Glendale shares details of deal with potential Phoenix Coyotes buyer

Posted on June 04, 2012 | Type: Issue
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By Lisa Halverstadt and Cecilia Chan, AzCentral 

A proposed 20-year agreement with a likely Phoenix Coyotes buyer may cost Glendale more than $45 per resident each year over the life of the deal.
 
The city appears poised to pay a group led by former San Jose Sharks chief executive Greg Jamison nearly $325 million over 20 years to operate and make improvements to the city-owned Jobing.com Arena.
 
An Arizona Republic analysis of a draft released Monday by the city showed Glendale expects to collect less than half that amount via ticket surcharges, rent, sales tax and other team fees during the same period.
 
The Glendale City Council is expected to discuss the proposed agreement at a public workshop Thursday but the city has not set a time for the meeting nor has it scheduled a vote on the deal. A 4-3 council majority would be needed, and the vote is likely to come within a week.
 
The agreement with Jamison follows a series of challenges for Glendale leaders. The city closed a $35 million spending gap in the upcoming year's budget with layoffs, tax hikes and service cuts.
 
Glendale also has spent the past three years trying to secure a new owner for the Coyotes. The National Hockey League has owned the team since 2009 when then-owner Jerry Moyes entered the team into bankruptcy. A handful of potential buyers have come and gone and Glendale has pledged two, $25 million payments to the NHL to cover team losses.
 
Glendale and NHL leaders are now banking on Jamison, a longtime sports executive who turned around another financially struggling West Coast hockey team, the San Jose Sharks. Jamison has said he hopes to capitalize on the Coyotes' deep playoff run this season to increase ticket sales and bring in more sponsorships for the team.
 
But such success may not translate into smaller payments for Glendale.
 
A Republic analysis revealed that even if the Coyotes went to the Stanley Cup Finals for the next 20 seasons and the arena booked 30 sold-out concerts each year for the next 20 years, Glendale could still expect to lose about $9 million annually.
 
That figure does not include the city's annual arena debt payments, which will average about $12.6 million a year over the next 20 years.
 
Longtime Glendale Mayor Elaine Scruggs, who has said next year's budgeted $17 million arena management fee is too steep, said Monday she cannot support the deal.
 
The current deal allows Jamison to keep all revenues to offset expenses and anything left over from the city's arena fee of $10 million to $20 million a year will help run the hockey team, Scruggs said.
 
The mayor said she's also concerned that Glendale will hand over $24 million for capital improvements at the arena when the city's own capital improvement budget is low on cash, prompting the council to proceed with a 61-cent secondary property tax hike that will be phased in over two years and will sunset in 2017.
 
Even with the tax hike, Glendale residents won't see the construction of new city facilities or park upgrades for at least the next five years.
 
"We are telling our residents we will not build anything, any city facilities or amenities," Scruggs said. Instead, "we are putting our money into (the arena's) capital improvements. Something is very wrong there."
 
But other city officials say keeping the Coyotes is best for Glendale.
 
Councilwoman Joyce Clark, an ardent Coyotes supporter, has said arena debt and operation costs exist whether the team stays or goes. She did not return requests for comment Monday.
 
Having the team helps Glendale pay those bills, Clark said.
 
Other Glendale officials have emphasized the economic benefits of the team, including dozens of jobs and increased business at the sports and entertainment complex that surrounds the arena.
 
At an April budget workshop, Deputy City Manager Jim Colson said a city-commissioned analysis by TL Hocking & Associates projected Glendale could expect to bring in an average of $15.7 million annually over a 20-year lease with Jamison and $6.5 million without the Coyotes.
 
Hocking's projections have been far more dire in the past.
 
A 2009 study the consultant completed for Glendale assumed all city sales-tax revenue the surrounding Westgate City Center and fees from the arena would halt if the team left, adding up to a $500 million loss for Glendale over 30 years.
 
Jamison's deal with Glendale gives him a financial incentive to keep the team in the West Valley city.
 
The city's draft non-competition and non-relocation pact calls for $250 million to $350 million in damages should Jamison choose to move the team.
 
Under the lease agreement, Jamison has an option to buy the arena and is obligated to attempt to change the team's name to the Arizona Coyotes. He also must promote Glendale's financial support of the team in Coyotes programs and at the arena.
 
It was not immediately clear whether the Phoenix-based Goldwater Institute would challenge the deal with Jamison. The conservative watchdog group is reviewing the deal to see if it could be in violation of the Arizona gift clause, which bars illegal subsidies to private businesses.
 
Glendale said in a statement Monday that independent experts have expressed confidence the deal does not violate the state's gift clause.
 
The city's deal with Jamison calls for both parties to carry an equal burden if the conservative watchdog group or another entity brings a legal challenge.
 
Sports economist John Vrooman said the team brings intangible benefits to Glendale, but the balance sheet may not add up for taxpayers. "(The city) needs to make sure the costs and benefits are all lined up and match up," said Vrooman of Vanderbilt University. "The benefit and the cost doesn't seem to match up in this case."
 
 
 

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