Coyotes have seriously found yet another way to ask for subsidies from Glendale

So the city of Glendale already built the Arizona Coyotes a new arena at public cost, then charged them low rent to play in it, then gave them $50 million to keep playing there, then agreed to pay the team $15 million a year more for another 15 years to keep playing there longer, then allowed the team to opt out of its lease if it wants to anyway regardless of all this. After all that, there is no possible way that Glendale can even find any more ways of subsidizing the hockey team, right? Right?

The Arizona Coyotes are talking to the city of Glendale about reducing, changing or getting rid of ticket and parking fees on concerts and special events at Gila River Arena…

The changes would amend a $225 million arena deal forged in 2013 between Glendale and the hockey team’s owners and could reduce direct revenue going to the city under that deal.


The basic idea behind the Coyotes’ plan is that with tons of concert venues in the Phoenix area and fewer and fewer arena-scale touring acts, the only way that the Glendale arena can compete is to lower its prices. And heaven forfend, the Coyotes can’t be expected to lower their ticket prices, because that might cut into profits — so instead, Glendale should forgo its cut of whatever slim concert takings there are in order to make the enterprise more “competitive.”

To his credit, Glendale Mayor Jerry Weiers, who already hated on the last Coyotes subsidy (as well as hosting the Super Bowl), wasn’t thrilled about this latest proposal either, saying, “They want the city to waive the surcharge, but they’re not willing to do anything for Glendale in return.” Weiers has been overruled by the city council before, though, so we’ll just have to see what happens this time. Give the Coyotes owners credit, though: They’re certainly creative in finding ew ways to try to milk blood from a stone.

Glendale’s lease deal with Coyotes is now officially most godawful of all time

Glendale’s series of lease deals to lure and keep the Arizona Coyotes in town have always been among the worst in sports history: The city built a new arena at its own expense and charged the Coyotes only $1 minimal rent [EDIT: see comments for more on the Coyotes’ past and present rent situation], gave the team $50 million in operating subsidies to keep its owners from leaving town after it filed for bankruptcy, then agreed to pay another $15 million a year for the next 15 years to ensure that the team stays put, leaving the city with a budget drowning in red ink even after laying off a quarter of municipal workers. That was all bad enough, but what may kick this over the top to Worst Sports Venue Deal Ever: Glendale gave the Coyotes owners an out clause that will let the team move even if it’s not losing money.

The short version, condensed from David Shoalts’ excellent investigation in Friday’s Globe and Mail: Under the escape clause, the Coyotes’ owners can break their lease and move the team if they’ve lost at least $50 million over the first five years of the deal, running through 2018. That would seem to be hard to do when you’re getting $15 million a year in subsidies from your landlords and paying very little rent, but the Coyotes figured a way around that:

The $15-million from Glendale is recorded as revenue on the books of the company [George] Gosbee and [Anthony] LeBlanc formed to manage the arena, not on the books of IceArizona, the company that owns the Coyotes. While that money eventually flows to IceArizona because it owns the arena manager, for perfectly legal accounting purposes the parent company can claim a larger loss on its hockey operations, which ratchets up the number for the escape clause. Just as important, it also means the $15-million is not recorded as hockey-related revenue, which has to be shared 50-50 with the players under the collective agreement.

So not only is Glendale paying the Coyotes to play in its arena, it’s agreeing to let the team owners claim unmanageable losses by not counting those payments on their books. That is some kind of crazy.

Now, it’s always possible that Gosbee and LeBlanc (and possible new majority investor Andrew Barroway) won’t exercise the escape clause, because where else are they going to find a city that’s willing to give them a free arena plus $15 million a year in cash while doing so in such a way that they’re still eligible for NHL revenue-sharing payments. But then, they don’t have to actually exercise the escape clause to make use of it — they can use the mere threat of it to try to extract even more concessions from Glendale in a revised lease. You may think Glendale is tapped out by now, but when you’re this far down the road in a long con, there’s nothing left to do but see how far you can push your mark.

Arizona Coyotes being sold again (of course), could demand more subsidies (of course)

The saga of the Phoenix (now Arizona) Coyotes was one of the longest in recent sports history, and ended in 2013 with the city of Glendale agreeing to pay the team $15 million a year to stay put in town for just five more years. But at least it’s finally over, and now Coyotes fans, such that there are fans, can enjoy the Coyotes season in peace, such that there’s much to enjoywait, what now?

The city of Glendale is not sure what impact — if any — a sale of the majority stake in the Arizona Coyotes will have on a $225 million arena accord reached with hockey team’s owners last summer…

City officials are not sure yet if a change in Coyotes majority ownership would necessitate a new or amended arena subsidy.

Why on earth would Glendale have to kick in more money just because of the checks being made out to a different name? Phoenix Business Journal doesn’t say, but presumably it’s connected to the out clause in the Coyotes’ lease, which allows the team’s owner (whoever it is at the time) to break the lease and move the team in 2018 if they’ve lost more than $50 million over the previous five years.

The Coyotes say they lost $24 million last year, which would certainly put them on the path to lease breakage. But it’s not entirely clear that that entire loss is really loss. As David Shoalts of the Globe and Mail explains it:

The problem for the latest owners is the same as it was for all the previous owners – despite any claims to a successful first year, the Coyotes’ cash flow is not enough to service the franchise’s enormous debt. The team’s hockey-related revenue (HRR) for the 2013-14 season was said to be just $40-million, last among the NHL’s 30 clubs.

Gosbee and LeBlanc borrowed $120-million from Fortress Investment Group and $85-million from the NHL to finance the team and have some working capital left over. While the NHL loan is at favourable terms, one source pegs the interest rate for the Fortress loan at 10 per cent.

The New York Post, which first reported the $24 million loss figure, doesn’t indicate if this counts debt service. But if it does, it’s completely ridiculous: Just because the team’s owners took out a terrible loan (which is soaking up the entire $15 million in subsidies from Glendale to pay off) because they didn’t have enough cash to buy the team shouldn’t count against the franchise’s performance. And it certainly shouldn’t allow the Coyotes owners to cry poverty in order to demand more subsidies. (They would have to repay some of the subsidies to do so, but it’s not really about whether they’d use the out clause, but whether they’d threaten to.)

Anyway, let this be a reminder to city officials everywhere: Don’t sign lease clauses based on team profits and loss, because the teams can cook the books however they want. Maybe someone could just print up some nice plaques with Paul Beeston’s quote on it and send them around to city halls everywhere? The world will appreciate it.

Glendale mayor seeks to overturn Coyotes lease after email shows councilmembers talked in secret

It’s baaaaaaaaaaack!

Glendale Mayor Jerry Weiers on Monday asked the state attorney general to investigate a previously undisclosed meeting of City Council members and an Arizona Coyotes attorney last June, days before the council approved a $225 million agreement with the team…

Violations of the Open Meeting Law can rescind actions taken by elected officials, which could potentially void Glendale’s deal with the team, which was then called the Phoenix Coyotes.

It’s been just slightly over a year since the Arizona Coyotes signed a new 15-year lease where the city of Glendale will pay them $15 million a year to play hockey in the arena that Glendale built for them. (They were the Phoenix Coyotes then, but as part of the lease the team owners agreed to change its name. But not to “Glendale Coyotes,” that’d be crazy.) It was one of the most generous sports deals in history, and only passed after councilmember Sammy Chavira made a last-second switch, so if it turns out that the whole thing was illegal, that’d be kind of a big deal.

Now, Mayor Weiers opposed the lease deal, so it’s not entirely unsurprising that he’s looking into trying to undo it. But according to emails obtained by the Arizona Republic, the evidence is kind of damning: Councilmember Gary Sherwood emailed councilmember Manny Martinez that he and councilmember Yvonne Knaack “spent over an hour with [incoming Coyotes attorney] Nick Wood last night,” and that “Sammy [Chavira] is already on board as he was with us last night.” Adding self-incrimincation to injury, Sherwood added, “Manny, please delete this email after you’ve read it.”

(Asked about this by the Republic, Sherwood defended holding secret discussions outside of public view by saying that he and Knaack only spoke with Wood over the phone, then spoke with Martinez and Chavira later. Which would still likely be a violation of the state Open Meeting Law, but hey, it worked for Cobb County.)

We’re still a long way from the Coyotes deal coming close to being overturned — among other things, even if last year’s vote turns out to be illegal, the council could just vote to reaffirm the new lease, this time without any hanky-panky. But if nothing else, this means we have more Glendale craziness to look forward to, which is always fun.

The “operating subsidies” epidemic: How sports teams get cities to throw good money after bad

I’m on the road the next couple of days, so posting will be lighter than usual. First, though, I’ll leave you with some reading material: My debut article for Al Jazeera America’s relaunched website, examining how teams like the Phoenix Coyotes, Indiana Pacers, and Atlanta Falcons have extracted sweetheart leases that pay them millions of dollars a year in public “operating subsidies” even as their host cities slash services and raise taxes. Here’s a sample:

To pay off the initial Pacers arena cost — plus the $650 million that it sank into a new stadium for the Colts football team — Indianapolis’ Capital Improvement Board had already cut off all of its arts and tourism grants the year before. To help fill the new gap, Mayor Greg Ballard funneled city property-tax revenues to the board, even as he asked city agencies to reduce library hours and close public pools because of budget shortfalls.

“Indianapolis might be a great place to visit, but it should be a better place to live,” says Pat Andrews, a longtime Indianapolis community activist and blogger who has closely followed the Pacers deal. In addition to cuts to parks, transit and other services, she notes, the city police force has stopped recruiting new officers because of budget cuts, and murders have risen dramatically this year. “The basic services of the city are suffering at the same time the Simons and [Colts owner Jim] Irsay are making out like bandits.”

Read, and discuss.

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!

Goldwater won’t sue to block latest Coyotes lease deal

If you’ve been hoping the Goldwater Institute was going to file one of its patented lawsuits against the latest Phoenix Coyotes lease deal, looks like that’s not going to happen:

“Based on the information available to us at this time, we do not believe that the Glendale arena management deal would be held unconstitutional,” Goldwater said in a statement on their website. “Changes made to the agreement during the course of negotiations partially bridged the gap between the market cost of arena management and the amount of the payment to the team owner, thus bringing the deal into conformity with cases interpreting the Gift Clause of the Arizona Constitution.

“The initial deal proposed several years ago would have included not only a substantial annual arena management fee, but a $100 million up-front payment to subsidize the purchase of the team. We are proud to have played a constructive role in protecting the taxpayers and taking an illegal deal off the table.”

In other words, but getting their money one year at a time instead of all at once, the new Coyotes buyers have apparently gotten around any potential legal entanglements. Not that past Goldwater suits were all that effective, but it’s one less hurdle that the new owners have to worry about.

Proposed manager of Markham arena with no sports team says arenas can’t survive without sports teams

Oh, this is embarrassing:

A key partner in the proposed $325-million arena in Markham, which doesn’t have a main tenant, has downplayed a remark by the company’s chairman who indicated big sports and entertainment centres need major pro teams to ensure financial success.

That’s right, sports fans: Comcast-Spectacor (aka Global Spectrum) chair Peter Luukko told the Associated Press regarding the Phoenix Coyotes arena, which his company will operate under the terms of the team’s new owners’ new lease with Glendale, that “for any arena or stadium in a major market to be successful, it needs to have a major league sports team.” That’s the same Comcast-Spectacor that wants to manage the proposed Markham arena that was approved in January despite having no major-league sports tenant. It’s shouldn’t be an exactly surprising or controversial statement, given that Comcast-Spectacor’s competitors Live Nation had previously said that a Markham arena couldn’t work without the guarantee of a major pro sports team. But it is embarrassing, especially since, as Markham deputy mayor Jack Heath put it, “You can’t be selling one message in Phoenix and another one in Markham.” Oh, can’t you now? Clearly, Mr. Heath, you don’t know anything about the arena game.

Coyotes sign sweetheart arena lease, arena bondholders run screaming

The buyers of the Phoenix Coyotes signed their new lease on Monday guaranteeing them $15 million a year in public operating subsidies in exchange for mumble mumble something something, and the city of Glendale is already reaping the rewards:

At the beginning of the year, Glendale, Arizona restructured the debt it took on for Arena, issuing $39.5 million of senior-lien notes backed by the city’s excise tax. Proceeds of the bonds will refund debt used to build the $220 million arena (Glendale still owes $152 million) that opened in 2003, and are structured to provide budget relief by reducing near-term debt service requirements. Those bonds have been hammered, with their yield jumping to $4.35% from 3.33% since January.

Much of that jump came before Monday, no doubt, but Forbes’ Michael Ozanian says bond buyers are looking askance at the Glendale arena bonds with good reason: Not only can the Coyotes leave after five years if they’re losing money, but even the shares of arena revenue that new owners George Gosbee and Anthony Le Blanc have promised to share with Glendale aren’t guaranteed. But hey, at least the struggling mom-and-pop businesses at the local mall like Johnny Rockets and the Cold Stone Creamery can rest assured of some of the Coyotes’ 500,000 fans a year wandering past before or after games. For the next five years, anyway. Unless there’s another lockout.