Part XIV: Phoenix Coyotes - To Infinity And Beyond....

Killion · Dec 3, 2010

Running Riot said:
Looking back in retrospect, the Ice Edge deal must have been dead for months before they were revealed to be the clowns that everyone (including Shoalts) suspected them of being. Yet they continued to lie through their teeth about being close to buying the team. I wouldn't be surprised if Hulsizer is doing the same thing - either he knows he won't be buying the team or the NHL/COG knows he can't buy the team.

At least Heath Ledger as the Joker in The Dark Knight had his crew whacking each other once their job was done. Why couldnt these Hyenas' have shown the same sense of classless grace?.... But seriously.... :naughty:

Whileee · Dec 3, 2010

Killion said:
I dont believe their ever will be a draw on the money. Should Hulsizer & Co. manage to close a deal with Glendale & the NHL, the losses from 2010-11 will simply be rolled forward & absorbed through the CFD or some other revenue center. Should a sale locally fall through, watch for the league to simply announce in a wonderfully magnanimous act of benevolence that the COG is "off the hook" thanks to a generous relocation fee. Never mind the $200M+ in debt servicing left on the job..... Think Big O, Montreal, Drapeau.....

And ya, $5M in light of the overall dealeo' moving forward?. Someone's telling Porkys...

I agree. Every bit of public evidence suggests that Glendale has never had any intention of forking over the $25 million this year. It suggests to me that either they believe they can't do this, legally and/or politically.

I wonder a bit about the hand-wringing over the potential financial loss to Glendale from the potential departure of the Coyotes. Public documents revealed that over the past 6 years the Coyotes provided the city of Glendale with a mere $22.8 million in lease payments and other fees (http://www.azcentral.com/ic/community/pdf/glendale-arena-payments.pdf). That amounts to less than $4 million a year. In the meantime, there is reason to speculate that the new lease arrangement would require about $25 million in subsidies to the Coyotes each year over the next several years, perhaps amounting to as much as $100 million in subsidies. At the amount that the Coyotes are currently paying to the City of Glendale for using the Jobing.com arena it would therefore take about 25 years to recoup as much money as they would be providing for the Coyotes' owners in just the next 4-5 years. It would take more than 6 years of payments from the Coyotes to just pay off the $25 million "escrow" fund if the NHL draws on that much for operating losses this year.

Could someone explain how keeping the Coyotes is such a financial priority for the City of Glendale and/or the CFD participants in light of these financial considerations?

MAROONSRoad · Dec 3, 2010

Whileee said:
I agree. Every bit of public evidence suggests that Glendale has never had any intention of forking over the $25 million this year. It suggests to me that either they believe they can't do this, legally and/or politically.

I wonder a bit about the hand-wringing over the potential financial loss to Glendale from the potential departure of the Coyotes. Public documents revealed that over the past 6 years the Coyotes provided the city of Glendale with a mere $22.8 million in lease payments and other fees (http://www.azcentral.com/ic/community/pdf/glendale-arena-payments.pdf). That amounts to less than $4 million a year. In the meantime, there is reason to speculate that the new lease arrangement would require about $25 million in subsidies to the Coyotes each year over the next several years, perhaps amounting to as much as $100 million in subsidies. At the amount that the Coyotes are currently paying to the City of Glendale for using the Jobing.com arena it would therefore take about 25 years to recoup as much money as they would be providing for the Coyotes' owners in just the next 4-5 years. It would take more than 6 years of payments from the Coyotes to just pay off the $25 million "escrow" fund if the NHL draws on that much for operating losses this year.

Could someone explain how keeping the Coyotes is such a financial priority for the City of Glendale and/or the CFD participants in light of these financial considerations?

People often claim that the Coyotes have a "terrible lease." Nothing could be further from the truth from what I've seen/read. The public built them an almost free arena. They handed over the keys to the arena to the Coyotes to take advantage of most of the revenue, hockey, non-hockey, etc. that can be derived from the arena. The Coyotes paid little of the capital costs for construction of the arena and were not saddled with the interest on the debt (as was the case with the Senators and led to their bankruptcy). In addition, since the Coyotes don't own the arena they pay no property taxes. The fact is the Coyotes have a sweetheart arena deal but still went bankruptcy. Any new arena lease is simply a discussion of how to further subsidize the franchise with public funds.

The COG would be wise to cut their losses and develop a Plan B for the arena and Westgate. The money they could save by letting the Coyotes go could be better spent on developing an alternative plan imo. As you point out, the Coyotes contributed very little to the COG's pockets anyway.

GHOST

Dado · Dec 3, 2010

Whileee said:
Every bit of public evidence suggests that Glendale has never had any intention of forking over the $25 million this year.

If they can't fork over $25M over one year, how are they going to fork over $150M (or whatever) over 5-7 years?

Sure seems the best path here is to have one of the My Blue Heaven witness relos have a relapse and torch the building...

RR · Dec 3, 2010

GHOSTofMAROONSroad said:
People often claim that the Coyotes have a "terrible lease." Nothing could be further from the truth from what I've seen/read. The public built them an almost free arena. They handed over the keys to the arena to the Coyotes to take advantage of most of the revenue, hockey, non-hockey, etc. that can be derived from the arena. The Coyotes paid little of the capital costs for construction of the arena and were not saddled with the interest on the debt (as was the case with the Senators and led to their bankruptcy). In addition, since the Coyotes don't own the arena they pay no property taxes. The fact is the Coyotes have a sweetheart arena deal but still went bankruptcy. Any new arena lease is simply a discussion of how to further subsidize the franchise with public funds.

The COG would be wise to cut their losses and develop a Plan B for the arena and Westgate. The money they could save by letting the Coyotes go could be better spent on developing an alternative plan imo. As you point out, the Coyotes contributed very little to the COG's pockets anyway.

GHOST

What makes you think they haven't?

As for the "sweetheart" lease, it's been debated ad nauseam. Some take your position while some others ask, what is "sweetheart" about a lease that makes it incredibly difficult, if not impossible, for the lessee to seek new revenue streams?

AllByDesign · Dec 3, 2010

RR said:
What makes you think they haven't?

As for the "sweetheart" lease, it's been debated ad nauseam. Some take your position while some others ask, what is "sweetheart" about a lease that makes it incredibly difficult, if not impossible, for the lessee to seek new revenue streams?

I have to agree with RR. Moyes complained that the lease was noose like. The NHL had mentioned an improved lease would make the franchise more attractive.

The only thing, RR, that I have to note is that it seems as if the only portions of the lease being negotiated on (that had been released for our eyes) is a reverse stream of revenues. One cannot be a tennant and complain that the lanlord isn't paying for the Cable TV and your 401K.

Whileee · Dec 3, 2010

Dado said:
If they can't fork over $25M over one year, how are they going to fork over $150M (or whatever) over 5-7 years?

Sure seems the best path here is to have one of the My Blue Heaven witness relos have a relapse and torch the building...

They (meaning Glendale) are not supposed to be the ones forking over all of those funds. A large portion of it is to come from Ellman and his Westgate business tenants. The rest is meant to come from increased charges to patrons of the Jobing.com arena, which is already struggling competitively for non-hockey events and seems to have little wiggle room in the short term on increasing costs for Coyotes' fans. Either way, the Coyotes would create a huge financial vacuum to feed their losses in the short term.

RR said:
What makes you think they haven't?

As for the "sweetheart" lease, it's been debated ad nauseam. Some take your position while some others ask, what is "sweetheart" about a lease that makes it incredibly difficult, if not impossible, for the lessee to seek new revenue streams?

Ummm... why should the lessee get new revenue streams from a building in which they have invested nothing? Sounds a lot like a "gift" to me... :sarcasm:

I thought the impetus for Glendale to keep the Coyotes was to help pay off the Jobing.com lease and help local business development, not the other way around.

MAROONSRoad · Dec 3, 2010

RR said:
What makes you think they haven't?

As for the "sweetheart" lease, it's been debated ad nauseam. Some take your position while some others ask, what is "sweetheart" about a lease that makes it incredibly difficult, if not impossible, for the lessee to seek new revenue streams?

I never said they haven't, but now that you mention it, that's what the Mayor said:

Glendale Mayor Elaine Scruggs said leaders have yet to come up with firm backup plans.

City staffers, operating in crisis mode to save the Coyotes for nearly two years, have focused most of their attention on securing a new owner by Dec. 31 to keep the National Hockey League from moving the franchise to Canada.

Losing USA Basketball, though disappointing, poses less of a direct blow to the city, which was not funding the project. Glendale also did not finance the Arizona Cardinals' stadium.

But paying off the baseball stadium without a commercial complex, Scruggs said, is "something we're going to have to address in this next budget session" in the spring.

If the Coyotes leave, she added: "Don't ask me what Plan B is. . . . We don't have a Plan B."

http://www.azcentral.com/sports/coyotes/articles/2010/10/10/20101010glendale-debt-sports.html

Isn't it nice to know that the local politicos have become big time business persons that don't mind making huge bets and taking risks with the tax payers' monies. And then they claim they haven't even come up with a Plan B?

GHOST

MAROONSRoad · Dec 3, 2010

AllByDesign said:
I have to agree with RR. Moyes complained that the lease was noose like. The NHL had mentioned an improved lease would make the franchise more attractive.

Oh, so because Moyes complained about the lease and the NHL mentioned an improved lease would make the franchise more attractive, that means that the Coyotes lease is terrible?

I challenge anyone to set out why the Coyotes lease is so terrible. Please compare it to the situations where a) the Coyotes would have to build their own arena with their own funds, pay debt service charges and property taxes (as is the case with most Canadian NHL teams and several USA teams) or b) other NHL teams' leases. I'm not saying the Coyotes have the best deal in the league, but it is not terrible as far as I can surmise.

Perhaps the most ridiculously 'sweetheart' deal was obtained by the Nashville Predators. In fact, the city of Nashville not only built the arena, handed over the keys to the Predators, but paid in addition a large portion of the expansion fee in order to induce the original owner to bring an NHL team to Nashville. After he gave up, the city subsequently offered even more concessions to the current owners. I concede that the Predators likely have a better lease, but that does not mean the Coyotes lease is 'terrible.'

GHOST

RR · Dec 3, 2010

Whileee said:
Ummm... why should the lessee get new revenue streams from a building in which they have invested nothing? Sounds a lot like a "gift" to me...

It has been posted here numerous times who paid what to get the arena built. I suggest you review the material. And while you're reviewing you should come across hundreds of posts that give some insight into why any business should have the ability to access at least portions of some new revenue streams it creates to keep its business going.

Whileee said:
I thought the impetus for Glendale to keep the Coyotes was to help pay off the Jobing.com lease and help local business development, not the other way around.

Up until now the Coyotes and Arena Management have been helping to pay off the arena and develop local business with rent and fees paid, and tax receipts they have generated. So the "impetus" is to try and figure out a way to keep them doing just that.

No one is suggesting that anything that is currently being required to be paid should be changed.

AllByDesign said:
I have to agree with RR. Moyes complained that the lease was noose like. The NHL had mentioned an improved lease would make the franchise more attractive.

The only thing, RR, that I have to note is that it seems as if the only portions of the lease being negotiated on (that had been released for our eyes) is a reverse stream of revenues. One cannot be a tennant and complain that the lanlord isn't paying for the Cable TV and your 401K.

It's not a "reverse stream," ABD. As I mentioned to Whilleee, there is no issue with rent and fees currently being paid. As you know the team and Arena management currently pay $2.70 to the COG on every ticket distributed to every arena event as a fee for parking. That will not change and cannot change because of the gift clause. Changing it would be deemed a "subsidy."

But what is wrong with Arena Management wanting to charge patrons for parking over-and-above the $2.70 ticket fee it pays to the COG? I say nothing. The current lease says otherwise. That's one of the reasons everyone is looking at a CFD.

GHOSTofMAROONSroad said:
I never said they haven't, but now that you mention it, that's what the Mayor said:

http://www.azcentral.com/sports/coyotes/articles/2010/10/10/20101010glendale-debt-sports.html

Isn't it nice to know that the local politicos have become big time business persons that don't mind making huge bets and taking risks with the tax payers' monies. And then they claim they haven't even come up with a Plan B?

GHOST

Do you have political posturing and doublespeak in Canada? Because it's rampant here from Mosquito Abatement Boards all the way up the political food-chain.

GHOSTofMAROONSroad said:
Oh, so because Moyes complained about the lease and the NHL mentioned an improved lease would make the franchise more attractive, that means that the Coyotes lease is terrible?

I challenge anyone to set out why the Coyotes lease is so terrible. Please compare it to the situations where a) the Coyotes would have to build their own arena with their own funds, pay debt service charges and property taxes (as is the case with most Canadian NHL teams and several USA teams) or b) other NHL teams' leases. I'm not saying the Coyotes have the best deal in the league, but it is not terrible as far as I can surmise.

Perhaps the most ridiculously 'sweetheart' deal was obtained by the Nashville Predators. In fact, the city of Nashville not only built the arena, handed over the keys to the Predators, but paid in addition a large portion of the expansion fee in order to induce the original owner to bring an NHL team to Nashville. After he gave up, the city subsequently offered even more concessions to the current owners. I concede that the Predators likely have a better lease, but that does not mean the Coyotes lease is 'terrible.'

GHOST

See below. Plenty of opinions by many contained within.

Whileee · Dec 4, 2010

RR said:
It has been posted here numerous times who paid what to get the arena built. I suggest you review the material. And while you're reviewing you should come across hundreds of posts that give some insight into why any business should have the ability to access at least portions of some new revenue streams it creates to keep its business going.

But what is wrong with Arena Management wanting to charge patrons for parking over-and-above the $2.70 ticket fee it pays to the COG? I say nothing. The current lease says otherwise. That's one of the reasons everyone is looking at a CFD.

Okay, I'll bite. Remind me exactly how much the Hulsizer group paid towards the building of the arena? After all, they are the ones that Glendale is being asked to provide concessions for, including subsidies from area businesses.

Going forward, suppose that the Coyotes continue to pay Glendale about $4 million a year for the use of the arena. In return, Glendale pays $25 million this year, and arranges for up to $100 million in subsidies over the next 5 years? Sounds like an okay deal to me. And if you can wrangle out a clause that allows you to recoup your investment or leave in 5 years, so much the better, though it would probably create a bit of annoyance with the businesses that have been asked to contribute via the CFD almost as much to the Coyotes as the owners have done. If I were a local business owner being asked to contribute substantially to a CFD I would want an ironclad guarantee from the owner that he is keeping the team in Glendale for a very long time.

Oh, and if the owners are bummed out because Glendale won't let them charge extra for parking to make an extra bit of money, here's an idea: raise ticket prices. After all, it comes out of the same pocket, does it not? I have always been curious about the magic of the CFD. Somehow patrons who can't abide higher prices for tickets etc. now will have no problem if they pay extra because it is routed via a CFD. Curious logic, I think.

RR · Dec 4, 2010

Whileee said:
Okay, I'll bite. Remind me exactly how much the Hulsizer group paid towards the building of the arena? After all, they are the ones that Glendale is being asked to provide concessions for, including subsidies from area businesses.

Going forward, suppose that the Coyotes continue to pay Glendale about $4 million a year for the use of the arena. In return, Glendale pays $25 million this year, and arranges for up to $100 million in subsidies over the next 5 years? Sounds like an okay deal to me. And if you can wrangle out a clause that allows you to recoup your investment or leave in 5 years, so much the better, though it would probably create a bit of annoyance with the businesses that have been asked to contribute via the CFD almost as much to the Coyotes as the owners have done. If I were a local business owner being asked to contribute substantially to a CFD I would want an ironclad guarantee from the owner that he is keeping the team in Glendale for a very long time.

Oh, and if the owners are bummed out because Glendale won't let them charge extra for parking to make an extra bit of money, here's an idea: raise ticket prices. After all, it comes out of the same pocket, does it not? I have always been curious about the magic of the CFD. Somehow patrons who can't abide higher prices for tickets etc. now will have no problem if they pay extra because it is routed via a CFD. Curious logic, I think.

The original "lessee," who also happened to be (and still is, AFAIK) the owner and developer of Westgate, contributed $40M to the building of the arena. We've established, I think, that Ellman's interest was always his Westgate development. That's where he expected to generate his significant revenue streams.

I'm sure he calculated he could afford to sign a restrictive lease that kept his obligations to the City down while foregoing future team and arena revenue opportunities other than hiking ticket prices. He did not care about how much his hockey team made. He was willing to cede much of it to the City. He cared what Westgate would make, because he projected that would dwarf hockey/arena revenues. And he negotiated a lease accordingly.

Was he a fool? In hindsight I'd say a first-class one. But you and others are suggesting that a new owner ignore the fact that the lease was negotiated from Ellman's perspective as the lessee who would be the recipient of all Westgate revenues.

Talk about curious logic.

peter sullivan · Dec 4, 2010

sounds like yet another excuse deflecting the failure of the coyotes away from the obvious....the fan base.

RR, can you articulate a few reasons why you believe the lease was worse than that of most other NHL franchises?....the 50 links is a bit much....just indulge us and outline briefly a few simple reasons for your assertion....

ghost has made some very valid points....to be handed a capital investment free arena without taxes and all the revenues from its use seems to me to be a very nice arrangement....not many others have that luxury.

you have said that the owners were not allowed to charge for parking (why was that exactly?)....it seems to me that if that was really an issue it could have been renegotiated...compared to the gymnastics they are going through now to provide new revenue to the team owner, that one would have been a slam dunk....

is it possible that the owners felt that charging for parking would be a deterent to their efforts in attracting fans to the games?....coyotes fans have enjoyed tickets at 2/3 the league average with free parking and still only manage 12000 in the building over 15 years....it seems likely that a parking fee would have only added to the myriad of reasons that fans in phoenix have stayed away.....if fans are willing to pay that money to go to games, but the owners were not allowed to charge it because of some clause in the lease, why not simply raise the ticket price somewhat to cover that restriction....again i suggest that they felt they couldnt.

if not being able to charge for parking is the only reason you feel the lease was restrictive, i would argue that it was outweighed by the restrictions put on the owners by the weak market.

Whileee · Dec 4, 2010

RR said:
The original "lessee," who also happened to be (and still is, AFAIK) the owner and developer of Westgate, contributed $40M to the building of the arena. We've established, I think, that Ellman's interest was always his Westgate development. That's where he expected to generate his significant revenue streams.

I'm sure he calculated he could afford to sign a restrictive lease that kept his obligations to the City down while foregoing future team and arena revenue opportunities other than hiking ticket prices. He did not care about how much his hockey team made. He was willing to cede much of it to the City. He cared what Westgate would make, because he projected that would dwarf hockey/arena revenues. And he negotiated a lease accordingly.

Was he a fool? In hindsight I'd say a first-class one. But you and others are suggesting that a new owner ignore the fact that the lease was negotiated from Ellman's perspective as the lessee who would be the recipient of all Westgate revenues.

Talk about curious logic.

I didn't know Ellman was currently in the running to buy the team. In any case, the document that I posted from the Arizona Republic shows the revenues that Glendale has received from Arena Management since 2003. The total is $22.8 million, or under $4 million a year.

But I am addressing my comments to the current lease negotiations, which according to the two publicly released MOUs look nothing like previous leases. My point is that the lease arrangements that have been contemplated over the past several months indicate that the new owners would receive much more in financial benefits than they could reasonably be expected to contribute back to Glendale or the surrounding businesses. To repeat, in return for $4 million in annual payments to Glendale and the patronage of Coyotes fans at a couple dozen businesses in Westgate the City of Glendale has committed to paying $25 million for operating losses this year, and ensuring a subsidy revenue flow from the arena properties and surrounding businesses of at least $100 million over the next several years. Instead of revisiting Ellman's lease, I would be interested in hearing why the City of Glendale and Westgate businesses are so desperate to give this much subsidy to the Coyotes when the return is evidently much less than that. My own theory is that the motivation is based on a strong theme of hubris involved around the reputation of Glendale as a municipality and fear amongst the politicians of being seen to have made serious financial miscalculations when investing in the arena project. That is a different motivation than purely financial, and I can certainly understand politicians being motivated by such things. However, I suspect that the businesses that would have to participate in the CFD would take a more pragmatic financial approach to their decision-making.

Fugu · Dec 4, 2010

Can it possibly be time again for a new thread title? :facepalm:

There were some good ideas posted by some of the users. Anyone want to refresh me?

@Whilee. A question I've asked several times. What possible financial gain is there to Glendale by handing over per annum 5-6x the amount they receive? I believe your view of motivational factors is pointing the right direction.

Pricing intangibles is always a slippery slope.

Whileee · Dec 4, 2010

Fugu said:
Can it possibly be time again for a new thread title?

There were some good ideas posted by some of the users. Anyone want to refresh me?

@Whilee. A question I've asked several times. What possible financial gain is there to Glendale by handing over per annum 5-6x the amount they receive? I believe your view of motivational factors is pointing the right direction.

Pricing intangibles is always a slippery slope.

Thread titles? The Led Zeppelin addition...

"Babe, I'm Gonna Leave You"
"Heartbreaker"
"Dazed and Confused"
"The Battle of Evermore"
"Celebration Day"
"Achilles Last Stand"
"Song Remains the Same".

Evil Doctor · Dec 4, 2010

Fugu said:
Can it possibly be time again for a new thread title?

There were some good ideas posted by some of the users. Anyone want to refresh me?

Since we're still in wait mode, I still prefer...

"Waiting for Guffman...er...Hulsizer....anybody"

Faltorvo · Dec 4, 2010

I gotta go with "the battle of evermore" it just sums it up to a T.

Fugu · Dec 4, 2010

Faltorvo said:
I gotta go with "the battle of evermore" it just sums it up to a T.

Yeah, I kinda like that one too.

headsigh · Dec 4, 2010

GHOSTofMAROONSroad said:
Isn't it nice to know that the local politicos have become big time business persons that don't mind making huge bets and taking risks with the tax payers' monies. And then they claim they haven't even come up with a Plan B?

GHOST

Did the City of Winnipeg have a contingency plan if the Jets left? Curious.

headsigh · Dec 4, 2010

Whileee said:
Thread titles? The Led Zeppelin addition...

"Babe, I'm Gonna Leave You"
"Heartbreaker"
"Dazed and Confused"
"The Battle of Evermore"
"Celebration Day"
"Achilles Last Stand"
"Song Remains the Same".

Gonna suggest a line from one of my favorite bands: "When the smoke clears, you can consider us even."

Whileee · Dec 4, 2010

headsigh said:
Did the City of Winnipeg have a contingency plan if the Jets left? Curious.

It sure looks like it.

Without the financial stress of supporting a money-losing NHL team with an unsuitable arena and an unfavourable business model...

1) Build a new arena.
2) Put in a highly successful AHL team to make a ton of money.
3) Make the new arena one of the busiest and successful in N. America.
4) Pay off the arena.
5) Build a business partnership with the richest man in Canada.
6) Create a "sports and entertainment district" to generate economic development and a business model that would support an NHL franchise.
7) Buy an NHL franchise that can thrive in the new financial system and with a successful business model.

How does that sound?

Dado · Dec 4, 2010

Whileee said:
How does that sound?

But...that sounds like real work!

Borrow-spend-pray sounds way sexier.

Dado · Dec 4, 2010

A coyote is a canine, right? I vote for Iggy Pop's "I Wanna Be Your Dog".

cbcwpg · Dec 4, 2010

headsigh said:
Did the City of Winnipeg have a contingency plan if the Jets left? Curious.

Not really, and thats a good thing.

One of the primary reasons that TNSE is successful today and has a workable business plan is because the City of Winnipeg gov't ISN"T involved. If you want to do something right, keep political hacks out of it as much as possible.

You can use gov't to help finance the building of the arena per-say, but keep the gov't away from running the day to day business.

Part XIV: Phoenix Coyotes - To Infinity And Beyond....

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Who's this ABD guy??

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leave at once!

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