May 17, 2009

What would Coyotes' flight really cost Glendale?

The Arizona Republic has another today in its series of articles on how the loss of the Phoenix Coyotes would screw over the city of Glendale. So far, it reports, Glendale has been able to pay off its $180 million debt for the arena it build for the team with rent payments and arena-related tax revenues: "From fiscal 2006 to 2008, ... Glendale paid $25.9 million on its arena debt in that period and collected $27 million in revenue from developments directly related to the arena." Take away the Coyotes' $2.4 million in annual rent payments, and sales taxes from fan purchases, and "the city could be forced to skim money from reserves or funds that could have gone to public services."

Of course, "arena-related tax revenues" is a notoriously fungible concept, thanks to the substitution effect (if you need a refresher on the substitution effect, here's an excellent one) — not to mention that some of the related development, like the retail/commercial/residential development that then-Coyotes owner Steve Ellman built next door, come with their own expenses for city services. But the point remains that unless Glendale can book more concerts or something to fill empty dates during the hockey season, it's going to have a tougher time paying its arena debt.

But then, that could be true if the Coyotes stay as well, since team officials were already talking about demanding lease concessions even before the team filed for bankruptcy. (There will be different team officials once the bankruptcy shake out, but three guesses as to whether they'll back off this demand now that the team has effectively broken its lease.) While losing rent payments would still leave the team-related tax revenues, those are the revenues that are most directly cannibalized from other spending in the Phoenix area, if not necessarily Glendale proper.

Maybe Glendale should be demanding that its neighboring cities pay an annual subsidy to let the Coyotes leave — and let their shoppers go...