Glendale opens Coyotes arena management deal up for bids, sky doesn’t fall (yet, anyway)

Back in July when the city of Glendale renegotiated its lease with the Arizona Coyotes to make it slightly less onerous and a whole lot shorter, I wrote:

The new lease only lasts until summer of 2017, after which everyone has to figure this out all over again.

Turns out, though, Glendale officials don’t intend to wait that long, and they don’t necessarily plan on doing their figuring out with the Coyotes management:

The Glendale City Council on Tuesday voted to hire Beacon Sports Capital Partners LLC as a consultant to seek bidders to manage the arena, with the manager taking over as early as July 2016…

Vice Mayor Ian Hugh said Wednesday the city hopes to select an arena manager as early as January and IceArizona will be considered if it responds to the city’s request for proposals.

In case you’re wondering why it’s a big deal who manages the arena, it’s a humongous one, because under prior leases the city has been paying IceArizona, the Coyotes owners, $7-8 million a year to run the place. IceArizona swears this is totally reasonable; other observers have disagreed, and now, if nothing else, we’ll get to see if Glendale can do better by actually bringing in other bidders instead of just going to the hockey team and asking, “How much do you charge?”

Of course, any other arena manager would also have to negotiate a rental fee or revenue share with the Coyotes, who will be one of their competing bidders, so this has the potential to be a total mess. But it’s the kind of mess that might end up with the city not left totally holding the bag, or at least not as much of a bag as it might otherwise have to, so I approve! Especially since it promises to be great fun to watch from a distance.

11 comments on “Glendale opens Coyotes arena management deal up for bids, sky doesn’t fall (yet, anyway)

  1. I love how cities flout these long-term leases as proof that teams will stay and justifying building stadiums, only to then shorten them at the first sign of discord.

  2. I can’t actually think of any other cities that shortened long-term deals of their own accord. And in Glendale’s case, it was mostly because a new mayor came in and said “My god, what have you done?”

  3. Neil, is there another new mayor?

    I seem to recall Weiers saying that “Glendale is not your cash register”, then voting for (? or at least being part of a council that approved) the $15m/yr subsidy to the Coyotes to play in the arena the city built for them for $185m a decade earlier. Of course, he did also lead the council that tore up that deal at the first opportunity they got…

    I agree that this is a good move by the city (hard to get competitive bids when you only have one bidder). I’m not sure the city believes having a lower management fee but losing the primary tenant would be a terrible outcome. As I recall, the club is now paying (or earning for) something like $6m/yr in total to the city (about double what they used to pay five years ago using the old calculations). So… they are still very much in the red on the present deal, though less so than under the previous one.

    I have looked at this basketcase franchise and lease arrangement for many years, and from my POV this is one of the (relatively rare) cases where the city doesn’t earn enough revenues off the existence of the club to make any subsidy worthwhile. Even with the operating costs of the arena to pay and no primary tenant, the city would be better off.

    The “Westgate traffic” argument (that the arena balance sheet is irrelevant because of the traffic drawn to the shopping centre) doesn’t hold water either. Even if every hockey fan attending a game spent $100 at Westgate every time and the city imposed a hefty 10% district sales tax (which itself would damage businesses and is decidedly unlikely…), it still only raises about $8m a year (and that is in a year with good attendance, something the dogs don’t generally get).

    The decision to build an arena to lure a hockey team to a relatively small suburban community that is difficult to get to is, in this case, nothing but a disaster for the taxpayers of Glendale. No amount of renegotiation will change the fact that there aren’t enough hockey fans willing to pay NHL prices and travel to Glendale to make the business work.

  4. No, same old new mayor. I meant that this is a continuation of Weiers trying to unravel the long-term deal that his predecessor put in place.

  5. Neil – You have the sequence wrong. Mayor Weiers ran on an anti-Coyotes subsidy platform. The previous deal with this ownership group was approved my council in his first year as mayor. He voted no, honoring his campaign promise. However, Glendale has a city manager form of government so the mayor is really just another council member when it comes to voting on stuff. They have staggered council elections in Glendale so in 2014, 3 of of council members were replaced. 2 of them were ones that had voted for the last deal (they did not run for reelection. The 3rd voted against it, she lost her election but not because of the Coyotes vote, her district was against the deal and her successor voted to void it.
    So with the new council in place the mayor had the votes to void the lease and ownership gave him an opening by hiring two former Glendale employees.

  6. Sorry, you’re correct, Aqib: It was a new mayor coming in, saying, “My god, what are you doing?” and then waiting for a new council so he could undo it.

    It’s still not the same elected officials signing a long-term deal and then turning around and nixing it, though, which was my point.

  7. Someone needs to compare (demolition cost +remaining debt) vs. (Arena revenue – remaining debt – management fee). I have a feeling Mayor Weiers is pondering those numbers…

  8. Neil: As you say, they are on the hook for that no matter what.

    A suggestion was made to me years ago that the nature of their bond issue might mean that if the arena is demolished they have to buy out the bonds more or less immediately. I have looked and looked but not found anything that supports that (the only way I could see it working that way would be if the bonds were structured in a way that demands arena revenues be committed directly to bond repayment… in which case you’d expect the bond holders themselves would have called in the demolition crew years ago….)

    What seems to be consistently ignored is what other events the arena could host if the hockey team was gone. The issues around location and population (and other arenas in the area) will be the same no matter what the attraction is, but clearly they are losing their shirts on professional hockey. IF they could fill the arena just 25 nights a year with events that actually make money instead of NHL hockey, they should be significantly ahead. Then again, if they just let the hockey team go and paid an arena management fee in the neighbourhood of $2-3m a year on a building that stays dark 50 nights a year more than it does, they would also be ahead of where they are now.

  9. John I am not sure if the same bonds used to build the arena are still in place. I recall some refinancing of city debt in 2011. I think that the covenant you describe would be rare as cities tend to issue general obligation debt with arenas not debt tied to the specific arena.