Phoenix CXI: Awaiting CoG arena manager decision [UPD: AEG new Arena Manager?]

[GuelphStormer]

I think the context was revenues so it's fair to isolate those amounts. But it's equally fair to say that SMG was entirely capable of booking the same non-hockey events so from the revenue amounts above, how much were attributable to the Coyotes? Luckily the report has line items.

FY15: approx $3.75MM
FY14: approx $3.5MM

Obviously that's no where near "some $7-8 million" but specifics rarely matter in these things

As for how much does IA pocket, their own budget submission for fiscal year ending 6/30/16 forecast a profit of $9,476,425. So, no, IA didn't pocket it all. They only pocketed 2/3rds of it.

see 15-16 proposed budget: https://www.glendaleaz.com/finance/documents/CityofGlendaleBudgetPackage2015-16.pdf

and for fun, see 14-15 proposed budget: https://www.glendaleaz.com/finance/documents/IceArizona-FY14-15BudgetPackage.pdf

 

[Bonsai Tree]

Okay, so now the idea is that one of the first nations might build the Coyotes a new arena in a favorable location, and possibly subsidize the hockey operations?

I'm not dreaming this up, am I?

A little familiarity with the area would do wonders for your sense of amazement. Native Americans don't call themselves "1st Nations" over here. The nation in question already has a beautiful spring training facility to go along with entertainment and casino operations. They have the money and cash flow to build an arena. Gambling and sports are synergistic so the whole idea of building an arena next to the spring training facility and across the highway from the casino and show venue is not the least bit farfetched.

 

[TheLegend]

That web site is sourcing both the Monthly Arena Reports and Glendale's Follow Your MONEY and consolidating/comparing both figures, which never seem to figure, as is also noted in Glendale's own compliance/audit report...

Maybe.... But a "source" which uses another source often leads to "interpretation issues."

 

[Ciao]

A little familiarity with the area would do wonders for your sense of amazement. Native Americans don't call themselves "1st Nations" over here. The nation in question already has a beautiful spring training facility to go along with entertainment and casino operations. They have the money and cash flow to build an arena. Gambling and sports are synergistic so the whole idea of building an arena next to the spring training facility and across the highway from the casino and show venue is not the least bit farfetched.

Nothing could be more logical. Like peas and carrots!

Why don't they just buy the whole franchise and really have a go at it?

Where have they been until now?

Do any other Native American organizations house pro-sports franchises to supplement their gambling operations?

 

[TheLegend]

Nothing could be more logical. Like peas and carrots!

Why don't they just buy the whole franchise and really have a go at it?

Where have they been until now?

Do any other Native American organizations house pro-sports franchises to supplement their gambling operations?

Not that I know of but there were some attempts. The Gila River tribe had made a bid to build the NFL Cardinals stadium on their land. As did the Fort McDowell band.

Gila River would have won the bidding but a state law preventing public funds being invested on tribal property blew it up.

 

[Dirty Old Man]

Where have they been until now?

They've just been sitting there silently.

Their first casino hasn't even been open as long as the NHL team's been in Arizona. When I moved to AZ in the mid 90s, that reservation was a vast, dusty expanse. Now it's a vast, dusty expanse with casinos, shopping, and sporting facilities cozied up to its (long) western boundary with the cities of Scottsdale and Tempe.

Casino_Arizona

 

[TheLegend]

I think the context was revenues so it's fair to isolate those amounts. But it's equally fair to say that SMG was entirely capable of booking the same non-hockey events so from the revenue amounts above, how much were attributable to the Coyotes? Luckily the report has line items.

FY15: approx $3.75MM
FY14: approx $3.5MM

Obviously that's no where near "some $7-8 million" but specifics rarely matter in these things

As for how much does IA pocket, their own budget submission for fiscal year ending 6/30/16 forecast a profit of $9,476,425. So, no, IA didn't pocket it all. They only pocketed 2/3rds of it.

SMG?? You mean Spectra don't you? Without specifics of course.

 

[The Feckless Puck]

Okay, so now the idea is that one of the first nations might build the Coyotes a new arena in a favorable location, and possibly subsidize the hockey operations?

I'm not dreaming this up, am I?

In fairness, this isn't the first time that an Arizona tribal entity has forwarded the idea of doing something with the Coyotes. Back in 2011-2012, the Tohono O'Odham nation nearly became 50% owners with Greg Jamison after the Goldwater Institute suggested the idea, since at the time the GI was contesting legal ramifications of potential leases that would not exist with the tribe. Glendale blocked the idea because they were in the middle of suing the Tohono O'Odham nation over the casino they were building on the tribe-owned land immediately north of Westgate (a lawsuit that ultimately was fruitless - the casino recently opened for business despite Glendale's best efforts).

And that leads to the answer to your next question...

Do they like hockey that much?

...what they like is increased business opportunity for their gaming facilities, and professional sports is one very powerful way to do that.

This conceivably is a big opportunity for the Salt River tribe - a pro sports franchise cut loose from their anchor facility and city, but still looking for a home within the market, is an extreme rarity. Put that together with the stupendous profits from their casino businesses, a plot of reservation land that coincidentally is within easy reach of the richest corridor in the metro Valley which also just happens to have a new MLB spring training facility, and the ability to proceed financially without all of the red tape that accompanies these sorts of deals outside of their "airspace" - well, it's not hard to see an opportunity there.

Now, as it was mentioned upthread, the really big fish in the market is the Phoenix Suns, but as has also been mentioned, the Suns' timeline is much less stringent. It could be years before they're even in a position to start negotiating for the new arena they want. Yes, the Salt River tribe wants the Suns and wants them badly, but the Coyotes and a new multipurpose entertainment facility is not a bad consolation prize for a nation looking to make a big splash on the Valley.

 

[MNNumbers]

SMG?? You mean Spectra don't you? Without specifics of course.

Legend,

If I could try to honestly clear this matter up.

The best way to think about it goes like this:

Yes, IA was contracted to receive 15M/yr from Glendale. This is indisputable. The part that flowed back to Glendale was not really arena revenues, as you suggested earlier. It was newly invented parking and ticket surcharges, so those amounts don't help us at all.

However, from SMG's bid to operate the arena in 2013, we do know that, upon looking at the financials, they were offering to operate the arena for a fee that would be a share of the profits over and above a base. The particular base from which they bid was that the arena ran at a 5.5M/yr loss in the years prior to that.

That's really all we need to know.

It means that IA was going to be about 9.5M in the black every year, if they were able to operate in the same efficiency that the NHL had been in years prior to that. And, then subtract 500K rent, for a final figure of 9M to the good.

This year, of course, it's different. CoG is only paying 6.5M. If the arena loses 5.5M, then IA is going to net about 1M. Figure the 500K rent, and IA is 500K in the black, plus whatever of those surcharges for tickets and parking continued to be in play.

Next year, if they still play there, they are required to pay 500K rent, and then they receive initially nothing else (according to the amended lease), except all game night revenues, which include tickets, concessions, and parking. And, the new manager does not have the right to add surcharges or parking without Coyote consent.

If you don't believe my analysis of SMG's bid, I will dig it out. It's tedious to get there.

Thanks.

 

[Ciao]

In fairness, this isn't the first time that an Arizona tribal entity has forwarded the idea of doing something with the Coyotes. Back in 2011-2012, the Tohono O'Odham nation nearly became 50% owners with Greg Jamison after the Goldwater Institute suggested the idea, since at the time the GI was contesting legal ramifications of potential leases that would not exist with the tribe. Glendale blocked the idea because they were in the middle of suing the Tohono O'Odham nation over the casino they were building on the tribe-owned land immediately north of Westgate (a lawsuit that ultimately was fruitless - the casino recently opened for business despite Glendale's best efforts).

And that leads to the answer to your next question...



...what they like is increased business opportunity for their gaming facilities, and professional sports is one very powerful way to do that.

This conceivably is a big opportunity for the Salt River tribe - a pro sports franchise cut loose from their anchor facility and city, but still looking for a home within the market, is an extreme rarity. Put that together with the stupendous profits from their casino businesses, a plot of reservation land that coincidentally is within easy reach of the richest corridor in the metro Valley which also just happens to have a new MLB spring training facility, and the ability to proceed financially without all of the red tape that accompanies these sorts of deals outside of their "airspace" - well, it's not hard to see an opportunity there.

Now, as it was mentioned upthread, the really big fish in the market is the Phoenix Suns, but as has also been mentioned, the Suns' timeline is much less stringent. It could be years before they're even in a position to start negotiating for the new arena they want. Yes, the Salt River tribe wants the Suns and wants them badly, but the Coyotes and a new multipurpose entertainment facility is not a bad consolation prize for a nation looking to make a big splash on the Valley.

Not surprisingly, it sounds like Anthony LeBlanc may have found the Land of Milk and Honey.

You know, it was so cold in Ontario last week that I heard someone say he thought he saw Anthony LeBlanc with his hand in his own pocket. Well it turned out not to be true, but if the Clowns can fund their hockey losses with casino subsidies they might never have to put their hands in their own pockets again.

This is all very illuminating, but one thing I'm not that clear on: with a new casino just built around the corner, why would the Coyotes have to change venue at all to try to squeeze some kind of ongoing subsidy out of the casino operators?

I would expect that the traffic at the Gila River Arena is already generating untold gambling profits for the casino nearby. With Anthony's nose for other people's money, I wonder if you could squeeze some cash out of the casino operators to tide them over until a new arena is built – or to prevent them from moving to another location entirely?

Here they have been extorting the municipality for operating subsidies when the municipality is broke.

It would make a lot more sense to enter into a "partnership" with a different kind of entity that is flush with cash, and there seems to be no shortage of them in the area.

Being completely unfamiliar with the area, as I am, I am hoping that those with greater knowledge will continue to educate me.

 

[CasualFan]

SMG?? You mean Spectra don't you? Without specifics of course.

No, I meant SMG because that was the company when it bid on management services in 2013. Since the discussion was in context of FY14 & 15, it made sense to use the legacy name that was on the bid. But if you want to try to equate my using SMG to your completely erroneous revenue numbers, that's cool with me.

 

[TheLegend]

Legend,

If I could try to honestly clear this matter up.

The best way to think about it goes like this:

Yes, IA was contracted to receive 15M/yr from Glendale. This is indisputable. The part that flowed back to Glendale was not really arena revenues, as you suggested earlier. It was newly invented parking and ticket surcharges, so those amounts don't help us at all.

However, from SMG's bid to operate the arena in 2013, we do know that, upon looking at the financials, they were offering to operate the arena for a fee that would be a share of the profits over and above a base. The particular base from which they bid was that the arena ran at a 5.5M/yr loss in the years prior to that.

That's really all we need to know.

It means that IA was going to be about 9.5M in the black every year, if they were able to operate in the same efficiency that the NHL had been in years prior to that. And, then subtract 500K rent, for a final figure of 9M to the good.

This year, of course, it's different. CoG is only paying 6.5M. If the arena loses 5.5M, then IA is going to net about 1M. Figure the 500K rent, and IA is 500K in the black, plus whatever of those surcharges for tickets and parking continued to be in play.

Next year, if they still play there, they are required to pay 500K rent, and then they receive initially nothing else (according to the amended lease), except all game night revenues, which include tickets, concessions, and parking. And, the new manager does not have the right to add surcharges or parking without Coyote consent.

If you don't believe my analysis of SMG's bid, I will dig it out. It's tedious to get there.

Thanks.

No... no need to. You've always been thorough as you can be and I appreciate that.

But I am a bit confused as to why we're suddenly using a proposed bid from 2013 to grade what has occurred since then. Because there are no guarantees SMG could have met what they proposed.

However in my previous post I was merely wondering if CF was referring to Spectra in his post instead of SMG?

 

[The Feckless Puck]

This is all very illuminating, but one thing I'm not that clear on: with a new casino just built around the corner, why would the Coyotes have to change venue at all to try to squeeze some kind of ongoing subsidy out of the casino operators?

I would expect that the traffic at the Gila River Arena is already generating untold gambling profits for the casino nearby. With Anthony's nose for other people's money, I wonder if you could squeeze some cash out of the casino operators to tide them over until a new arena is built – or to prevent them from moving to another location entirely?

Well, herein lies the rub. The Salt River-Maricopa Indian community that is the potential arena builder/partner I've been referring to is a different entity than the Tohono O'Odham Nation whose little rectangle of reservation land (which IIRC exists because of a clever bit of gerrymandering) lies north of Westgate. And it is crucial to point out that a potential Salt River arena would be built wholly on tribally-owned reservation land, whereas the Tohono parcel does not include the Westgate land, which is owned by the City of Glendale.

The anecdote I offered upthread about the Tohonos' interest in buying a half-stake in the team in 2012 is interesting in historical context, but the ownership interest extended largely as a way to grease the skids with Glendale for the Tohono casino. Now that there is not an ownership stake available (although I doubt Leblanc and co. would turn down their money if they offered it) and their casino is built and running, the conditions where they might have had any interest no longer exist.

It is also very important to note that Leblanc has not just burnt bridges with Glendale, he nuked them from orbit, salted them with weaponized herpes, and left a giant bag of flaming poop on the City of Glendale's front porch. He has done this because it is the best way to keep making Glendale out to be the villains in this story when, in fact, anyone who has even a cursory knowledge of the audit performed by the City knows that the reverse is true. So staying in Glendale for longer than it takes to get a new facility built or, alternately, to work out a deal to move to downtown Phoenix temporarily until a new facility is built, is not an option whatsoever.

 

[MNNumbers]

No... no need to. You've always been thorough as you can be and I appreciate that.

But I am a bit confused as to why we're suddenly using a proposed bid from 2013 to grade what has occurred since then. Because there are no guarantees SMG could have met what they proposed.

However in my previous post I was merely wondering if CF was referring to Spectra in his post instead of SMG?

I am sorry if my description was not clear. SMG's bid did not PROPOSE a 5.5M/yr loss, it REFERENCED that that was the loss in the years before that. They were suggesting that as a base, and then saying, "We will do better, and share the 'betterness' with you."

The only piece of that I want to refer to is their 5.5M/yr loss REFERENCE. That was their conclusion from looking at the books. That number is the best number we will ever find about "how much does it actually take to run the arena."

They were saying, "This arena ran a 5.5M loss averaged over the last years." If you want to know what IA actually got from CoG, then take the 15M fee they received, assume that all arena profits and losses came and went from IA's pockets and do the math.

That's the result. If you compare IA's situation with the AMF to without a management contract, the difference is that their position is 9M weaker without it.

I thought that was what you wanted to do. You seemed to be saying "The 15M was not free and clear. It came with responsibilities, too."

So, I guess my real question is "Are you discussing the CoG position without the team, or the IA position without the management fee?"

Because, again, the question here seems to go like this:

Apparently, IA is not going to be playing at GRA long-term. For them to stay in the Valley, what is necessary?

Most here suggest that they need lots of revenues to cover the current losses. Many here suggest a move downtown will benefit them in better ticket and in-house sales. Many here question how much of a management contract IA might expect in a shared facility.

Thus, we were talking about how much benefit IA actually had from their AMF.

Now, I would like to ask another question TL. Do your current tickets have any surcharges on them? And, are the parking fees from last year still in play?

 

[TheLegend]

No, I meant SMG because that was the company when it bid on management services in 2013. Since the discussion was in context of FY14 & 15, it made sense to use the legacy name that was on the bid. But if you want to try to equate my using SMG to your completely erroneous revenue numbers, that's cool with me.

My "erroneous numbers" were a lump estimate. I had actually lowered the amount from what I'd originally thought before posting. Based upon the original promise from IA that Glendale would get back roughly $9 million in revenues of the $15 million allocated for arena management, but that had come up short by $1-2 million each of the first two seasons (I'll even make it 2-3 if that'll make people feel better).

But if people want to compare that with an unproven proposal made two years ago that's fine by me.

 

[TheLegend]

I am sorry if my description was not clear. SMG's bid did not PROPOSE a 5.5M/yr loss, it REFERENCED that that was the loss in the years before that. They were suggesting that as a base, and then saying, "We will do better, and share the 'betterness' with you."

The only piece of that I want to refer to is their 5.5M/yr loss REFERENCE. That was their conclusion from looking at the books. That number is the best number we will ever find about "how much does it actually take to run the arena."

They were saying, "This arena ran a 5.5M loss averaged over the last years." If you want to know what IA actually got from CoG, then take the 15M fee they received, assume that all arena profits and losses came and went from IA's pockets and do the math.

That's the result. If you compare IA's situation with the AMF to withbeforemanagement contract, the difference is that their position is 9M weaker without it.

I thought that was what you wanted to do. You seemed to be saying "The 15M was not free and clear. It came with responsibilities, too."

So, I guess my real question is "Are you discussing the CoG position without the team, or the IA position without the management fee?"

Because, again, the question here seems to go like this:

Apparently, IA is not going to be playing at GRA long-term. For them to stay in the Valley, what is necessary?

Most here suggest that they need lots of revenues to cover the current losses. Many here suggest a move downtown will benefit them in better ticket and in-house sales. Many here question how much of a management contract IA might expect in a shared facility.

Thus, we were talking about how much benefit IA actually had from their AMF.

Now, I would like to ask another question TL. Do your current tickets have any surcharges on them? And, are the parking fees from last year still in play?

So far been to two games and didn't take a look at my ticket to see how the charges broke down. Wife made the purchases and I didn't see the reciept either. Parking is still the same as before.

 

[MNNumbers]

So far been to two games and didn't take a look at my ticket to see how the charges broke down. Wife made the purchases and I didn't see the reciept either. Parking is still the same as before.

OK. This is good information. Again, we are at the question:

Are we discussing Glendale's financials with or without the team?

Or, are we discussing the question "How much benefit did the team really gain from their 15m/yr?"

 

[Llama19]

Well, well...the February 23 agenda has been posted...

And, as predicted, it looks like Glendale will not be awarding AEG the arena contract until the next voting meeting on March 22...

That is, unless the council decides to hold a 'Special Voting' meeting sometime in March...

Looks like we are down to the Weiers (sic) once again...

 

[CasualFan]

My "erroneous numbers" were a lump estimate. I had actually lowered the amount from what I'd originally thought before posting. Based upon the original promise from IA that Glendale would get back roughly $9 million in revenues of the $15 million allocated for arena management, but that had come up short by $1-2 million each of the first two seasons (I'll even make it 2-3 if that'll make people feel better).

But if people want to compare that with an unproven proposal made two years ago that's fine by me.

The financial performance is documented so estimating it is not very difficult. Wait, let me amend that - it shouldn't have been very difficult. How people feel about the numbers is pretty irrelevant. But thanks for being willing to adjust your estimates to be closer to the actual performance?

The RFP responses are useful because they demonstrate the alternative. Both IA and SMG were capable of programming non-hockey events. It's not unproven because SMG had managed arenas and Jobbing.com had booked NHEs. The delta is the hockey revenue. That was the justification for giving IA $15MM instead of giving SMG $300k. Accordingly, isolating the hockey revenues shows what the city got in return for paying the larger AMF. Well, it shows the financial impact - it cannot measure the intangibles.

 

[MNNumbers]

The financial performance is documented so estimating it is not very difficult. Wait, let me amend that - it shouldn't have been very difficult. How people feel about the numbers is pretty irrelevant. But thanks for being willing to adjust your estimates to be closer to the actual performance?

The RFP responses are useful because they demonstrate the alternative. Both IA and SMG were capable of programming non-hockey events. It's not unproven because SMG had managed arenas and Jobbing.com had booked NHEs. The delta is the hockey revenue. That was the justification for giving IA $15MM instead of giving SMG $300k. Accordingly, isolating the hockey revenues shows what the city got in return for paying the larger AMF. Well, it shows the financial impact - it cannot measure the intangibles.

Another way of looking at the situation, CF......

For IA, they received 15M. Without trying to parse their own statements to CoG, which apparently are fraught with difficulty, I will simply say that their performance as managers was the same as NHL's. They lost 5.5M. (Note, if they did better than that, then this analysis looks worse yet for them). That leaves them a 9M profit for their contract. Now, as it happens, they did have to pay the supplemental surcharge, so that cost them in the neighborhood of 1.5M because they didn't book enough tickets. So, now they have about a 7.5M profit for the contract. (Again, if their managing skills were better, then this number is even higher for them).

That 7.5M has to be made up somewhere.

 

[GuelphStormer]

OK. This is good information. Again, we are at the question:

Are we discussing Glendale's financials with or without the team?

Or, are we discussing the question "How much benefit did the team really gain from their 15m/yr?"

good post. two different questions that were getting jumbled.

 

[TheLegend]

OK. This is good information. Again, we are at the question:

Are we discussing Glendale's financials with or without the team?

Or, are we discussing the question "How much benefit did the team really gain from their 15m/yr?"

good post. two different questions that were getting jumbled.

I agree.... both good questions.

I was looking at the latter one mainly. My original point was people keep using the $15M figure as if IA pocketed all of it and that is misleading.

But since Glendale had originally figured on $6.5M to operate the arena (with or without a hockey team) no one can say the extra money can be anything else than a subsidy. For which IA was supposed to return to the city through various revenues streams. including some never implemented before.

 

[rj]

The notion of pro sports benefitting from casinos when they are so anti-sports gambling irks me in general.

 

[MNNumbers]

I agree.... both good questions.

I was looking at the latter one mainly. My original point was people keep using the $15M figure as if IA pocketed all of it and that is misleading.

But since Glendale had originally figured on $6.5M to operate the arena (with or without a hockey team) no one can say the extra money can be anything else than a subsidy. For which IA was supposed to return to the city through various revenues streams. including some never implemented before.

Not sure how much irony and/or sarcasm is in the last part.

Of course, I mainly agree with this. The real point seems to me to be something like this:

The needed compare is:
IA as Arena Manager/Hockey Team vs Hockey Team only, with game night monies only

We are all aware that the arena operations/bookings/etc has been a money loser for CoG. We could choose whichever figure we want. Legend wants to use 6.5M, as that's the budget. I would choose 5.5M, since that is the figure SMG came to after looking at the books. But, whichever way you choose, it is reasonable to say that IA could expect to that as a NET LOSS, simply because they were managing the arena.

Now, balance that with the 15M/yr they got as a fee, and you have something like a 9M profit for them on the deal.

Note that this analysis cuts through all the details of surcharges, parking, etc. Those details really don't matter. The surcharges going back to COG were not monies that the team would have had if they were not managing the arena.

Also, I think it's fair to say that, because the team was required to pony up the supplemental surcharge because they did not sell enough tickets, that that surcharge should be subtracted as well.

Thus, my final answer is in the neighborhood of 7.5M/yr was their profit since they were managing the arena.

Legend's comment about getting the 15M back to Glendale through various means has been covered here multiple times. The reality of the whole system was that Fortress required the 15M for the loan payment. Everything that came afterward was smoke and mirrors on the part of IA and COG, both, to justify that and make it appear not as bad.

 

[CasualFan]

My original point was people keep using the $15M figure as if IA pocketed all of it and that is misleading.

Misleading? From Aug 2013 to Jan 2015, the entire $15MM (or prorata thereof) was paid directly to Fortress. The only misleading part was calling it an "arena management" fee. It was a franchise acquisition fee. Several corrupt members of Glendale staff and council agreed to let IA use public funds to secure a loan so IA could buy the team. Glendale routed the quarterly payments direct to FIG. Literally every penny of it. Keep fighting the good fight against misrepresentation though