I think your point is well taken, and certainly one of the GI's concerns (no public bid). I was not trying to argue what the ultimate result would be if GI sues and a court decides the issue. My point was simply that it is not a $197M subsidy to Hulzy. The $97M is offset by substantial operating expenses, and Hulzy takes on risk the City passes off. And, the $100M payment shifts or assigns the right of the Coyotes to charge for parking, to the City. Since the City has never had the right to charge for parking on land it does not own, there certainly is consideration of the City's payment. How much is 30 years of parking for 5,500 spaces worth? I have no idea, but this is nothing like the City North case in terms of the shocking lack of consideration. Remember, City North does not stand for the proposition that cities cannot provide subsidies, just that there is a reasonable limit to what cities can do before the Gift Clause becomes an issue.
Part XVII: Phoenix -- This Thread Title Available For Lease
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I think your point is well taken, and certainly one of the GI's concerns (no public bid). I was not trying to argue what the ultimate result would be if GI sues and a court decides the issue. My point was simply that it is not a $197M subsidy to Hulzy. The $97M is offset by substantial operating expenses, and Hulzy takes on risk the City passes off. And, the $100M payment shifts or assigns the right of the Coyotes to charge for parking, to the City. Since the City has never had the right to charge for parking on land it does not own, there certainly is consideration of the City's payment. How much is 30 years of parking for 5,500 spaces worth? I have no idea, but this is nothing like the City North case in terms of the shocking lack of consideration. Remember, City North does not stand for the proposition that cities cannot provide subsidies, just that there is a reasonable limit to what cities can do before the Gift Clause becomes an issue.
crazycanuck900
Registered User
Matt Hulsizer baught the rights to that too.....GLendale is thinking to buy the thread for $100,000,000.
There are three items in play here:
1. Arena Operating Costs
2. Arena Revenues
3. Arena Management Fee.
He gets a fee equal to expenses AND the arena revenues to offset the expenses. That is what makes it an unusual and suspect agreement. The arena manager is double dipping.
As do the revenues.
The Arena Management Fee is highly suspect because the manager already receives essentially all of the arena revenues to offset the operational expenses. I mentioned this once before, but again, this is the most basic of profit vehicles: make more money than you spend. Or put into an equation:
(Arena Revenue) - (Operational Expenses) = Arena Manager Profit
Glendale could conceivably also provide a nominal fee for the actual service of managing the arena. I've seen this reported in other areas as perhaps $500k or $1MM per year. So clearly $17MM per year is a bit above market value. It certainly appears to be grossly disproportionate for the act of managing an arena. Glendale created this equation:
(Arena Revenue) + ($17MM Fee) - (Operational Expenses) = Arena Manager Profit
I would be interested to hear Mr. Tindall and the City of Glendale explain how paying Arena Operation Costs without receiving Arena Revenues in return is equitable consideration. Or I'd like to hear how paying an amount equal to Operational Costs is appropriate consideration for the act of Arena Management. If Glendale covers the expenses, why don't they get the revenues? If the Arena Manager gets the revenues, why are they paid a fee? No matter how you move the pieces, they don't appear to fit.
*Note: There is language in the agreement regarding how profit is distributed and what occurs if the fee is greater than the expenses, however, that language does not alleviate the underlying concern.
Arizona state had to sell government building to investor and lease them back to save needed money, Glendale has to issue bonds just to pay Hulsizer. When is this madness really going to stop ?
When does a city say enough is enough ?
When does a city say enough is enough ?
I read an article about Glendale, apparently if they lose the Yotes their credit worthiness would be knocked down a peg. Meanning the city would have to pay higher interest rates on it's loans.
MaskedSonja
Registered User
It's not going to stop. The city feels better to have a tenant and hope for large growth in that business district(and hope MH buys the arena in 5 years) and to recoup the losses by leasing 5000 parking spaces at 20 bucks a pop, than simply paying debt on an empty building which may or may not be 17 mil a year-judging by the debate on this thread.
Essetially-darned if they do, darned if they don't; just by doing it's going to cost extra $$$$$
MaskedSonja
Registered User
Isn't CoG already in massive debt? I would just wonder what their current credit worthiness is.
OthmarAmmann
Omnishambles
It is noteworthy that the total debt service and expenses could exceed $200 mm.
I suspect that they will be downgraded eventually anyway. The higher interest would probably only affect future borrowing, as the rate on a bond is typically set when it is issued.
Someone please correct me if i have this assumption wrong, I'm not fully versed with the Muni bonds.
If the Cog issues a $100m bond on a 30 year term at 7%, am i right in stating the total cost will be $310 million?
OthmarAmmann
Omnishambles
I'm out of the office so I can't check their current ratings, but I believe Moody's has them at Aa2. That's pretty good.
Between the arena management fee, the parking debt, and the debt on Camelback Ranch, they will be facing some serious pressure in the next few years.
OthmarAmmann
Omnishambles
About that, assuming all bonds mature after 30 years. If they pay off some along the way, the total interest would be less.
Again, just to clarify - according to the COG-NHL agreement, the NHL has been allowed to talk to out-of-towners all along. They have to wait for Jan. 1 to actually consummate an out-of-town agreement.
RR
Registered User
Depends on your standard. Even with the huge drop in housing values assessed property values in COG is ~$21B and total debt of ~$1B (that includes the $100M bond proposal in the latest lease). Credit rating is stellar.
Based on what? Assessed property values-to-debt ratio ~5% after going through one of the worst economic crisis in the last 70 years speaks very well for the city's fiscal responsibility. It had the foresight in good times to set aside revenues that allowed it to pay off debt early and soften the blow when the economy took a crap.
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I don't understand how a NHL franchise ties in towards the city's credit rating.
And what if Goldwater successfully challenges the lease and the possibility of the yotes leaving, i doubt the city would pay more for any outstanding debts.
Ok I've downloaded the June 30, 2009 Glendale F/S and I cannot find that $21B figure anywhere. Are you sure it wasn't $2.1B. I got the statements here:http://www.glendaleaz.com/finance/
On page 25 it show the statement of net assets which, in summary, says:
Assets of $2.3B less Liabilities of $1.3B for a net asset balance of ~$1B. Not that Glendale is in rough shape but I really questioned that $21B figure. Now I may not have the whole picture so if you can show me what I missed I'd be grateful.
edit: the city of Winnipeg which is 3X the size of Glendale has net assets of $4.3B so you can see my scepticism at $21B.
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Ok wait a sec now I'm confused a little, lol.
I know ,i know it happens easily, heh.
If i purchase a Muni bond with a 30 year term , your telling me they can buy me out before the 30 years is up?
RECCE
The Dog House
See attachment.
oops, didn't quite get it all.
Ending should read
...."transaction which would involve a relocation of the team to another city."
So ignore Goldwater's requests for documentation and then assume they won't sue based on the belief they are bluffing. Sounds like a great plan.
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crazycanuck900
Registered User
LadyStanley
Registered User
http://hockeyjobs.nhl.com/teamwork/r.cfm?i=33164
Coyotes announce job fair in February (Yotes, NBA Suns, MLB Diamondbacks, ASU, etc.)
Coyotes announce job fair in February (Yotes, NBA Suns, MLB Diamondbacks, ASU, etc.)
Tommy Hawk
Registered User
- May 27, 2006
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Nice summary. And the whole thing about it costing 18 million to operate does not factor in any of the revenues from the arena prior to this deal.
Not really. It depends if the bonds were issued at a discount or a premium. Let's say they want to issue the bonds at 6% interest but the market wants more than 6% for this issue. The bonds are sold at less than face value (let's say they sell at 95% of face) so the investor realizes more due to the discount. Coupon payments would be at 6%. This means that they need to issue more than $100 million in bonds in order to realize a net of $100 million, and this is without any issuing fees and costs which could also be in the millions and is usually deducted from the proceeds. So that $100 million issue could easily turn into an issue of $120 million on which they would pay 6% over 30 years.
Yes and no. It depends on the terms of the bonds (callable). It also depends on if you are willing to outright sell them on the secondary market where they can buy them back without them being callable.
Whole thing looks like a hedge fund deal designed to make a few people a lot of money at little risk to their own money.
peter sullivan
Winnipeg
- Apr 9, 2010
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i used to be a firm believer that the 31 december deadline was (like all previous deadlines) loose at the very best....if there was even a shred of progress it would be allowed to continue.
after seeing the panic in glendale's eyes last week, i am begining to think differently....they voted to accept what seemed to be an unfinished agreement, with all its to be determined revenue sources and such.....it looks to me that they felt the pressure to show the NHL that they are progressing.
all this leads me to speculate that the deadline might be a more significant milestone than i had originally considered.
i also didnt give goldwater much credit, but the deal seems so easy to pull apart that they might be a factor....they were lobbed a big fat watermelon and all they really have to do is swing at it....if it was even remotely difficult i suspect they would move along but im not sure how they can not step up to the plate on this one.
that big fat cheque collecting dust under that paper weight on bettman's desk must be looking pretty tempting at this point.
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