Glendale councilmember flips, city approves $15m a year to keep Coyotes through 2018

I’m still on the road (had a great time at tonight’s Oakland A’s game — no sewage malfunctions at all!), but wanted to stop by to report on tonight’s vote by the Glendale city council, which approved the plan to give $15 million a year in subsidies for the next 15 years to the Phoenix Coyotes in exchange for the team staying put for five years and paying way less than that in rent, ticket surcharges, and other stuff.

With the council split 3-3 and Mayor Jerry Weiers skeptical about the plan, somebody was going to have to flip to get the subsidy package passed, and somebody did:

Councilman Manny Martinez said he supported the deal after the potential team buyer offered more financial guarantees to the city, including a partnership with a successful events-management firm and repayment under certain circumstances if team revenue projections don’t pan out.

“These two things put an entirely different picture before us tonight,” Martinez said.

[UPDATE: The above from USA Today notwithstanding, it was actually councilmember Sammy Chavira who flipped from the no to the yes column, complete with a poorly timed metaphor about firemen rushing into a burning building.]

I wasn’t able to watch the hearing itself (was at the A’s game, remember?), but that “repayment under certain circumstances,” as near as I can understand it, is a promise that if the new Coyotes owners exercise an out clause in their lease and leave after five years of losses, the team would pay the city for any losses it incurred beyond $6 million. That’s something, I suppose — though given that this was promised in exchange for Glendale dropping its demand for its own five-year out clause (the team get break the lease in 2018 if it wants, but the city is stuck in it through 2028), and given that I’m not clear on how “losses” will be calculated for the purpose of this clause, it’s a pretty meager concession.

The Glendale council also considered bids by several other arena operators, some of which offered to run the Jobing.com Arena for just $6 million a year in subsidies, but according to USA Today, those were rejected because they “couldn’t guarantee NHL hockey.” So in essence, the four members of the Glendale council who voted for this deal decided that it’s worth paying $9 million a year for the next 15 years just to have 40 home hockey games a season. That’s about $18 per game per fan who actually shows up to Coyotes games, or nearly half what the fans themselves are paying — and they, unlike Glendale taxpayers overall, are at least actually getting hockey tickets for their money.

The deal — which also includes the team changing its name to the Arizona Coyotes, which helps Glendale because, um, tourists might hear the name and decide to come to the state and accidentally stumble upon Glendale? — will only be finalized if the sale of the team goes through by August 5th, which is reportedly not a stumbling block, but then, this is the Coyotes we’re talking about, so probably best to believe it when we see it. Assuming that happens, though, Coyotes fans can look forward to at least five more seasons of their team being in town, even if they have to buy all new gear now that says “Arizona” on it. And Glendale residents can look forward to at least five more years, if not 15, of sending checks to the local hockey team — plus, one assumes, all sorts of exciting debates about what public buildings to sell off next.


36 comments on “Glendale councilmember flips, city approves $15m a year to keep Coyotes through 2018

  1. What the NHL has done here is a travesty. Everyone who has ever been a part of this fiasco from ’96 to now should be utterly embarrassed.

    I can guarantee I’ll be taking my hockey sabbatical in light of this and the recent lockout (which will solve nothing for the Owners) and who knows if I’m coming back. I hope others are like me but only time will tell.

  2. What, the O.co Coliseum isn’t blanketed in WiFi ? A non-poop reason to tear it down and start again.

    Arizona Coyotes is probably a nod to Glendale being tapped out and the next place they relocate to could be anywhere, but would some other town in AZ step up ? Tuscon ? Mesa ?

  3. Great news for the NHL. Great news for Coyotes fans. Great news for the NFL/Cardinals/Fiesta Bowl. Great news for Westgate businesses.

    I have to say I’m impressed. I believe that true leadership is making the sane decision when everyone around you has gone crazy. That’s what the Glendale pols did. Now the only worry is whether all of this dithering has poisoned the Coyotes’ chances of becoming an unlikely success story like the Sharks, Lightning or Memphis Grizzlies.

  4. Lightning are welfare recipients who spend like Rockefellers. Quite a success story.

  5. Nice heat spell in California, eh? It’s been nasty.

    While you’re in Northern California, drop by Downtown Sac and see what you think of that arena location. I think that freeway access will be a nightmare situation, but you may reach a different conclusion.

  6. Purchasing Manny Martinez did the trick. Kudos to you Phoenix Coyotes, you are NFL-worthy in my eyes!

  7. Wow. A local government caves in to multimillionaires to make them wealthier still. How very shocking. /sarcasm

  8. Did Piggy Wilf just announce that Mac Worthy is going to bring an NFL team to Sacramento ?

  9. “Great news for Coyotes fans…Great news for Westgate businesses. ”

    The other 99% of the people of Glendale and all the other businesses in town…not so much. But, hey, they don’t count, right?

  10. Who knew that Don Maloney was such a comedian?

    “Fortunately, we got the result we needed to stay in a great place and a great hockey town.”

    I’m kind of thinking that Ben Miller must be pseudonym for Don Maloney.

  11. Keith,

    Excellent point. Thriving businesses are terrible for the citizenry at large.

  12. Andrew,

    I don’t know enough about the Tampa Bay area to comment on the Lightning’s impact. I do know that people I’ve met from Tampa (which admittedly is about 2) have told me that Lightning games do boost bar & restaurant business a decent amount.

  13. Ben: So you’ve met two people from Tampa who have a weak grasp of economics?

    Noted.

  14. Ben,

    So as a former hockey fan in a city where people actually pay generous amounts of money for hockey tickets it’s been mine and others responsibility to see some of that money syphoned off and handed to TB so their local economy can thrive?

  15. Before I started reading this site, I used to think every team that contemplated a move, moved. Not so. I can’t believe this. It surprises me more than Sacramento. I mean, everything was there. The team hemorrhaging money, they can’t find a new owner, potential owners want subsidies (rightfully so), nobody goes to the games, and they play out in the ‘burbs. How would Phoenix become anything other than what it is in anyone’s mind, if this team left town? I forget they exist. I recommend a full name change. Instead of Arizona Coyotes, why not Arizona Jaguars?

  16. ” I believe that true leadership is making the sane decision when everyone around you has gone crazy.”

    Apparently by your standards, 4/7ths of the Glendale city council has gone crazy. This is a horrible deal for the city. A city that was already contemplating the closure of a a firehouse leading to unknown response times. Awesome. Not to mention RSE (the professional salesmen) had to take out a 9% loan just to buy the team, doesn’t seem like the best group to get into bed with. RSE will be broke within 5 years (and will flip the team/relocate) and Glendale will be left holding an empty moneybag.

  17. “Thriving businesses are terrible for the citizenry at large.”

    “Requires government subsidization” is an interesting definition of “thriving”.

    Governments helping to pick winners in the competition for discretionary income = bad idea.

  18. As has been noted many times, the Coyotes have a value of zero or less than zero in their current location. The only value they represent to an owner is the amount of subsidy they are able to extract from local taxpayers, and the hoped-for payoff in 5 years when the team is sold. The taxpayers of Glendale will pay for the team while they remain, but will get none of the gain when the team is inevitably sold and/or relocated.

    Ben Miller and others like him can talk all they want about the value of sports to a city. Glendale is the most sports-besotted small city on earth, and they are broke. The only difference between a large and small city is that it’s much easier to hide the economic damage done by subsidized sports in a larger city. In Glendale, you get to see it in all its glory. Fortunately for its citizens, this saga will end in 5 years. The chance of the Coyotes staying for the full 15 years of subsidies is so small as to be undetectable.

  19. It could end sooner than that, Dave. The $50m in total losses escape is still in place, so by the club’s recent standards, it should take 2-3 years to reach that number.

    By pure coincidence I’m sure, that’s about the time new arenas will either be done or nearly done in Seattle, Quebec City and Las Vegas. Maybe even Markham, Ont… though I’m much more skeptical that one will ever get off the ground…

    So Glendale are lead by fools, yes. But at least they’ll only be on the hook until RSE triggers it’s escape clause. The ultimate nightmare is that other destinations aren’t ready and Glendale is stuck with this turd of a business for the full 15.

  20. Neil, wasn’t Manny Martinez the councilmember who said “We are close to a decision, but not the right one” a couple of weeks ago?

    Sure sounded like he was willing to close schools, fire stations, libraries and lay off policemen in order to fund a few more years of Coyote losses for their “star capitalist” owners.

  21. That’s exactly what I was thinking, John; they are going to wait 5 years to see what new arenas get built, and if any in a market the team would like to move into (Seattle, Quebec City, San Fran) get built, they will bolt out of the lease and leave. Hell, I think that even if nothing opens up, they might void the lease to force the city to agree to another bad one that also has a 5 year opt out so worst case they can wait until 2023 and try again.

  22. With Westgate STILL in foreclosure, I don’t see the Coyotes will be of any help to the mall. If your business is dependent on 41 games a year how are you surviving the other 324 days?? I really don’t see how the arena can prop up the shopping center and vice versa.

    Really interested to see how the team fills their roster this year. Do the new owners keep the team salary near the basement or do the spend closer to the cap? Oh man, I’d hate to be the big free agent signing that could be blamed when RSE is unable to meet their projected revenues.

    The Mayor also brought up an interesting point: the current budget for fiscal 2013 is $900M, projected budget for next year is $500M (!), and that is not encouraging at all. Sorry I can’t give you a citation.

    One way out of this mess for Glendale is to file for bankruptcy, the same thing (former Coyotes owner) Jerry Moyes did in 2009 to break his ironclad lease with the city. With the way things are going I’m surprised Glendale hasn’t already followed in Stockton CA’s footsteps.

    And lastly (sorry for being long-winded), I don’t buy the new partnership with Comcast (they’ll supposedly bring more events to the arena) as being beneficial to the deal at all. If there was any gain for any business to co-host events at Jobing.com arena IT WOULD HAVE HAPPENED BY NOW. You think AEG or some other arena events firm would pass up the chance to make a percentage of profit from an arena that is idle some 275 days a year?

    Winnipeg had no NHL team and their arena was (and still is) among the busiest in North America. There’s something wrong when Glendale is the newer, nicer, and bigger arena and it’s struggling to draw events. Has to be a lousy location. They’ve had no luck in 10 years, I’m not at all optimistic going forward.

  23. The NHL came out of a bad mess very well. They successfully got the Atlanta Thrashers moved to Winnipeg, the Islanders trading the Nassau Coliseum for Brooklyn, a nice TV Contract, a successful season ( even surviving the lockout), a deal to get the Red Wings a new Arena, and now the Coyotes drama is now over. I suspect the next move will be an Expansion to Quebec City and Seattle ( possibly in conjunction with an NBA Team), and you still have other possible arenas like Las Vegas and Markham, Ontario for relocation options for Franchises like the Florida Panthers.

  24. Dave:

    The “mall traffic” argument put forth by the recipients of the subsidy is spurious at best.

    Even if all 500k ticket holders visiting the arena each year (and yes, a bunch of those are going to be individuals counted multiple times… and a bunch will be residents who would have visited Westgate anyway) also spent $200 at Westgate each and every game, it would still raise less than half of the arena subsidy (assuming a CRL/BRZ/TIF rate of 7%, which is pretty high as these things go).

    Anyone else find it amusing that a team that has averaged in the neighbourhood of 12,000 paid attendance projects they can earn revenue from 12,000 parked cars each game?

    Happy 4th of July everyone.

  25. Ryan: This kind of tragicomic subsidy is the gift that keeps on taking. From the moment they put shovels in the ground for the arena the taxpayers have been paying for this team. As noted elsewhere, the city have averaged around $2.5m annually in combined payments from the team – less than half the funds needed just to cover the construction debt.

    The rest has been made up from the general fund since day one, as I understand it. And with each turn in the road, the city is paying the NHL (or the club owners) ever more to keep the team there. In rough figures, up until 2008, the city had paid about $30-35m to cover unfunded obligations related to the arena. Since then they’ve paid the NHL $45m (with another $5m past due) to keep the club there for 2010/11, and will now (assuming the purchase is completed and the lease put into force) pay them $15m a year directly.

    I would expect the city’s ‘return’ to remain at or near it’s historic average (ticket and parking surcharges have always been part of the “rent” the team is supposed to pay… this is not new revenue), possibly lower now that the parking surcharge is larger. People will carpool. Or just not bother to drive 45 minutes each way to watch a hockey game. Subsidies can bridge a business through a tough time. They can never fix a basic economic problem like no-one being interested in your product.

    It’s a good thing nobody mentioned local tv revenues… when some rating periods have shown fewer people watching the Coyotes on TV (7-10,000) than were actually at the game.

  26. Martinez has ALWAYS been inclined toward an arena deal. I took his comments as nothing more than political grandstanding. In fact in the previous session he was a little annoyed the city wanted their own out clause. Now he has always been cautious that RSE could manage the arena themselves and wanted an idea who they would bring in to manage the arena (especially in the off season). He was always considered a yes vote.

    The wildcard was Sam Chavira. Unfortunately the Canadian press has decided to suggest he somehow did something untoward or maybe took money. But the reality is Westgate is in his district and he has been inundated with pleas from local business owners to accept the deal.

    The dirty little secret that nobody bothers to discuss is that the COG was still on the hook for the arena whether the Coyotes played there or not. In addition there are a total of only two major upcoming events at Jobbing.com for the remainder of the year (New Kids on the Block in July and another concert in December), that’s it. Westgate has been bleeding due to the economy and the uncertainty surrounding the team. Frankly Westgate and was in a position to completely fold without retaining the team, and a number of business were planning to break their lease agreements and pull out stakes had the deal fallen through..

    What the city really needs is to negotiate a deal to extend the Phoenix Metro Light Rail out to Westgate. It’s been discussed to death but no deal has ever been finalized. That would be an enormous win for the Coyotes and for Westgate as it would allow East Valley residents an opportunity to completely avoid the long commute to west Glendale.

  27. Thanks for the correction, Gallandro — I was confused by bad USA Today reporting and reading my own archives too quickly.

  28. John, my quick read of the arena lease says that the Coyotes will have access to 5,500 parking spaces. Are there other spaces they already collect from not mentioned ?
    $10 min, 5500 spaces, 41 hockey games = $2,255,000 (minus the base $20k/game to the team = $1,435,000 maximum to the city from reg season Hockey parking unless they actually raise the rates)

  29. Joe: In one of the earlier attempted deals (it may have been Hulsizers) there was a suggestion that the club could take in $20 per car from something like 7500 spaces, but that’s the only other figure I’ve seen. Darryl Jones (IEH/Ice Arizona) mentioned the 12,000 figure a few days ago, which I found odd given their avg attendance. From what I read, the parking ‘stats’ are as you characterize them. I did read that they believed they could get $12 per car (this time around).

    Again, those are max numbers based on full usage of the spaces 41 (+preseason) games a year. I don’t see that happening, frankly. But Glendale can dream… even if it can’t pay it’s bills.

  30. Gallandro:

    One of the major problems with the arena has always been how little it is used. My view of the subsidy offered to the team is this: If Glendale has $15m to throw at arena management, they could find someone better to do it than an affiliate of the hockey club.

    Similar arenas in other markets are managed for $2-5m annually (depending on the number of events, avg attendance etc). The city will have to pay for the arena anyway, as you’ve noted. So why pay a hockey team $15m to play in it when you can hire an AEG or someone similar to manage it as a concert/event facility?

    In the big picture, the city receives about $2.5m back from the Coyotes (historically). If they brought in concerts, monster trucks, dog shows… anything… 20-25 times a year my view is that they would generate at least that much – without the need to pay $15m to secure an anchor tenant.

    The great myth in this ridiculous scenario is that Glendale “needs” hockey. It doesn’t. It needs something to fill 30-50 dates in it’s arena. It doesn’t have to be hockey. Given the tepid level of support for the team in the west valley, celebrity bowling would probably generate more revenue.

  31. It brings a tear of joy to my eye when a city bankrupts itself to make a rich pro sports team owner even richer. By god that is the American way!

  32. I feel for my friends in the Phoenix area who are huge Coyotes fans. They have spent long hours in the sun trying to persuade Glendale residents of their case. They have put up with an annual soap opera surrounding team ownership and location. They have loyally bought season tickets and gone to games and practices. They have learned to play hockey themselves at wonderful facilities supported in part by the Coyotes, like the Ice Den in Scottsdale. And if you casually subscribe to the “not a hockey town” criticism, I suggest visiting a public skate at that arena and seeing how many young kids are skating around with full hockey gear on. They wouldn’t be anywhere near so keen without a team in the Valley, and many will give the sport up if their team disappears. That’s a base that will continue to grow, if someone can withstand the money losses between now and a decade or so down the line.

    None of these things, sadly, makes this deal a good one for Glendale. I fear the team will continue to struggle with its loyal, fanatical, but too small fan base, and be out after 5 years. And the gloating from Seattle or Quebec City will be nigh unbearable.

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