Part VI Phoenix Coyotes post bankruptcy

[william_adams]

According to that article, it's back to a CFD for the $25M.

CFD with an explicit COG guarantee though, correct? That's a big deal.

 

[MAROONSRoad]

It appears the subsidies could be illegal. But where does that leave us? The COG is clearly incompetent. Hence, why they were dealing with IEH for the last several months?

GHOST

 

[jol]

the economic impact of professional sports teams has been studied many times and it can be easily taken apart if you have the right bias....this would be even more of an issue when it is likely that much of that impact is outside of the civic borders (scottsdale probably could make a case for an even greater impact if all the players move away)....really, much of the money spent on pro sports stays in the community and is spent elsewhere....economic impact of sports teams if often very overstated....even for the arena...im sure their revenue predictions assumes it stays empty after the coyotes leave, when it can be easily shown with several examples that arenas can be profitable without an NHL franchise (winnipeg, KC, Tulsa)

I find this topic very interesting. Studies are showing that it's mostly local spending which supports teams, some exceptions like All-Star games etc and maybe even some fans might fly to Glendale and see some regular games, otherwise they wouldn't be visiting area. Now it you were to have balancesheet, moneys coming in and going out. Some part of going out money is players taking money with them to their homes (Canada, Europe etc), they don't spend all of their money in Arizona. But whatabout incoming money, clearly revenue sharing and in Phoenix's case NHL covering losses is/was benefiting Glendale area (not sure if Phoenix gets any revenue sharing anymore). For the next season it looks like it will be local spending (city of Glendale) covering those losses.

JOL

 

[Killion]

CFD with an explicit COG guarantee though, correct? That's a big deal.

Huh?. The CFD comes AFTER the COG has either deposited $25M into a Bank America Account in Chicago or provided the league with a LOC that they can draw against commencing July 01/2010. In parallel, the COG will be working with IE (maybe, if they can get exclusivity) & JR (not sure if he's still in the running but don't count him out just yet)) to draft a new AMULA with the full-on CFD included. The $25M is to be covered by the CFD through the sale of the team. No sale by December 31st = $25M problem.

 

[GSC2k2*]

Huh?. The CFD comes AFTER the COG has either deposited $25M into a Bank America Account in Chicago or provided the league with a LOC that they can draw against commencing July 01/2010. In parallel, the COG will be working with IE (maybe, if they can get exclusivity) & JR (not sure if he's still in the running but don't count him out just yet)) to draft a new AMULA with the full-on CFD included. The $25M is to be covered by the CFD through the sale of the team. No sale by December 31st = $25M problem.

Actuially, Killion, they cannot start drawing against the funds until September 1, 2010.

REgarding whether JR is "in the running" or not, suffice to say this - if they are out, IEH would have exclusivity already. Honestly, I find it kind of baffling that others (not you) have been fussing over the CoG being obliged to "find" a buyer. I guess they somehow have a notion that the two buyers currently in play have gone somewhere.

 

[Killion]

Actually, Killion, they cannot start drawing against the funds until September 1, 2010.

Ah. Thanks' for the correction. An interesting document no?.

 

[billy blaze]

http://www.nypost.com/p/sports/more_sports/coyote_ugly_GLEe7eMgTVSxJqTVGMBiIJ

NHL ignoring partners in NHLPA when it comes to Arizona

In choosing to re main for the time being in Glendale, Ariz. -- the time being defined by the city's politicians' willingness to inflict the cost of business on its citizens -- rather than relocate immediately to Winnipeg, the NHL is going for at least one more year in a market that never has demonstrated the ability to generate the revenue necessary to turn the team into a profitable enterprise.

This is not a felony, but in sacrificing immediate additional guaranteed revenue north of the border -- and for the second time in a year now, following the Jim Balsillie debacle -- Gary Bettman and the power brokers on Sixth Avenue are taking money out of the pockets of every player in the league without giving them, or their representatives in the NHLPA, a seat at the table or a voice in the process.

 

[GSC2k2*]

Ah. Thanks' for the correction. An interesting document no?.

Meh. I doubt it will come into play when all is said and done (or if it does, not long at all).

To me, the part that is interesting are the references to the parking agreements in section 5. I have spent some time this morning at the Maricopa County Recorder website to try to dig up the parking agreements that are referenced therein, but I have found only summaries.

I seem to recall that there was some sort of obligation on the part of the City to fund the construction of a parking structure to the tune of about $20 million. IF this is the case, and if the documents referenced in section 5 are those agreements (as they seem to be), then what appears may be happening is that the obligations to build that structure (and the monies put away to fund same, which may be held by First American Title) are to be transferred to the City (after which they would presumably be cancelled).

IF that is the case, then we may have the solution to the issues of (i) where a significant portion of the monies to be funded for the purchasers are coming from and (2) what the city is to receive as consideration for its $25 million. If the City is getting out from under a $20M+ obligation AND arena management services for its $25M, then that would put quite a different spin on the issue of the validity of the consideration provided to the NHL.

The above is just speculation, though. It might be quite beneficial if one of our PHO-based friends could get a copy of those documents (they are available from th eCoG directly).

 

[Tommy Hawk]

Meh. I doubt it will come into play when all is said and done (or if it does, not long at all).

To me, the part that is interesting are the references to the parking agreements in section 5. I have spent some time this morning at the Maricopa County Recorder website to try to dig up the parking agreements that are referenced therein, but I have found only summaries.

I seem to recall that there was some sort of obligation on the part of the City to fund the construction of a parking structure to the tune of about $20 million. IF this is the case, and if the documents referenced in section 5 are those agreements (as they seem to be), then what appears may be happening is that the obligations to build that structure (and the monies put away to fund same, which may be held by First American Title) are to be transferred to the City (after which they would presumably be cancelled).

IF that is the case, then we may have the solution to the issues of (i) where a significant portion of the monies to be funded for the purchasers are coming from and (2) what the city is to receive as consideration for its $25 million. If the City is getting out from under a $20M+ obligation AND arena management services for its $25M, then that would put quite a different spin on the issue of the validity of the consideration provided to the NHL.

The above is just speculation, though. It might be quite beneficial if one of our PHO-based friends could get a copy of those documents (they are available from the CoG directly).

Did the docs say who the obligation of building the parking garage was to - Yotes or someone else - or the source of the original funds?

 

[GSC2k2*]

Did the docs say who the obligation of building the parking garage was to - Yotes or someone else - or the source of the original funds?

You mean the parking agreements?

No, the Maricopa Recorder only have summaries, as I mentioned. My recollection of previosu reports was that the money was to be provided by the CoG as part of the deal to build the arena, or something like that.

IF (and I emphasize IF) the CoG is getting out from under that obligation, then that does explain the issue of consideration (or value) received in exchange for the operating fee. As well, it would explain some of the cryptic statements in council about the deal being funded out of the arena transaction (or however they put it).

 

[Jesus Christ Horburn]

Considering the agreement still hasn't been made official (although I suspect it will be soon), I'm interested in knowing who exactly leaked the document and for what purpose.

As far as I can tell, the only ones who benefit from the details of the agreement being released to the public ahead of schedule are Goldwater Institute.

 

[CasualFan]

To me, the part that is interesting are the references to the parking agreements in section 5. I have spent some time this morning at the Maricopa County Recorder website to try to dig up the parking agreements that are referenced therein, but I have found only summaries.

I seem to recall that there was some sort of obligation on the part of the City to fund the construction of a parking structure to the tune of about $20 million. IF this is the case, and if the documents referenced in section 5 are those agreements (as they seem to be), then what appears may be happening is that the obligations to build that structure (and the monies put away to fund same, which may be held by First American Title) are to be transferred to the City (after which they would presumably be cancelled).

IF that is the case, then we may have the solution to the issues of (i) where a significant portion of the monies to be funded for the purchasers are coming from and (2) what the city is to receive as consideration for its $25 million. If the City is getting out from under a $20M+ obligation AND arena management services for its $25M, then that would put quite a different spin on the issue of the validity of the consideration provided to the NHL.

From the Glendale City Council June 24, 2008

http://www.glendaleaz.com/Clerk/agendasandminutes/Meetings/Agendas/062408-07.pdf

Funding the parking does not appear to be an obligation of the city, but an obligation of Coyote Center Development, LLC. It appears that in exchange for developing residential units on what was then a temporary parking lot, CCD LLC agreed to put $25M into escrow to fund construction of a permanent parking structure.

It's going to be really difficult for Glendale to prove that money in an escrow account intended to build a permanent parking structure serves a public purpose if it is instead used to pay Actual Cash Losses of the Coyotes.

So instead, they throw us Section 5.1 of the Arena Management and Operations Agreement where the city attempts to assume CCD LLC's obligations, likely for the purpose of validating consideration as GSC2k2 outlines above.

Pretty slick. Far from legal genius, but a commendable effort.

 

[Killion]

Considering the agreement still hasn't been made official (although I suspect it will be soon), I'm interested in knowing who exactly leaked the document and for what purpose. As far as I can tell, the only ones who benefit from the details of the agreement being released to the public ahead of schedule are Goldwater Institute.

No idea who leaked it Riot, couldve' been jointly agreed upon to do so by the COG/NHL, as they do in fact benefit in having terms disclosed minus signatures. It telegraphs' to one & all prior to an "official announcement" what the concept is, content & execution for public evaluation & discourse/debate, inviting criticism & possible challenge's from the likes of GW. Its' pretty much basic PR 101 stuff. Take the temperature before diving in head first.

 

[Killion]

So instead, they throw us Section 5.1 of the Arena Management and Operations Agreement where the city attempts to assume CCD LLC's obligations, likely for the purpose of validating consideration as GSC2k2 outlines above. Pretty slick. Far from legal genius, but a commendable effort.

Thanks to GSC for digging this up. Either one of you care to speculate on it's chances of passing challenge?...

 

[billy blaze]

No idea who leaked it Riot, couldve' been jointly agreed upon to do so by the COG/NHL, as they do in fact benefit in having terms disclosed minus signatures. It telegraphs' to one & all prior to an "official announcement" what the concept is, content & execution for public evaluation & discourse/debate, inviting criticism & possible challenge's from the likes of GW. Its' pretty much basic PR 101 stuff. Take the temperature before diving in head first.

except no one in Arizona except the odd fan on here will see it or care to see it- leaking it serves a purpose here, yet I have not seen in any Arizona media except for Resnik's blog on Arizona Central jumping on the story- PBJ pointed to Globe and Mail- I believe Shoalts was the one who posted on G&M- why give to him?

 

[Dado]

Considering the agreement still hasn't been made official (although I suspect it will be soon), I'm interested in knowing who exactly leaked the document and for what purpose.

I'm more interested in knowing why it still isn't official.

 

[Killion]

except no one in Arizona except the odd fan on here will see it or care to see it- leaking it serves a purpose here, yet I have not seen in any Arizona media except for Resnik's blog on Arizona Central jumping on the story- PBJ pointed to Globe and Mail- I believe Shoalts was the one who posted on G&M- why give to him?

OK. I first heard about it here with a link to TSN for a 3 paragraph blurb; then googled it several times thereafter with no results. Likely it was "shared" amongst the various reporters from an original single source (Dreger & or Resnick). Why are you suggesting that fans' & or taxpayers' in Glendale/Phoenix wouldnt' care to see it?. They were/are the targeted audience of the "leak" with much at stake. The league & COG will be measuring their response prior to ratification in as much as they've floated this out to await comment from GW.

 

[Greschner4]

I'm more interested in knowing why it still isn't official.

It can't be until COG has the $25 mil or the LOC. Its obligation is to deposit same "concurrently" with the contract's execution. (2.2) (**)

At that point, it would seem to me, Goldwater's case would be ripe. COG would have either promised a gift and allocated funds for its payment; or paid for an LOC, itself a subsidy.

It remains the case that until Goldwater either loses in court, or agrees to stand still, the NHL doesn't have "clean title" to the $25M. Unless it's willing to take the risk that it never gets the money, I'm hard-pressed to see that it will be willing to proceed in Glendale.

(**) Thus, references to a CFD funding the $25M seem misplaced, unless it's going to be months until the contract is executed.

 

[GSC2k2*]

From the Glendale City Council June 24, 2008

http://www.glendaleaz.com/Clerk/agendasandminutes/Meetings/Agendas/062408-07.pdf

Funding the parking does not appear to be an obligation of the city, but an obligation of Coyote Center Development, LLC. It appears that in exchange for developing residential units on what was then a temporary parking lot, CCD LLC agreed to put $25M into escrow to fund construction of a permanent parking structure.

It's going to be really difficult for Glendale to prove that money in an escrow account intended to build a permanent parking structure serves a public purpose if it is instead used to pay Actual Cash Losses of the Coyotes.

So instead, they throw us Section 5.1 of the Arena Management and Operations Agreement where the city attempts to assume CCD LLC's obligations, likely for the purpose of validating consideration as GSC2k2 outlines above.

Pretty slick. Far from legal genius, but a commendable effort.

To me, the "public purpose" portion of the test is the layup of the two-pronged test. Everything here is dedicated to the operation of the Jobing.com arena, which is a publicly owned facility.

 

[GSC2k2*]

From the Glendale City Council June 24, 2008

http://www.glendaleaz.com/Clerk/agendasandminutes/Meetings/Agendas/062408-07.pdf

Funding the parking does not appear to be an obligation of the city, but an obligation of Coyote Center Development, LLC. It appears that in exchange for developing residential units on what was then a temporary parking lot, CCD LLC agreed to put $25M into escrow to fund construction of a permanent parking structure.

It's going to be really difficult for Glendale to prove that money in an escrow account intended to build a permanent parking structure serves a public purpose if it is instead used to pay Actual Cash Losses of the Coyotes.

So instead, they throw us Section 5.1 of the Arena Management and Operations Agreement where the city attempts to assume CCD LLC's obligations, likely for the purpose of validating consideration as GSC2k2 outlines above.

Pretty slick. Far from legal genius, but a commendable effort.

Nice job finding the Glendale parking agreement, BTW.

 

[peter sullivan]

that is really amazing....thanks for looking into that....the gymnastics by a city government to circumvent the law are incredible.

so, CCD is a private company that made a promise to the city that they would build a parking structure in lieu of land for condominiums...they put money in escrow for that purpose....now the city wants to change the agreement with CCD and say that instead of building a parkade in exchange for that land, they will fund the coyotes losses for next year.

would the money not be seen as coming from general revenues?....i guess it is kind of one step removed...its like giving up land to a private company in exchange for them paying a government bill.....sneaky.

is money from selling land paid to a government not considered taxpayer money? isnt all government reveue owned by tax payers even if it doesnt come from taxes? i wonder who they have to convince to allow this?

 

[billy blaze]

OK. I first heard about it here with a link to TSN for a 3 paragraph blurb; then googled it several times thereafter with no results. Likely it was "shared" amongst the various reporters from an original single source (Dreger & or Resnick). Why are you suggesting that fans' & or taxpayers' in Glendale/Phoenix wouldnt' care to see it?. They were/are the targeted audience of the "leak" with much at stake. The league & COG will be measuring their response prior to ratification in as much as they've floated this out to await comment from GW.

i'm saying this is not getting any "play" in Arizona, much like everything to do in Arizona with the Coyotes - it is not a "big" story, there is no public outcry one way or the other ( stay- go- meh) , it seems as if it's an inconvenience to all but the couple of thousand die hard Coyote fans. Not front page news- nobody cares ( and that is the problem)

 

[peter sullivan]

i'm saying this is not getting any "play" in Arizona, much like everything to do in Arizona with the Coyotes - it is not a "big" story, there is no public outcry one way or the other ( stay- go- meh) , it seems as if it's an inconvenience to all but the couple of thousand die hard Coyote fans. Not front page news- nobody cares ( and that is the problem)

you would think there would be at least protest groups lining up opposing government money going to an NHL team....when the jets were going through this, even in hockey mad winnipeg there were all kinds of opposition groups....i realize nobody cares about hockey in phoenix, but dont they care about how their government spends their money?

 

[peter sullivan]

Prior to your post, I had completely missed the importance of Sec 5.1. After a quick review of all of this, the maneuver appears to be (in simplest terms)

1) Glendale assumes the parking structure obligations of CCD, LLC (or whatever entity was formed to develop/manage the parking structure) through bankruptcy (either directly or having the NHL assume the obligation and then immediately pass it to the city).

2) The city then cancels or amends the obligation they assumed in Step 1 to actually build a structure, thus creating $25M in "found money" in the escrow account.

3) Use the $25M to secure the BofA line of credit from which the NHL can draw for actual cash losses.

4) Attempt to satisfy the gift clause by removing the parking structure obligation the city assumed in Step 1, securing an arena manager, and protecting the direct benefits in AMULA for 10-11 season.

I welcome your comments/corrections to this rather elementary summary. I understand that without reviewing C-5575-1,2,3 there is still uncertainty.

yeah so it boils down to a land exchange for a private company to fund coyotes losses....i realize that there are many steps in between but in its essence isnt that what it becomes?...if there were not all the steps in between and glendale went to a land developer today and said, if you put $25m in an account that the NHL can use we will give you a piece of land to develop, would that be allowed?...

are property assets exempt from the gift clause?....the money didnt come from taxes but its still a taxpayer asset.....no matter how convaluted the process, it is in the end still government money financing a private company's operating losses..... or am i missing something?

where would that money go if they did not do this?....back to general revenues?...its hard to believe that just because the source of the money is bankrupt that it becomes exempt from illegal use by the government.

 

[GSC2k2*]

yeah so it boils down to a land exchange for a private company to fund coyotes losses....i realize that there are many steps in between but in its essence isnt that what it becomes?...if there were not all the steps in between and glendale went to a land developer today and said, if you put $25m in an account that the NHL can use we will give you a piece of land to develop, would that be allowed?...

are property assets exempt from the gift clause?....the money didnt come from taxes but its still a taxpayer asset.....no matter how convaluted the process, it is in the end still government money financing a private company's operating losses..... or am i missing something?

where would that money go if they did not do this?....back to general revenues?...its hard to believe that just because the source of the money is bankrupt that it becomes exempt from illegal use by the government.

WEll, Peter, it is nothing like a land exchange.

You could look at it this way. THe ability to spend the money to build a parking garage by the arena is intended to develop and enhance the viabiltiy of the arena, which is city-woned infrastructure. That enhancement, though, would be of little use without a lead tenant. The existence of a long-term lead tenant is also an enhancement to that infrastructure. Accordingly, the CoG is, given the exigent circumstances, electing to use the money towards a different enhancement to the same facility.

I usually just hate using everyday examples to explain business transactions, but consider it this way, perhaps. You have been given $25,000 to build a swimming pool for your house. However, before you spend that money, you discover that your house has developed some structural defects that are going to result in your house collapsing in a pile of bricks and wood splinters. Keeping that money to build the pool would sure be nice, but it would be pretty pointless to have a swimming pool on a lot where no one lives because the house fell down in a heap. So, you spend the $25,000 to fix the structural defects.