Coyotes to stay in Phoenix, apparently

[KW Sluggo]

Yeah because those 50 jobs could actually be saved by letting the arena sit empty???

Interesting observation however maybe you should ask the 50 families that are out of work whether they think it is a fair deal.

Also, one politician was quoted as saying that the arena should be able to secure enough bookings to service the debt even if the Coyotes leave town.  I rather doubt that particularly after that city council has thrown $50M down the rat hole and plans to toss in another $17M for good measure.

Why would they be giving away so much money if the Coyotes are not integral to the financial well being of the arena?

The number of lies, misstatements and half truths on the Coyotes ownership situation is about equal to the number of dollars involved.

 

[KW Sluggo]

As I suggested before, I hope RIM connects on their Hail Mary as well.

Hindsight is 20/20 but when you look back at the distraction Balsillie got himself into in 2009 going after the Coyotes, to some extent I can understand bitter shareholders wondering why he would allow something like that to take his eye off the ball at a time when his corporation needed 100% of his attention and focus. I'm sure the Coyotes didn't get 100% of his attention but it had to be a significant distraction with all the press coverage and lawyers.

The other interesting thing I got a sense of when I went through the introduction of the Playbook was similar to some things I felt when I went through the docket of court documents on Balsillie. This guy is a bit of a swashbuckler when it comes to managing things. That sometimes works well for an entrepreneur and sometimes it bites them. For Balsillie, it's probably been a bit of both.

I agree with Nik re his approach to the NHL. If he'd truly tried the front door properly, he'd probably be in the club. But from the outset, he schemed to save himself a buck. Everyone wants to save a buck but some wouldn't resort to the sorts of things Balsillie did for ethical reasons. Balsillie could have, for example, bought the Leafs and then sold them after he blessed expansion to Hamilton to get the Hamilton franchise. We may see Rogers and Bell do that. It wouldn't have been cheap but he might have made out ok financially and got his dream team. Over time, he definitely would have done well because he would wind up with a franchise that would probably be the 3rd or 4th most valuable in the league -which would dwarf what he'd have to pay for it and he'd get all the annual profits that would certainly have followed.

His net worth probably largely plummeted with the RIM stock so there's little chance of him being able to finance such a thing any time soon. With the collapse of RIM stock, maybe this has all worked out for the best even for him.

a bit of a swashbuckler ???

You are getting soft, you used to flat out call Balsillie a criminal.

 

[cw]

As I suggested before, I hope RIM connects on their Hail Mary as well.

Hindsight is 20/20 but when you look back at the distraction Balsillie got himself into in 2009 going after the Coyotes, to some extent I can understand bitter shareholders wondering why he would allow something like that to take his eye off the ball at a time when his corporation needed 100% of his attention and focus. I'm sure the Coyotes didn't get 100% of his attention but it had to be a significant distraction with all the press coverage and lawyers.

The other interesting thing I got a sense of when I went through the introduction of the Playbook was similar to some things I felt when I went through the docket of court documents on Balsillie. This guy is a bit of a swashbuckler when it comes to managing things. That sometimes works well for an entrepreneur and sometimes it bites them. For Balsillie, it's probably been a bit of both.

I agree with Nik re his approach to the NHL. If he'd truly tried the front door properly, he'd probably be in the club. But from the outset, he schemed to save himself a buck. Everyone wants to save a buck but some wouldn't resort to the sorts of things Balsillie did for ethical reasons. Balsillie could have, for example, bought the Leafs and then sold them after he blessed expansion to Hamilton to get the Hamilton franchise. We may see Rogers and Bell do that. It wouldn't have been cheap but he might have made out ok financially and got his dream team. Over time, he definitely would have done well because he would wind up with a franchise that would probably be the 3rd or 4th most valuable in the league -which would dwarf what he'd have to pay for it and he'd get all the annual profits that would certainly have followed.

His net worth probably largely plummeted with the RIM stock so there's little chance of him being able to finance such a thing any time soon. With the collapse of RIM stock, maybe this has all worked out for the best even for him.

a bit of a swashbuckler ???

You are getting soft, you used to flat out call Balsillie a criminal.

I don't recall "criminal" but I do recall things that looked illegal & unethical and things that if Rodier was a practicing lawyer could have got his ability to practice yanked. As Moyes hasn't been able to shake the $70 mil NHL lawsuit, obviously, at the very least, the courts still feel some of those allegations are worthy of closer scrutiny or the case would have been promptly dismissed. Time will tell though if I had to bet on it, Moyes will be paying something for his conduct of trying to go along with Balsillie's sleazy scheme.

The Ontario Securities Commission nailed Balsillie for $77 mil in fines and restitution in a stock options scam - largest in history and they made him step down as chairman. The SEC followed up, agreed with the OSC and also nailed him. Those activities were blatantly illegal and at the very least, more than flirted with being criminal.

And now his own company has punted him to the curb for pretty gross mismanagement of RIM.

Getting dinged for over $600 million in a patent suit that nearly shut down RIM where he could have settled for $23 mil wasn't a shining moment for Balsillie's appreciation of and willingness to follow the law.

It took time but at some point, a lot of people who worked with this guy or looked closely at what he'd done joined the dots against him legally and won big and handily. As I said in 2009, I wouldn't buy a stick of gum off him.

 

[Kin]

Why would they be giving away so much money if the Coyotes are not integral to the financial well being of the arena?

That's a fair question but it's one whose answer, I'd suspect, would end up being remarkably similar to the answer if you asked why a city the size of Glendale ever thought it would be a good decision to get into the business of subsidizing the construction of an arena for a NHL team.

I don't dispute the idea that Glendale is better off with the Coyotes than without the Coyotes. I just have a hard time believing it's worth anything close to what they're paying. I think the city has always been playing the long game. They figure that the Coyotes are worth, say, 10 million dollars a year to them and so by writing that initial 25 million dollar check a buyer would only have to keep the Coyotes around for three years for it to be a good investment. Even now at 67 million or whatever you're only talking about 7 or 8 years.

The flip side to that is that if the city wipes their hands of the mess right now then I'd imagine they'd all have some ugly questions to answer from their constituents about why they let this play out so long and cost them an additional 60+ million on top of what the whole debacle will end up costing them.

So it's snowballing. Each year they don't find an owner adds to the embarrassment they'd be in for if the team moves which entices them to keep propping this whole enterprise up. Personally, I find that to be a far more compelling answer than the idea that the Coyotes are worth 25 million dollars a year to anyone.

 

[Kin]

The issue they've been facing since Moyes bailed out is whether they can find a way where the subsidizing is less than what it would cost them if the tenant left. If they do (and quite frankly, they did long ago except for Goldwater & the gift clause)]

I have to be honest this is one of the things that remains kind of mystifying to me. While I remember some of your really good posts about some of the Goldwater Institute's other inconsistencies it really doesn't make sense to me how they could fight so vociferously against the idea of the city giving the money to Hulsizer and yet the city's giving the money to the NHL seems to be alright. If the arrangement the city has with the NHL doesn't violate the gift clause, why would it with a new owner?

 

[cw]

Why would they be giving away so much money if the Coyotes are not integral to the financial well being of the arena?

That's a fair question but it's one whose answer, I'd suspect, would end up being remarkably similar to the answer if you asked why a city the size of Glendale ever thought it would be a good decision to get into the business of subsidizing the construction of an arena for a NHL team.

I don't dispute the idea that Glendale is better off with the Coyotes than without the Coyotes. I just have a hard time believing it's worth anything close to what they're paying. I think the city has always been playing the long game. They figure that the Coyotes are worth, say, 10 million dollars a year to them and so by writing that initial 25 million dollar check a buyer would only have to keep the Coyotes around for three years for it to be a good investment. Even now at 67 million or whatever you're only talking about 7 or 8 years.

The flip side to that is that if the city wipes their hands of the mess right now then I'd imagine they'd all have some ugly questions to answer from their constituents about why they let this play out so long and cost them an additional 60+ million on top of what the whole debacle will end up costing them.

So it's snowballing. Each year they don't find an owner adds to the embarrassment they'd be in for if the team moves which entices them to keep propping this whole enterprise up. Personally, I find that to be a far more compelling answer than the idea that the Coyotes are worth 25 million dollars a year to anyone.

Goldwater was not accepted as a legal party to the bankruptcy. The city is proceeding on the basis of the bankruptcy decision. That's a much tougher thing for Goldwater to attack with their gift clause issue because the city is within the boundaries of the existing contracts and the bankruptcy decision. And the bankruptcy was something brought on the city - not something the city directly brought upon themselves. The new proposed deals are more easily assailable under the gift clause though I continue to question whether Goldwater has a very good case (as did four separate legal opinions when the bonds came up).

To answer comments above Nik's posts:
The original deal and contract forecast over $700 mil in direct and indirect revenues to the city from the rink over a 30 yr period. That forecast was tied into the lease agreement in the event there was a default - both parties agreed to it. That number, for the purposes of assessing damages, was recalculated during the bankruptcy for the years remaining allowing consideration for the circumstances to be around $500-550 mil for the 25 or so years remaining.  It represents the lease payment and various tax and parking revenues that would come to the city during the life of the deal. There wasn't great exception taken during the bankruptcy to those numbers by their opponents (I don't recall any) and even the Az Republic newspaper's hired accountants to examine the bond deal of last year  didn't find major flaws in the finances of that deal  based in part on that $550 mil analysis.

So when folks howl about the $25 mil currently being given annually by the city for the team, they often forget the $22 mil or so annually - or whatever it is that has been coming back to them. And with the parking and other jiggling of the proposed deal, they have rational and legitimate plans to increase those revenue dollars. Very roughly, they're currently hanging on to the team much closer to break even with that $25 mil to the NHL - a handful of millions lost - not $25 mil lost.

This is an argument about money. The simple analysis after looking at a variety of alternatives is that under the deals that have been proposed by the city,  the city is better off financially with the team than they are without it.

 

[Kin]

To answer comments above Nik's posts:
The original deal and contract forecast over $700 mil in direct and indirect revenues to the city from the rink over a 30 yr period. That forecast was tied into the lease agreement in the event there was a default - both parties agreed to it. That number, for the purposes of assessing damages, was recalculated during the bankruptcy for the years remaining allowing consideration for the circumstances to be around $500-550 mil for the 25 or so years remaining.  It represents the lease payment and various tax and parking revenues that would come to the city during the life of the deal. There wasn't great exception taken during the bankruptcy to those numbers by their opponents (I don't recall any) and even the Az Republic newspaper's hired accountants to examine the bond of last year  deal didn't find major flaws in the financial analysis of  based in part on that $550 mil analysis.

Now, was that 550 or 700 million dollar figure tied directly to the Coyotes or was it the estimated benefit of the arena? Obviously the 41 or so dates a year the Coyotes would contribute would be a significant part of that but is that all them?

 

[cw]

To answer comments above Nik's posts:
The original deal and contract forecast over $700 mil in direct and indirect revenues to the city from the rink over a 30 yr period. That forecast was tied into the lease agreement in the event there was a default - both parties agreed to it. That number, for the purposes of assessing damages, was recalculated during the bankruptcy for the years remaining allowing consideration for the circumstances to be around $500-550 mil for the 25 or so years remaining.  It represents the lease payment and various tax and parking revenues that would come to the city during the life of the deal. There wasn't great exception taken during the bankruptcy to those numbers by their opponents (I don't recall any) and even the Az Republic newspaper's hired accountants to examine the bond of last year  deal didn't find major flaws in the financial analysis of  based in part on that $550 mil analysis.

Now, was that 550 or 700 million dollar figure tied directly to the Coyotes or was it the estimated benefit of the arena? Obviously the 41 or so dates a year the Coyotes would contribute would be a significant part of that but is that all them?

It was for the overall operation of the arena - not exclusively a derivative from the Coyotes. But under the existing bankruptcy situation, that is what was at issue as the lease covered the whole arena - not just the hockey club. In fact, it was the arena operating company that was arguably performing worse than the hockey club but that's in part a function of how the contract allocated which party would be picking up which revenues and expenses.

The NHL is doing more here for the $25 mil than merely providing a team. They've filled the role of operating the arena, etc - the roles Moyes & his related companies did. So it's an apples to apples arrangement for the $25 mil - the whole arena operation is involved.

And again, the numbers have been sliced and diced to look at just operating it as an entertainment venue with a AHL/ECHL team. When compared to keeping the NHL club, keeping the NHL club is financially significantly more attractive for the city. The $25 mil (net a few mil loss to the city) has been keeping the hope of achieving that better deal alive.

 

[Kin]

The NHL is doing more here for the $25 mil than merely providing a team. They've filled the role of operating the arena, etc - the roles Moyes & his related companies did. So it's an apples to apples arrangement for the $25 mil - the whole arena operation is involved.

That strikes me as a pretty hefty chunk of change for that role. I forget where but I thought I'd read that AEG is performing a similar role for Kansas City for 8 or 9 million a year.

And again, the numbers have been sliced and diced to look at just operating it as an entertainment venue with a AHL/ECHL team. When compared to keeping the NHL club, keeping the NHL club is financially significantly more attractive for the city. The $25 mil (net a few mil loss to the city) has been keeping the hope of achieving that better deal alive.

Yeah, again, I don't disagree that it's in the city's best interests for the Coyotes to be sold and for the team to stay put. I just don't think the "few million" net loss is something they can keep doing year after year while they're laying people off.

 

[Bates]

The new agreement has a rumored arena mangement fee that averages $14.5 million per year which is not that far from the $10 million that Phoenix currently pays the Suns to mage US Airways center.

 

[Kin]

The new agreement has a rumored arena mangement fee that averages $14.5 million per year which is not that far from the $10 million that Phoenix currently pays the Suns to mage US Airways center.

Well, it's still 45% higher for an arena that I assume will see slightly less use than a downtown arena.

I mean, at the end of the day, I'm not a Glendale taxpayer so my rage is fairly muted but I would not be happy if I were living there.

 

[Bates]

While it may be 45% higher right now this average is based on a 20 year agreement.  I can't remember exact timeline but the Phoenix arena will be renogotiating theirs in next few years which may bring the numbers closer??  There is also the hope that the new management team will be able to attract more non-hockey acts to Jobing.com and thus increase income from taxes and such for the City.  I still think that Glendale is better to overpay their tenant to manage arena than to pay market rate to management team that does not own a hockey team as a major tenant.

 

[cw]

The NHL is doing more here for the $25 mil than merely providing a team. They've filled the role of operating the arena, etc - the roles Moyes & his related companies did. So it's an apples to apples arrangement for the $25 mil - the whole arena operation is involved.

That strikes me as a pretty hefty chunk of change for that role. I forget where but I thought I'd read that AEG is performing a similar role for Kansas City for 8 or 9 million a year.

And again, the numbers have been sliced and diced to look at just operating it as an entertainment venue with a AHL/ECHL team. When compared to keeping the NHL club, keeping the NHL club is financially significantly more attractive for the city. The $25 mil (net a few mil loss to the city) has been keeping the hope of achieving that better deal alive.

Yeah, again, I don't disagree that it's in the city's best interests for the Coyotes to be sold and for the team to stay put. I just don't think the "few million" net loss is something they can keep doing year after year while they're laying people off.

During the bankruptcy, Moyes was accused of trying to scuttle the team to help the chances of a relocation via the bankruptcy. It's part of the civil damages that the NHL sued Moyes for. Further, it's hard for fans, advertisers and sponsors to get or remain committed when the team is in limbo without an owner and there's lots of negative media surrounding the team in that way. So some of the $25 mil is paying for the bankruptcy damages that continue top affect the team annually. A good hunk of those damages will go away if they can get the ownership situation resolved. In the interim, it's costing them and that's part of the reason the $25 mil is as high as it is.

 

[Kin]

There is also the hope that the new management team will be able to attract more non-hockey acts to Jobing.com and thus increase income from taxes and such for the City.  I still think that Glendale is better to overpay their tenant to manage arena than to pay market rate to management team that does not own a hockey team as a major tenant.

But isn't that sort of the trade-off? Give the money to the NHL or Jamison or whoever to manage the arena and you've got a tenant with a personal interest in making things work or alternately you could go out and hire someone like AEG who have the track record of managing arenas really successfully without necessarily needing a primary major league sports tenant.

 

[Kin]

During the bankruptcy, Moyes was accused of trying to scuttle the team to help the chances of a relocation via the bankruptcy. It's part of the civil damages that the NHL sued Moyes for. Further, it's hard for fans, advertisers and sponsors to get or remain committed when the team is in limbo without an owner and there's lots of negative media surrounding the team in that way. So some of the $25 mil is paying for the bankruptcy damages that continue top affect the team annually. A good hunk of those damages will go away if they can get the ownership situation resolved. In the interim, it's costing them and that's part of the reason the $25 mil is as high as it is.

Fair enough. I don't doubt that there's some sort of reasoning behind it. It is, though, pretty terrible optics.

 

[cw]

The new agreement has a rumored arena mangement fee that averages $14.5 million per year which is not that far from the $10 million that Phoenix currently pays the Suns to mage US Airways center.

Well, it's still 45% higher for an arena that I assume will see slightly less use than a downtown arena.

I mean, at the end of the day, I'm not a Glendale taxpayer so my rage is fairly muted but I would not be happy if I were living there.

Would you be happier if the team left and you had to pay even more annually?

All the city is trying to do is just take the lesser of two evils.

 

[Kin]

Would you be happier if the team left and you had to pay even more annually?

If that were the case? No, but I'm speaking about the situation as a whole. I'd be pretty upset at anyone in city government who'd ever thought that the 88th biggest city in the United States building a hockey arena was a good idea and my being upset with them wouldn't really be abrogated by them dealing with the resulting catastrophe as best as they could.

All the city is trying to do is just take the lesser of two evils.

If you were a Glendale resident, would you be largely satisfied with your city's financial management when it came to their involvement with the NHL as a whole?

Again, I get that they're making an honest attempt at cleaning it up rather than shoving it all under the bed but it's still their mess.

 

[Peter D.]

Sorry to chime in on the intense debate with merely a general question, but I still can't get around a few things. 

For one, even with their long playoff run, it's safe to assume the team is still faced with tens of millions of dollars in losses (even after the $25M in each of the last two seasons).  Is there any way this team could ever make a profit?

And on that point, I'm confused how Jamison is going to convince a bunch of investors to pony up money for a losing proposition.  I understand if it was an owner like Thompson or Pegula who is a multi-billionaire and could afford (would be willing?) to incur some losses over the years, but will any step forward here?  I can't help but think it's easier to pull the plug once and for all than going through this charade year after year.

 

[Bates]

Nik stating the population of Glendale and it's place in US city population is a little shady don't you think?  Glendale is a part of the Greater Phoenix area which certainly has enough population to sustain a building.  I assume you also feel the same way about Glendale having Univ of Phoenix stadium??

 

[Kin]

Nik stating the population of Glendale and it's place in US city population is a little shady don't you think?  Glendale is a part of the Greater Phoenix area which certainly has enough population to sustain a building.  I assume you also feel the same way about Glendale having Univ of Phoenix stadium??

Well, as a general rule I feel the same way about any city investing heavily in any sports facility. The academic literature is pretty overwhelming that it's not a good investment/use of taxpayer dollars for local governments.

For a smaller city like Glendale the risk is significantly greater because they don't have the deep tax base that a larger city does. Yes they're reasonably close to Phoenix but I'm guessing the city of Phoenix doesn't kick in money when things are going rough. The few million dollars in losses cw is talking about is more significant to a smaller city than it is to a larger one. The kicker here is that Phoenix already has a good, modern downtown arena for basketball and concerts so Glendale doesn't even have some of the advantages that Kansas City has with the Sprint Center in terms of drawing concerts/non sports entertainment.