Okay, I need to confess something. I have been reading a lot of blogs and message boards lately. I know it’s not good for me, but sometimes you just can’t help yourself. The thing just keeps bringing me back in. It’s like train wreck, reality TV. You’ve probably guessed it by now. I just cannot stop reading about the Phoenix Coyotes – Matthew Hulsizer – Goldwater Institute fiasco. It’s fascinating and mind bogglingly irritating at the same time.
Every piece I read is bashing the Goldwater institute and calling for a rally to arms, almost, to save the sacred Coyotes franchise. Now it’s possible that many of my copious hoards of readers are not familiar with the details surrounding this controversy. I’ll give a little background.
The Coyotes are currently owned by the NHL because the previous ownership went into bankruptcy in 2009 and they could not find a buyer. NHL commissioner, Gary Bettman, stepped in to save the franchise because he needed to save hockey south of the Mason-Dixon Line, which, unfortunately for him, is going to end up as a major part of his legacy. The NHL has been trying to find a buyer for the franchise that would agree to keep the team in Glendale, since the city just spent an awful lot of money to build a brand new arena in 2003. Enter Matthew Hulsizer. Hulsizer is a Chicago businessman who put together an investment group to buy the team under the condition that he would sign a lease to keep the team in Glendale for at least 30 years. If the Hulsizer group cannot finish a deal, then the team will all but definitely relocate to Winnipeg, Canada.
Here is where the problem begins. There are questions about the legality of the deal. The city of Glendale has promised large incentives to Hulsizer’s group because the city fears that the loss of the team would be a major economic burden on the city, which of course is feasible because they are still on the hook about $300 million for the initial cost of the arena. The expected sales-tax revenues in the surrounding retail centers are a major source of income for the city in repaying some that debt.
Now enter the Goldwater Institute. The Goldwater Institute, named after former Arizona Senator and fiscal conservative Barry Goldwater, is a conservative think tank that sees itself as the watchdog for the taxpayers of Arizona. The Goldwater Institute is challenging the deal with Hulsizer because they say that the deal is illegal because it puts taxpayers at risk.
Personally, I believe that the Goldwater Institute is getting a bad rap for all of this. They make some very valid points, and even if the deal is considered legal by the courts, I think we still need to take a long look at how these economic incentives are being handled. Let’s look at the deal piece by piece.
-Hulsizer agreed to buy the team from the NHL for an estimated $160 million
-The City of Glendale agreed to pay Hulsizer $97 million to operate Jobing.com Arena
-Glendale also agreed to pay $100 million for the right to charge for parking, by selling bonds which the team will pay back over time at an estimated 6% interest.
-Hulsizer will pay the city rent for the arena of around $54 million over the 30 year lease
-Hulsizer can then purchase the arena from Glendale for $40 million at the end of the 30 years
Glendale city officials claim that this is all a great deal for Glendale because the team brings in around $500 million in overall economic surplus for the city. I am not really going to address this claim, but just know that every impartial economist who has looked at the impact of sports subsidies agrees that economic impact studies are enormously exaggerated.
Sounds like a good deal, right? Pay $197 million for “$500 million” in economic output? Wrong. (Okay, I couldn’t help myself. This $500 million is describing lost revenue if the team left, but it accounts for nearly all of Westgate’s tax revenue. Westgate will still continue to operate and will still bring in money) First off, Forbes estimates that the Coyotes are worth $134 million. Wow, that’s only about 70% of what the Glendale is planning on GIVING to Hulsizer. Maybe Glendale could just buy the team themselves (Which is another story for another time, I personally think there is something to this idea. Packers anyone?). Oh wait, they really don’t want to do that because they probably won’t make very much money owning this franchise since no one else has either. Since the Coyotes came to the Valley of the Sun in 1996 they have lost money every single year, culminating in the previous ownership declaring bankruptcy and bailing. Everyone thought that once they had their own, brand new arena they would start making money. Guess not.
Next we have the issue of the parking rights. Glendale has agreed to buy the rights to charge for parking. I don’t understand. Glendale owns the arena. How do they not have the rights to charge for parking? Oh yes, it’s because they needed to find a clever way to pay Hulsizer to buy this sorry franchise. This is the main issue behind Goldwater’s lawsuit. Hulsizer did promise to pay back any unmet parking revenues, but that still doesn’t solve the initial problem. Glendale should already own these rights. It’s their arena!
This is all added to the $300 million already owed on the arena’s initial construction. Adding this altogether and we realize that the city has already put themselves in a bad spot by desperately trying to put themselves on the map, an now is trying to fix the problem by paying for a private businessman to come buy a team that’s worth less than what they are paying him. It just doesn’t make sense. And what’s to stop Hulsizer from declaring bankruptcy when the team just doesn’t bring in enough revenue? Another $200 million subsidy?
Now I have heard some people make the claim that it’s not all about money. There is something special about a kid falling in love with a sport. No really, I actually read this…by a real writer. We live in Arizona. No one plays hockey. No one really likes hockey. That is evident by the consistently bottom-feeding attendance records that the Coyotes boast; another reason why the team is losing money. We just don’t support hockey. But, do you know what we should support? I have the perfect fit to put another professional sports franchise in Glendale near Westgate. It’s a sport that kids actually play in Arizona, and can be played outside, without thousands of dollars in equipment. Glendale, it’s time to start putting together a bid for an MLS team!
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