Glendale still plans to give Coyotes owner buckets of money, will just make him wait a bit

The promised revisions that the city of Glendale was demanding to the Phoenix Coyotes‘ new lease have been partly revealed, and … prospective team owner Greg Jamison will get less city subsidies in the first five years of the lease, and in exchange get higher payments in the last 15 years. Yeah, that’s it. If you had your money on “Glendale tells Jamison he can have $224 million in subsidies when Arizona freezes over,” you lose.

At least, probably you lose, as the official re-revised deal isn’t public yet. And Glendale councillor Phil Lieberman, when asked what he expects to be in the new lease, told the Globe and Mail: “I have no idea. The city is so screwed up nobody knows what’s going on.”

Jamison’s purchase of the Coyotes, meanwhile, is still being held up, not because of the lease talks, but because, according to the Globe and Mail, it depends on “Jamison and his partners raising additional money, somewhere between $20-million and $40-million, to cover the annual losses of the Coyotes.”

If you’re wondering how on earth everyone got themselves into a situation where an NHL team playing in an arena it got for free is depending eight-figure annual public subsidies and still projected to lose money, the Arizona Republic’s Lisa Halverstadt has the whole, sad story. Highlight:

The sports debt, coupled with a voter initiative on the November ballot to repeal a city sales-tax hike, has some worried the city could be pushed to the brink of bankruptcy. But city administrators and experts say that is less likely than painful budget cuts. Among those unveiled this week: shuttering libraries, laying off nearly a quarter of city staff and even eliminating a decades-old holiday festival that draws thousands from across the Valley.

Political upheaval has accompanied the budget strife. The mayor and two City Council members, who for years touted the sports and entertainment vision, are not seeking re-election. The city manager who was the architect of that plan retired in June.

“We were once called visionaries,” said Glendale Councilman Manny Martinez. “Now we’re being called other things which I won’t name.”


14 comments on “Glendale still plans to give Coyotes owner buckets of money, will just make him wait a bit

  1. Poor politicians now have to go on with life trying to figure out ways to spend their fat pensions. In the mean time property owners taxes keep going up and services keep getting cut.

  2. It’s been beaten into us time and again that Glendale will lose money if the Coyotes leave – how is keeping them worth $25M?

    Wouldn’t the city still be able to generate revenue off concerts and maybe some NCAA March Madness games and maybe an AHL hockey franchise?

    I’d like to know if there’s any logic in what the city will lose if the Coyotes leave. I just don’t see it.

  3. There’s a long list of places hoping to host March Madness stuff. Putting that in your accounting is a lot of wishful thinking. $25M a year is pretty steep for a hockey team. Maybe if we put a monetary value of $5 per person per year in “civic pride” and “first class city-ness” and all 7 million people in AZ have that… then the city is “up” $10M each year.

  4. See, I figured those March Madness games are probably not as lucrative as some would like to make it out (sorta like the Super Bowl as Neil’s pointed out here) but I just mentioned as an example of getting something in there.

    My question stands – couldn’t the city run the arena sans a major league tenant and whatever they could make on the actual building with concerts plus whatever else can float a boat. After all the pluses and minuses are added maybe this approach costs the city, let’s say, a loss of $10M a year doing this but isn’t it better than just handing over $25M to someone else to run the arena?

    Maybe I’m missing something. Hence my question.

  5. Andrew:

    You aren’t missing anything. I got into an argument with a pro Coyotes’ subsidy idiot (who interestingly, lives in Scottsdale and doesn’t pay the local levies that are purported to support the franchise) about this very thing.

    The Coyotes – in their best years – have generated something like $16m in total gate revenue (less than half what a borderline NHL franchise needs and about one fifth of what a top 10 market can generate). But let’s forget about historic attendance (and total revenue from that attendance, which is a bigger problem than the number of people willing to drive to the arena…)

    Let’s assume instead that fans in Glendale will suddenly fall in love with the club and that 17,000 people will come to the arena for every game under the astute leadership of Mr. Bettman’s close friend Mr. Jamison. Let us further assume that the city imposes a 10% sales tax on all revenues in and around Westgate during the hockey season. And let’s say that every hockey fan attending a game not only buys a ticket, merchandise and food at the arena, but also spends $100 at Westgate every game night.

    All three of those assumptions are ludicrous and could never actually happen in the real world. Yet if they did, it would raise just $8.5m in additional revenue for the city. Under a more realistic taxation and attendance projection, the total amount raised would be more like $4m maximum, even if we assume that 17,000 “other” people will be shopping at Westgate every game day during the hockey season.

    The reality is that aggressive surtaxes on retail developments tend to drive business away from those developments rather than raise additional revenue for the host city, as consumers can drive to other malls that don’t have to charge that “destination” tax and get the same merchandise for substantially less. (If the proposed taxes were for general revenue or paying for a school lunch program or, gasp, healthcare, rather than to subsidize the deadbeat hockey club, conservatives across the state would be howling about oppressive and regressive tax regimes).

    Add in the fact that Glendale isn’t that much of a destination to begin with (unlike Scottsdale, Mesa or Phoenix itself) and it seems more likely to me that any CRL district around that arena would reduce rather than create net revenue.

    Similarly any suggestion that a $20 parking levy could raise additional revenue to subsidize a perpetual money losing business are equally ludicrous. No-one is coming to watch at $12/ticket and free (or close to free) parking. Does anyone really believe that charging more for parking won’t discourage those who only grudgingly pay $10-15 for a game ticket?

    Arena ops in many NHL markets hover between $10-13m annually. It should be cheaper in Glendale because they don’t pay to heat the building (much), nor for snow removal as arenas in northern climates must, though A/C and ice plant costs will be higher for 2-3 months of the year in the desert. If the building were empty, those costs drop considerably (a good deal of it is cleaning staff & security on game days, along with costs related to having the ice itself – all things that are reduced if the arena isn’t used as much or for hockey). I’ve been told by a couple of guys involved in arena operations that an “empty” 15-20,000 seat building could be maintained for around $100-150k per month, including security and basic heat/light etc.

    In short, Glendale would save money if it could replace any of the Coyotes home dates every year with nothing at all. If they replaced even 20 of them with alternate events, they almost certainly come out ahead (by far).

    Had they done any sort of competitive bid process with arena operators (rather than reinsdorf/hulsizer/reinsdorf/IEH/jamison as sole source operators), they would likely be earning money by leasing the building to a promoter/operator. They wouldn’t earn enough to cover the bond payments, but then, they’ve earned a maximum (including ticket surcharges and their share of parking) of $4.5m in ANY year from Coyotes ops (I believe the avg since 2003 is still around $2m p/a), which isn’t enough to cover the bond payments anyway.

    Council can talk about spin off revenues and business development all they want. It’s nothing but window dressing. Any subsidy greater than $4m per season to the Coyotes is nothing but throwing good money after bad. Not only doesn’t it pay for the bond debt, it doesn’t even support the revenues coming in at cost.

  6. “If the proposed taxes were for general revenue or paying for a school lunch program or, gasp, healthcare, rather than to subsidize the deadbeat hockey club, conservatives across the state would be howling about oppressive and regressive tax regimes”

    To be fair, the only group aggressively attacking this in the courts is a conservative group (Goldwater).

  7. The fine print to any of these hockey scenarios reads, “League not included.”

    AZ needs to get out of the hockey business, use that annual $25M to turn that stadium into an aquarium and open it 360 days a year. Get on with it.

  8. To all saying this is all just scare tactics…..it is only kinda true. Yes they are trying to scare residents, but the service reductions coming if this does not get voted down are real. Erik Strunk told all of the library staff that if the vote doesn’t go the city’s way, all 55 library staff people will be let go. The two library branches will be closed, and the main library will be outsourced to and outside company. The new staff will be part time paraprofessionals, and hours and services will be less. City Of Glendale documents back this up. The librarians
    believe it enough that people I know, and love, are looking for other jobs to start before 2013. There is also NO GUARANTEE that if the library system helps the city keep this tax, that the layoffs won’t happen anyway. That is how dire this situation is for the city library system. But we have to give it a chance.

    The library system is not losing patrons, or is an antiquated dinosaur either, as some critics suggest. . Last year the Glendale Public Library System served 180,000 patrons, and checked out 2.1 million items. On busy days the library system serves, educates, and answers questions of over 3, 0000 residents. The numbers in library patronage have gone UP since 2008, even as the library system has shed 17FTE’s and 40% of it’s budget. Elaine Scruggs thinks so little of the library system and its employees that she was overheard at a council meeting saying, “The library is a black hole in the budget.” However, to save the library system, we need to put politics aside.

    If you do not support the library system with this tax. It WILL go away. This does not mean that the tax was voted on fairly. It also does not mean that you support the city’s positions that made this tax necessary. I do not. It does mean that the library system will have a chance to dig it’s heels in against this rising tide, keep staff employed, and maybe become the once great library it was for Glendale families, ans residents in the year to come. If not, the library as we know, and love it, will cease to exist. This is the choice we face. the future.

  9. “Give us money for the hockey team or we’ll kill the library.” Didn’t National Lampoon have a cover like this a few decades ago?

  10. @ John Bladen

    Always look forward to your analysis. Can’t say I’m not a tinge disappointed that someone could actually make a pro-argument for Glendale to float the Coyotes, but beggars can’t be choosers.

    Well thought out; well written. Thank you.

    @ AK Benjamin

    I was saddened reading your post, mostly because seeing some sort of tax remedy to keep things like public libraries open and public is something I would support. It’s too bad that these public services need to make a deal with the devil to stay open. It’s really unfortunate that a No vote in November will only spell the end of the Coyotes.

    Let me where to comment on keeping public services like libraries open and I’ll get behind you.

  11. Thanks, Andrew. Anything new w Katz/Edm?

    AKB:

    Maybe they’ll take the extra tax revenue, give it to the next (and the next, and the next) coyotes owner – because no subsidy will be enough to ‘assure’ the club’s future, now or in future – and close the libraries anyway?

    I sympathize with the position Glendale’s many long suffering public employees have been put in, but if there’s one thing we’ve learned from the inaccuracies, misstatements and downright lies that the present city gov’t has put forth over their terms, it’s that nothing they say can be taken as truth and no promise they make can be trusted.

    Dave Boz/Nat Lampoon summarize the city’s position well:
    “Give us this tax increase or we shoot this dog”. It’s blackmail, and you can’t trust blackmailers, even if you pay the ransom.

  12. Outside of the Katz group meeting with council (I believe behind closed doors) and the fact that many of the pro-arena supporters have started to ask questions and shift away from blind loyalty to the home town kid who owns the team there’s nothing new with Katz that hasn’t been brought up here.

  13. The Arizona Cardinals’ stadium is in Glendale. The Cardinals could have gone to Scottsdale or any other place in Arizona. Heck the Arizona Cardinals could have gone to Tucson but chose Glendale. Jobing.com Arena is not going to get that much concerts/events/shows with the US Airways Center in Phoenix.