug 29, 2009 12:35 PM CDT up reply actions 0 recs

But if the hockey team leaves altogether that is still the worst-case scenario for the city because they lose a massive investment. Without the Coyotes the arena is worthless and they waste millions of dollars with absolutely no return. If the Coyotes stay they have some hope of a possible return on their investment.

by Masha on Aug 29, 2009 12:56 PM CDT up reply actions 0 recs

But is it really the worst case? If they keep investing money every year and never quite recoup it, after a decade they will find that they have lost a few million each year which might not seem like much, but adds up. The city has to look at the situation and decide when they can expect an actual return on their investment, and commit to helping the team until that time. They can’t just keep spending money on the hopes that it will turn around, like a gambler who figures that the next hand will be his big win – and when he loses again, the next hand after that is for certain going to make him back everything he’s been losing.

I feel for the residents of Glendale, hockey fans or no – they really are in an impossible situation economically.

Regardless of what happens with the Coyotes, they have got to be thinking about what to do with the arena. Kept in good repair, it’s still a potential asset in the future – if they let parts of it fall into disrepair to save a few bucks, it will cost even more later on to get in good condition. I’m glad it isn’t my choice to make. The players at least, as distracting as the situation is, are likely to have jobs somewhere whether it’s in Arizona, in whatever city the team relocates to, or whatever team they play with if there is a dispersal draft or something. The people who work in the offices and concessions and security for the Coyotes don’t have as many options.

"Be kind, for everyone you meet is fighting a great battle." -- Philo of Alexandria
(Currently, and sadly, on a self-imposed team-specific puck sabbatical.)

by Baroque on Aug 29, 2009 1:08 PM CDT up reply actions 0 recs

“it doesn’t look like they’re making one at all.”

At least not one that they are prepared to share with the media.

As James knows very well, it is not often the case that people decide to share their business strategies with media members.

by Gerald on Aug 29, 2009 1:37 PM CDT reply actions 0 recs

Some have told us their business strategy. No taxing district, no escape clause and no giving money away.

Besides, this is about sharing a plan with taxpayers, not the media.

Blogging on hockey at fromtherink.com

by James Mirtle on Aug 29, 2009 1:56 PM CDT up reply actions 0 recs

Well, that must be true, since certainly no one would ever think of using the media to send negotiation messages that only those actually at the table would understand, nor would anyone say anything to the media which they do not fully intend.

by Gerald on Aug 29, 2009 10:14 PM CDT up reply actions 0 recs

Sometimes a cigar is just a cigar.

by J. Michael Neal on Aug 30, 2009 12:43 AM CDT up reply actions 2 recs

You’re a pistol today. Another Rec.

by Gerald on Aug 30, 2009 11:04 AM CDT up reply actions 0 recs

Strategies

They are representatives — they damn well better share their strategies with the citizens of Glendale.

Contributor to The Copper & Blue, and leader of The Cult Of Hartikainen.

by Derek Zona on Aug 29, 2009 5:13 PM CDT up reply actions 0 recs

Can I ask a stupid question?

What makes the Coyotes lease in Glendale so financially terrible, exactly?

by HockeyinHD on Aug 29, 2009 1:49 PM CDT reply actions 0 recs

That’s actually a fair question. I may have misspoke in calling it “horrible,” actually.

We get into that a little bit here. It’s probably far from the worst lease in the league, but it doesn’t do the team any favours.

Blogging on hockey at fromtherink.com

by James Mirtle on Aug 29, 2009 1:54 PM CDT up reply actions 0 recs

Not to pick on you, James, but I categorically disagree with this. It does do the team a huge favor: they have an arena to play in. It may not be as good a deal as some other hockey teams have, but the Coyotes got something for a lot less than it is worth.

by J. Michael Neal on Aug 29, 2009 4:39 PM CDT up reply actions 0 recs

Here's a link about the lease written as it was signed.

http://sports.espn.go.com/nhl/news/story?id=1693100

~~link found via post on HFBoards~~

Of course, this was done by ESPN, so there’s that. Still, it’s an interesting ‘before’ picture on what the perception of the Coyotes lease was.

It certainly reads like the city was expecting to make money back based on the development of the Westgate project… I just don’t know how much the Coyotes specifically were hurt by that project apparently not taking off.

by HockeyinHD on Aug 29, 2009 6:07 PM CDT up reply actions 0 recs

I apparently don’t know what strikethrough commands are. :)

by HockeyinHD on Aug 29, 2009 6:08 PM CDT up reply actions 0 recs

They’re very dumb is what they are. Thanks for the link.

Blogging on hockey at fromtherink.com

by James Mirtle on Aug 29, 2009 6:11 PM CDT up reply actions 0 recs

I thought the Islanders had the worst lease?

by 49er16 on Aug 31, 2009 12:13 PM CDT up reply actions 0 recs

Kansas City 2010!

It’s funny. The NHL initially argued that Moyes had no right to take the team into bankruptcy, and now they’re going to use bankruptcy to move the team.

Although they want nothing less than to move a team to southern Ontario, they’ve managed quite successfully to paint Balsillie as the problem, not southern Ontario. And now they’re using these hostile bankruptcy proceedings to move the Coyotes to Kansas much quicker than they could have originally hoped for originally.

These guys really know what they’re doing. No matter what side you’re on, you have to be impressed.

by FourFeetOfCurl on Aug 29, 2009 3:07 PM CDT reply actions 0 recs

impressed or disgusted. Some days it’s hard to decide.

by yrmom on Aug 29, 2009 7:09 PM CDT up reply actions 0 recs

So I’m stuck in an airport so I went back and read the interview with Resnick from earlier this month and this is what stuck out at me.

"To the point that, it is the Coyotes that still pay the $1-million penalty for Westgate falling short of its sales tax revenue targets. The Coyotes are stuck with that."

He goes on to say that Westgate falls short of the revenue targets every year, forcing the Coyotes to pay up each year.

"Boy, Glendale is in such a pickle with this team. They need a team there. They’re on the hook for more than half a billion dollars in bonds, that whole area, they need a team there, they need to keep generating tax revenue to support the bonds. It’s a house of cards. You build a house of cards and you keep it up with tax revenues, so they must have a team there."

So essentially the City of Glendale loses regardless of the outcome. As a sidenote, the total budget for FY2009 $925 million and the arena generated approximately $5,580,000 in revenue. They expect it to generate $6,714,000 for next year’s budget.

by Masha on Aug 29, 2009 3:18 PM CDT reply actions 0 recs

Yes, and their expenses are about $12 million a year. The city is losing about $6 million a year on this lease. I’ve argued before that there is a strong possibility that Glendale would be better off financially for the team to leave town, and pay a penalty for breaking the lease. My guess is that a settlement of around $100 million would equal the present value of the remaining payments on the construction bonds. They could buy a matching annuity, and get those things off their books. Then they can figure out what to do with the arena. There are probably worse options than just demolishing the thing and starting completely over.

by J. Michael Neal on Aug 29, 2009 4:44 PM CDT up reply actions 0 recs

And if the NHL leaves the lease in the hands of Moyes Company, while separating the team? The city would probably have to sue to enforce the lease against the NHL, and even if it won, the legal bills would eat up a good chunk of a settlement.

The city pretty much loses any which way this happens.

by Resolute on Aug 29, 2009 4:57 PM CDT up reply actions 0 recs

Well if Resnick is right that the city owes more than half a billion in bonds then that’s more than half their annual budget and far more than any settlement would award them. There’s no upside for the city regardless of what happens.

by Masha on Aug 29, 2009 5:16 PM CDT up reply actions 0 recs

It isn’t really accurate to say that they owe more than a half a billion in bonds. They owe about $150 million in bonds. The rest of that money is interest payments over the next 25 years on that $150 million. Using a discount rate of 8%, and an approximation on what the payment streams are, I figure that the present value of the obligations is more than $100 million, but not by much. That’s the figure that a settlement would have to equal to cover the payments.

I pretty much agree that there’s no upside for the city in all of this. Even if they can cover the debt, they’ve had big losses over the past five years. However, when it comes to minimizing the downside, it isn’t clear to me that the team leaving is the worst possible outcome for Glendale.

by J. Michael Neal on Aug 30, 2009 12:52 AM CDT up reply actions 0 recs

I pretty much agree that there’s no upside for the city in all of this. Even if they can cover the debt, they’ve had big losses over the past five years.

Yeah, what a nightmare for Glendale from every angle.

Enough to teach other municipalities not to build arena/stadiums for sports teams with long strings attached? Sadly, probably not.

Lighthouse Hockey: Side effects may include Weight gain and frequent game loss.

by Dominik on Aug 31, 2009 12:08 AM CDT up reply actions 0 recs

Blackmail

We’ve seen it time and time again – and Gary Bettman is a master at this – billionaire owners preying on the passion fans feel for their teams to get taxpayers to subsidize their sports teams. I have to admit, as a Canadian, I would love to see another team in this country. But if it means taxpayers in Ontario or any other province siphoning money off to Jim Balsillie or some other attention seeking high roller it ain’t worth it and I’m glad to hear Glendale currently standing up to Gary Bettman’s blackmail.

Quite frankly, the 23 million Reinsdorf was banking on squeezing from Glendale would be better spent on any number of infrastructure projects than subsidize billionaire owners and their millionaire players. Yes, the Coyotes create jobs, but mostly are either minimum wage or player contracts. More good jobs are creating paving streets or repairing public schools than they are investing in a sports team.

by Glenw9 on Aug 29, 2009 5:13 PM CDT reply actions 0 recs

But if it means taxpayers in Ontario or any other province siphoning money off to Jim Balsillie or some other attention seeking high roller it ain’t worth it

Oh, so you’re not in favor of the renovations to Copps that Balsillie has already promised will be paid for by Hamilton tax dollars? I thought that was already agreed to by the fine citizens therein. :P

Personally, I don’t live in Glendale – I live in Peoria – but hockey hardcore or not I wouldn’t agree with the kind of subsidies that Reinsdorf is looking for. The taxing district, the idea of getting El Mirage – a city of about 10 people, all over 80 years old – to pitch in with bonds… ridiculous. Those things would be tough to get even in a good economy but in a recession Reinsdorf/NHL have got to be insane to ask for that kind of public money for a sports team.

Cheaper for the city to buy the Coyotes fans a Center Ice package and let them watch hockey on the tube.

You are validating my inherent mistrust of strangers.

by zyllyx on Aug 29, 2009 5:58 PM CDT up reply actions 0 recs

nope – not in favour at all. Every level of government is looking at a deficit in Ontario. How do you justify giving Balsillie tax money (and make no mistake, Balsillie isn’t in this for altruistic reasons or his love of hockey, he’s trying to move a team into a hockey mad area at a cut rate price) on the one hand but cutting back on health care or education with the other?

by Glenw9 on Aug 29, 2009 6:29 PM CDT up reply actions 0 recs

…because it’s HOCKEY. At least, that’s what Hamilton’s mayor appears to be thinking.

And I can’t really talk, because here in the States if it was football they’d be doing the same thing.

You are validating my inherent mistrust of strangers.

by zyllyx on Aug 29, 2009 7:02 PM CDT up reply actions 0 recs

The argument on Copps is essentially that it’s a relatively older facility and it needs to be either upgraded or replaced at some point. Balsillie doesn’t own the arena, either, and I’m not sure you’ll find a lot of situations where a non-owner upgrades a publicly owned facility.

The Coliseum is certainly worth a lot more to Hamilton with an NHL tenant than without. I haven’t looked at the numbers to see how big of a benefit the team would be to the city, but it would certainly make an impact.

Enough to justify the province and feds kicking in the $100-million or whatever? I don’t know.

Blogging on hockey at fromtherink.com

by James Mirtle on Aug 29, 2009 7:33 PM CDT up reply actions 0 recs

The Feds would almost certainly stay out of it. They give one penny to Hamilton, and both Calgary and Edmonton, each with new arena plans in the works, would be right there expecting equal treatment. Everyone else down the road when they want to renovate their current buildings.

by Resolute on Aug 29, 2009 8:16 PM CDT up reply actions 0 recs

It’s not going to be city money, I know that much. Other governments have some sort of infrastructure revitalization cash or something that comes into play here.

Blogging on hockey at fromtherink.com

by James Mirtle on Aug 29, 2009 11:04 PM CDT up reply actions 0 recs

When the plans were released, I recall it being Dalton McGuinty who was most enthusiastic about the project.

by dzuunmod on Aug 30, 2009 12:22 PM CDT up reply actions 0 recs

Cities can apply to get federal money for ‘shovel-ready’ projects provided that they are completed by March of 2011 I think. That’s where I assume a large chunk of the money would originate under Balsillie’s plan to bilk Canadian taxpayers.

Pension Plan Puppets: A Toronto Maple Leafs blog and a group therapy session.

by PPP on Aug 31, 2009 7:53 AM CDT up reply actions 0 recs

They already own the giant decaying rink that is Copps; might not be a bad idea to get some use out of it.

I’ll have to check to see if I can find instances of pro sports team owners putting that much of their own money into publicly owned buildings.

Blogging on hockey at fromtherink.com

by James Mirtle on Aug 31, 2009 8:04 AM CDT up reply actions 0 recs

Wang and a “transformed” Nassau Coliseum is one instance, if it happens…

Lighthouse Hockey: Side effects may include Weight gain and frequent game loss.

by Dominik on Aug 31, 2009 12:53 PM CDT up reply actions 0 recs

Might be nice to see just how much use they already get out of it, how much marginal use they’ll get, and the theoretical payback period on a $150M investment.

Pension Plan Puppets: A Toronto Maple Leafs blog and a group therapy session.

by PPP on Aug 31, 2009 10:32 PM CDT up reply actions 0 recs

Bulldogs are the main tenant, and their attendance is pitiful. Hamilton does draw some concerts and things away from Toronto, but not really that many.

The upgrade’s likely coming in the near future, anyway. What the city should try and do is negotiate more cash from Balsillie in terms of the lease and concessions.

Blogging on hockey at fromtherink.com

by James Mirtle on Sep 1, 2009 12:33 AM CDT up reply actions 0 recs

I don’t know if you are right on the upgrade issue for other arenas, James. IIRC, does not the PHO lease itself require upgrades to be paid for by the team? It has been a while since i read it.

by Gerald on Aug 29, 2009 10:20 PM CDT up reply actions 0 recs

I am not an attorney all I am is a hockey fan! Gary Bettman is making a joke out of the entire NHL and I feel that he should be removed as commissioner! Please help accomplish this by signing my petition to have him dissmissed
http://www.petitiononline.com/82009/petition.html
Thanx
Ken

by Fishingman000 on Aug 30, 2009 6:05 AM CDT reply actions 0 recs

Your post reminded me of this

Ladies and gentlemen, I’m just a caveman. I fell on some ice and later got thawed out by some of your scientists. Your world frightens and confuses me! Sometimes the goal horns of your ice arenas make me want to get out of the building.. and run off into the hills, or wherever.. Sometimes when I see a message on the Jumbotron, I wonder: “Did little demons get inside and type it?” I don’t know! My primitive mind can’t grasp these concepts. But there is one thing I do know – when a man like Gary Bettman bungles the Coyotes situation, then he deserves to be removed from office. Thank you.

The 2009-10 Colorado Avalanche: Aiming for the Charity Point
Jibblescribbits: C'mon over and waste some time

by Jibblescribbits on Aug 31, 2009 9:10 AM CDT up reply actions 1 recs