Coyotes sold, firehose of subsidies from Glendale set to be turned on

The moment we never thought would arrive has: The Phoenix Coyotes have been sold, to George Gosbee, Anthony LeBlanc, and assorted other wealthy Canadians for $170 million. Or as we like to call it here, $55 million less than the new owners will get from Glendale, Arizona over the next 15 years for playing there.

Over the next 15 years, that is, assuming the Coyotes stay put. Gosbee and LeBlanc negotiated an out clause where the team can move after five years if it’s lost $50 million over that time, which should be a pretty easy bar to reach if they want, given sports bookkeeping and the fact that it’s the Coyotes. Gosbee reassured Arizonans by noting that he wants to retire to the Phoenix area, and his home in Calgary was destroyed by floods, and calling the out clause “frustrating” to his plans to rebuild a fan base in the Phoenix area. Hey, here’s a crazy idea: If you find the out clause frustrating, how about you don’t put it in the deal in the first place?

Anyway, in the meantime, Glendale still has to pay that $15 million a year worth of “operating subsidies” (a fraction of which will come back to the city via ticket surcharges and parking fees). There hasn’t been any progress that I can tell on the proposal to sell City Hall to pay for past subsidies, but Glendale is considering closing a fire station. But things aren’t all bad: There’s a new city manager, and she likes sharks!


11 comments on “Coyotes sold, firehose of subsidies from Glendale set to be turned on

  1. Be fair to Gosbee. The 5 year out clause was almost assuredly required by the NHL and/or the creditor financing the rest of the purchase.

  2. Want to take any bets on how long before they move back to Canada after the 5 years are up?

  3. Or demand more subsidies in order to stay put, presumably. I mean, they’d be crazy not to at least ask.

  4. if they leave before 5 years, the ownership group will need to reimburse glendale to a limited extent … so count on an exit after 6 years

  5. “Or demand more subsidies in order to stay put, presumably. I mean, they’d be crazy not to at least ask.”

    Or how about the city going BANKRUPT long before the five years are up?

    “if they leave before 5 years, the ownership group will need to reimburse glendale to a limited extent … so count on an exit after 6 years”

    Not if the city goes bankrupt and they will. Hopefully some people in Glendale will make the ultimate sacrifice and either burn or blow the arena up! Such a fitting end if such a scenario plays out!

    Remember, NOBODY is going to drive to the suburban wasteland known as Glendale on a weeknight, especially with prices going up. Thus I stand by my prediction that Glendale goes bankrupt before the five years are up.

  6. Neil;

    I understood the out clause to be triggered when the “owners” losses have reached $50m regardless of the number of years they have been in Glendale, is that not still the case?

    As another poster notes, there appear to be some limited “recovery” clauses should the new “owners” bail before the five year mark is hit, but if the Coyotes losses continue at their historic (and monumental) pace, they should reach the $50m mark during season 3 (if not before, depending on whether the NHL’s welfare plan is included as income for the purpose of calculating operating losses). If they lose $30m a year and have to pay back $25m to leave a year or two early, well, the math isn’t all that tough.

    But, of course, the out clause has another staggering benefit to the new owners: The minute it looks like it the chute might be pulled, the owners can march into city hall to extract even more subsidies from the near bankrupt city. Hey, Glendale paid the NHL $50m for two seasons of hockey a couple of years ago, why not just bump that lease deal up…

  7. Interestingly, back in May (I believe) the city asked for it’s own out clause if revenues from the team weren’t reaching the projections (which were, of course, extremely rosy)…

    The owners said “No”. And then proceeded to refine their own demands for an out clause. Do elected officials actually have to have their brains removed when they take office?

  8. No, John, looks like they have to wait till after the 5th year:

    “Notwithstanding the other terms and provisions of this
    Agreement, Team Owner and Arena Manager jointly shall have the right to terminate this Agreement
    without penalty or cost by delivery of written notice to the City at any time following the fifth (5th) year
    after commencement of the Term when (a) neither terminating Party is in material default of any term or
    condition of this Agreement, and (b) Team Owner has incurred a cumulative Operating Loss of
    $50,000,000 or more, calculated as the sum of Team Owner’s operating income/loss for each of the Fiscal
    Year periods then ended, provided that if such notice is given during any NHL hockey season, the
    termination shall not be effective until the end of the applicable hockey season, including all Home
    Games associated with the season.”

  9. Thx Neil.

    It’s still a little hard for me to view it as Glendale “getting” five years when they are paying $15m p/a for that particular privilege.

  10. Leggy:

    Thanks for the belly laugh ( from your screen name). It has been several years since I watched “all you need is cash”/the Rutles.