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Why Glendale will regret keeping Coyotes

Ken Campbell, The Hockey News, 2012-05-07

It’s the perfect backdrop, isn’t it? Gary Bettman in Phoenix, almost three years to the day after former owner Jerry Moyes threw his ownership keys on the table, to announce the Coyotes have been sold just before the team puts a bow on the first second round series win in franchise history.

All will be well in Phoenix, then it’s time to move on to the Florida Panthers and New Jersey Devils, the next two teams requiring the league’s attention.

If only it were that easy. In fact, the prospective sale of the Coyotes might be nothing more than a shell game, with the objective of the game to extract as much money out of the good people of Glendale as possible. For example, if former San Jose Sharks CEO Greg Jamison is to purchase the Coyotes, the new lease could cost Glendale a total of $92 million over the next five years. And that could be with no guarantee the team stays beyond that time period.

According to one source close to such matters, there are a couple of major caveats to this deal.

“It might kick the can down the street by a few years,” the source said, “but that’s about it.”

That’s because there is speculation Jamison will not be required to sign an “unconditional guarantee” attached to his ownership. After Moyes essentially bailed on the Coyotes three years ago, the NHL made it mandatory for new owners to promise they’ll keep paying the bills ad nauseam. Hence the unconditional guarantee. Jeff Vinik had to sign one when he bought the Tampa Bay Lightning and Terry Pegula did the same when he purchased the Buffalo Sabres. The unconditional guarantee basically ensures the owner will be obliged to continue to throw unlimited amounts of money into the sinkhole without leaving the NHL to become a ward of the state.

(Deputy commissioner Bill Daly did not reply to an email asking about the terms of Jamison’s prospective sale.)

There is reportedly no such provision in the deal for the Coyotes with the NHL. The deal will be announced at about $170 million, but our source said it’s unlikely the actual money changing hands will amount to even $100 million. Remember, this is for a team Jim Balsillie was willing to pay $225 million to purchase not long ago.

The deal, of course, will be contingent upon Jamison negotiating a new arena lease with the City of Glendale, which should have anyone who pays property taxes in that city very, very nervous. According to Glendale council member Phil Lieberman, the new lease would cost the city $92 million in management fees over the next five years – $17 million next year, $20 million in each of 2014, 2015 and 2016 and $15 million in 2017. And while Lieberman hasn’t seen the entire proposal, he’s doubtful even that will be enough to keep the Coyotes in Phoenix long-term.

“Who knows?” Lieberman said. “Jamison says yes, but how do we know that’s not a bunch of bull? The NHL is the third owner of this team in the past five years and they’ve wanted $25 million a year to break even. How is Jamison going to make a profit? It’s impossible.”

Lieberman said the city, in return, receives only about $4.5 million per year in revenue, meaning that in order to keep the team in Glendale for another five years, it will cost a city of about 225,000 almost $70 million.

It doesn’t add up for people such as Lieberman. He said Global Spectrum manages the University of Phoenix Stadium, also located in Glendale, for about $9.2 million a year. Lieberman thinks the city can, without the Coyotes, hire someone to manage the facility for less money and attract more non-hockey events to the building to make it profitable.

“That’s where I’m coming from,” Lieberman said. “I’ve owned three businesses in Glendale. How much of a subsidy do you think the city has given me? None.”

Here’s a thought. Isn’t it time that perhaps the NHL did the right thing here and stopped holding this city hostage? Glendale is in for $50 million so far and if Jamison gets his lease, will have to pay another $92 million over the next five years. And so far, there is no guarantee from anyone the Coyotes will stay in Glendale long-term.

But Bettman is capitalizing on a feel-good situation in Glendale, where the team is winning and creating a short-term buzz. Hey, it might even win the Stanley Cup this spring. But does anyone really think that’s going to make one iota of difference in the long run? Will a long playoff run suddenly make the Coyotes profitable?

It’s highly doubtful. What is more likely is it will create a small, temporary spike in interest. None of the Carolina Hurricanes, Tampa Bay Lightning or Anaheim Ducks has seen its long-term numbers go up significantly because of their Stanley Cup titles.

Sources say just over 10 percent of the Coyotes revenues come from corporate business and that simply doesn’t cut it. No corporation is going to invest long-term in a team that can’t guarantee it will be there in a few years. Yes, there is a small, hardcore group of fans that might grow slightly in number, but filling a building with low-priced tickets 50 times a year is not a recipe for long-term success.

Greg Jamison will learn that and the good people of Glendale will continue to pay for a team that will always be in limbo.

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Grange on Coyotes: Bettman's bill of goods

Michael Grange, Sportsnet.ca, May 7 2012

In any other context, it would be a story as uplifting and inspirational as the Phoenix Coyotes' unlikely run through the Stanley Cup playoffs has been so far.

Tales of persistence and perseverance, of fighting uphill battles and somehow winning?

Sports fans — even hockey fans in Phoenix — lap that up, with good reason.

That might have explained the smile on NHL commissioner Gary Bettman's face as he introduced "tentative" (adjective courtesy of NHL.com) Phoenix Coyotes buyer Greg Jamison Monday night.

After all the doubters, from Jerry Moyes throwing the keys on the table to the Goldwater Institute making Matthew Hulsizer disappear to the cash-poor tire kickers who moved on wordlessly; to all the rumoured interested parties that were never interested enough to give names, Bettman was finally able to announce a buyer for the money-losing team.

He even got a live body, Jamison, the respected former president of the San Jose Sharks, to stand up and say it was so. And he did it in advance of home game with a full(ish) building expected to watch the plucky Coyotes try to advance to the Western Conference finals.

How's that for feel good?

What shame, and a sham.

If Bettman really wanted to hold a press conference that would please someone, anyone, that cares about hockey or about the NHL or about a mid-sized desert town already stretched past its financial limit, he'd announce the Coyotes were leaving, not staying.

The deal for an NHL team in Glendale will likely be so bad the community would be better off if the team simply went 'poof'. Surely the NHL and its players would be better served in a market where there was a fighting chance to make some money.

That's not going to happen in Glendale, based on track record.

According to long-time Glendale city councilor Phil Lieberman, the terms of the deal being given to Jamison — who has partners, apparently, but wouldn't name them — basically see him guaranteed $306 million in management fees for Jobing.com Arena over the next 21 years, or an average of $14.6 million a year. A large chunk of that money is front-end loaded, with Glendale on the hook for $92 million over the next five years.

So no, he and his backers — whoever they are — aren't complete fools to write a cheque for $170 million for a team that has lost more than $50 million the past two seasons despite a rock bottom payroll and consecutive playoff appearances.

The management fee seems like a pretty good deal for them, revenue sharing makes it better. Nearby University of Phoenix Stadium, home to the Arizona Cardinals of the NFL, carries a $9.2-million management fee annually.

Perhaps an even better comparison is the $50 million AEG paid upfront to Kansas City for the right to manage The Sprint Center (which was opened in 2007) through 2033. The arena was built with an eye toward attracting an NHL or NBA team. It never happened, but the city and the arena may be better off for it.

The flexibility the arena has in terms of dates without having to work around a sports team's schedule may actually off-set whatever benefits the facility might get from a sweetheart lease deal the club would surely command.

Since opening the Sprint Center AEG has turned a $6 million operating profit without an anchor tenant and been one of the busiest arenas in North America. So far the city's $14-million bond payment has been covered by a tax on rental cars and hotels. It's not like the city is swimming in cash thanks to their arena, but they're making it work and don't have the burden of under-writing a money-losing sports franchise.

Maybe that's why the former Ice Edge Holdings — who once tried to position themselves as buyers for the Coyotes — recently offered to run Jobing.com Arena for between $5-10 million if and when the NHL club does leave.

Who knows? There might be some money to be made running an arena in Glendale as long as you don't have to fork over $50 million in NHL salaries or more on top of it.

Lieberman has long been a vocal opponent of paying the NHL to stay in Phoenix from his seat on council, and he was no different when Bettman and his posse presented the deal to him in a conference room at city hall Wednesday afternoon.

They didn't change his mind, though it's expected a majority of the seven city councilors will approve the deal.

"If I had to choose between the Coyotes staying and them leaving, I wish they were leaving," said Lieberman.

It's not hard to see why, and they still may yet. Monday night's press conference aside, there are a lot of hurdles to overcome before a deal to keep the Coyotes out of Quebec City is reached.

The city of Glendale has to agree to the deal being sought by the Jamison group, and then a city with a $35-million budget shortfall has to figure out how to pay for it — no easy task given homeowners are already going to be hit with a 30 per cent property tax hike in August that will likely come with a layoff of city employees. There's also the matter of the watchdog Goldwater Institute deciding whether or not the deal is enough of an affront to taxpayers to make it worthwhile opposing through litigation.

Lieberman says he shudders to think what hockey in the desert has cost the city he's lived in, worked in and served for most of his life after returning from the Second World War.

"I figure about $134 million in cold hard cash so far," he said. "Wow is right."

And if this deal goes through it will only mean more of the same. Good money after bad, is the expression.

So come on Gary. What do you say? Do you really want to have press conference people can feel good about? How about giving Glendale, the NHLPA, hockey fans in Quebec City or even Southern Ontario a break and doing the right thing.

Next time you have an announcement to make in Glendale regarding the Coyotes, how about cutting the taxpayers a cheque for $10 million or so as a token of your appreciation, offering a heartfelt apology for everything that's happened and then get the hell out?