Coyotes buyers count everything but kitchen sink, still can’t come up with $15m a year in value to Glendale

The city of Glendale has at last released figures of how it would pay for its $15 million annual subsidy to the Phoenix Coyotes (see PDF here) … sort of. What’s it’s actually issued is a summary of “proposed draft points and projections” from the group that wants to buy the Coyotes (and get the subsidy), and then a list of city “concerns” that adds up to — well, let’s add it up:

Glendale would, as previously discussed, hand over $15 million a year for the next 15 years to the new Coyotes owners, Renaissance Entertainment Group, to “manage and operate” the arena. In exchange, the city would get:

  • $500,000 a year in rent
  • $1.5 million a year in surcharges on hockey tickets
  • $1.7 million a year in surcharges on other tickets
  • $2.2 million a year in parking revenue
  • $670,000 a year in arena naming rights
  • $150,000 a year in naming rights for a new smaller theater
  • Some undetermined amount of sales taxes from “admissions, concessions, etc.”

This list raises almost as many questions as it answers. First off, if the Coyotes keep selling 500,000 tickets a year as they have been, this would mean a $3 per ticket surcharge, which makes you wonder why the Coyotes couldn’t just raise ticket prices by $3 a pop instead of laundering it through the city. (There could be some revenue sharing implications, I suppose but I’m not familiar enough with the intracacies of NHL revenue sharing rules to say.) The surcharge on non-hockey tickets is a weird thing for the Coyotes to “give” to the city, since the city could go ahead and levy this fee (reportedly $5 a head) on concert tickets whether the Coyotes were there or not.

Most of all, though, the above only adds up to $6.7 million a year, which would put Glendale in an $8.3 million annual hole. Counting sales taxes generated at the arena would help fill in that hole, but it’s also a pretty bogus way of doing so, given that 1) only a little over half the attendance at the arena is for Coyotes games and 2) some chunk of that money would be spend in Glendale anyway, since it’s not like those people and their spending money would disappear from Arizona if the Coyotes left.

In short, Renaissance’s proposal is better than “give us $15 million a year for 15 years, and we’ll give you a hockey team that your citizens can continue to be disinterested in,” as it looked a couple of weeks ago. It’s more like “give us $15 million a year for 15 years, and we’ll give you back a few million a year, depending on how ticket sales go, and here’s a bunch of other stuff that we wouldn’t really be giving you, but if you don’t look too hard you can pretend it’s new money, and while you’re at it you can pretend it all adds up to $15 million. Oh, and we get to cancel the lease in five years if we don’t like it (or if we run up $50 million in losses), but you’re stuck with it for 15 years regardless.”

That’s not exactly an offer the Glendale council can’t refuse, which is no doubt why so far they haven’t agreed to it. It looks like two pro-subsidy councilmembers are going to force a vote next Tuesday, though, so we should know by then who’s going to win this game of chicken.

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16 comments on “Coyotes buyers count everything but kitchen sink, still can’t come up with $15m a year in value to Glendale

  1. From what I’ve read here, RSE needs that $15M to secure their financing to buy the team:

    I’m not sure if it’s just that initial $15M that will get the financing, or guaranteeing $15M on an annual basis, but if it’s the former COG should spring for the $15M for year one, and $6.5M every year after.

  2. There’s only one good reason why the team would rather “give” the team a $3 ticket tax than raise ticket prices: they know they might be hard pressed to get this cash anyways so why not give the city the first right to the money and if it comes up short, well TFB.

    I find it interesting that in exchange for $15M the team will give back $500K… Why not forgo this and just ask for $14.5M?

  3. Hey! I thought you were supposed to be on vacation… more and more it looks like a working vacation. It’s bad for ya, Neil, it’s bad for ya….

    I suggest the surcharge/raise prices impact on revenue sharing would be zero. This is not because I have a deep and abiding understanding of the NHL’s revenue sharing system, but because the commissioner has already said that “any buyer” (*not named Jim Balsillie) will be guaranteed a full revenue share regardless of whether the Coyotes ever qualify for same.

    In general, teams must sell a certain percentage of their suites and a fixed percentage of their seats (not sure if club seats are included but I doubt it) to qualify for a “full” share. They also must not be in a major market (check…) as those teams are pretty much excluded (even the Islanders, in Hempstead, weren’t able to qualify…)

    In Glendale’s case, the future of the franchise is so bright that the team doesn’t have to do anything to qualify for a full share (perhaps as much as $18m p/a) other than play 41 games (and try to limit the hard liquor giveaways, I guess…)

    All together now…. “always look on the bright side of life, de do, de do, de do, de do…. always look-“

  4. Andrew raises a good point, Neil:

    Are the surcharges and amounts listed guaranteed to the city? Or are they “projections” of earnings the club might make and be able to pass on?

    If the latter, this agreement is no better for the taxpayers than the one Moyes operated under – arguably considerably worse.

  5. Oh, they’re projections, not guarantees – so there’s absolutely a huge amount of risk on top of this. But even if the projections come through, it still looks like a pretty horrific deal for Glendale.

  6. Hrm, at least they do a good job of providing some public documents on their city website. I would still love to see some of the “exhibits” cited in the proposed lease, like the Permitted Encumbrances and the Arena Annual Budget .

    It sounds like there might have been some scuffle (discussed on azcentral by Brahm Resnik) about RSE providing an absolute guarantee against city losses of some sort… which may have been compromised on by a $1.50 ticket surcharge that goes into escrow (although, based on the amounts from other ticket surcharges and basic algebra, this is only a $1M/yr escrow account).

  7. It’s true, Chef Joe. It’s not nearly enough.

    I read an email written by Richard Bowers regarding the risks involved.

    Apparently, he and the city attorney tried to get RSE to accept the risk associated with their own projections for revenues Glendale “could” earn. They refused. Nothing says confidence like refusing to endorse your own revenue projections…

  8. Is it just me, or is this impossible to follow after all these years? One thing I can’t recall is what happened to the CoG accepting open bids on running the arena. There was concern that if it were awarded to a non-NHL party, then the Coyotes were toast. Did that arena operation contract ever go out for bid?

    Is it possible that the CoG has their own Plan-B up their sleeve? Could they generate any non-NHL interest? Certainly, it must be possible to find a partnership that will not guarantee millions of dollars in losses every year. New home of Cirque du Soleil? Permanent Monsters of Rock? Laser tag? Aquarium?

    It seems like they have been toughening up on their stance in this latest round. Maybe they have an idea that hockey won’t work. If they’re demanding more cash in exchange for this proven, high-risk venture, good for them.

  9. John Bladen,

    I believe the latest NHL CBA redefined some of the provisions for qualifying for revenue sharing and “not being in a major market” was one of those old provisions that went the way of the dinosaur.

    So teams like the NY Islanders now can qualify, playing in Long Island or Brooklyn.

    The rest of your provisions . . . I can’t comment one way or the other on the rest of the provisions. I tried to shun any CBA news, good or bad, by the end of the latest fiasco.

  10. Anyone taking odds on this ? I think Glendale’s going to find a way to delay taking a vote on this… maybe all the supporters not pressing for the vote decide to disappear or remain silent.

  11. @ChefJoe

    I think Glendale will cave. When you add it all up having the Coyotes stay is the lesser of two evils, albeit not by much.

  12. For a nice recap of some of the changes from the new CBA…

  13. Hrm, even grumpy Alvarez was saying this is going to pass. I guess listening to an hour of public comments is even more pointless.

  14. Just found a live feed of the Glendale meeting. If anyone else is interested, here you go

  15. Passed 4-3, which was coming from a mile a way. An older guy threatened “referendums” afterwards – I assume he means he’ll try to recall the four, but who knows. Also mentioned the Goldwater Institute or someone else challenging this legally, so maybe we’re not done yet.

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