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Proposed Coyotes deal stirs questions Glendale likely to OK hefty arena subsidies by Lisa Halverstadt and Craig Harris - Jun. 6, 2012 11:06 PM The Republic | azcentral.com Glendale's proposed $17 million taxpayer-funded arena-management deal with the Phoenix Coyotes for next year would be the only one like it among the Valley's major sports teams and may be one of the most lucrative in the National Hockey League. The city would pay the team's prospective owner anywhere from $10 million to $20 million a year over the 20-year life of the deal, for a total of $300 million, leading some sports-industry experts and Glendale leaders to question whether it is more lucrative for the team than necessary. A 4-3 majority of the Glendale City Council appears poised to approve the lease agreement with likely Coyotes buyer Greg Jamison to operate the city-owned Jobing.com Arena. None of the other professional sports teams in the Valley -- the Arizona Cardinals, Phoenix Suns and Arizona Diamondbacks -- receives a tax-funded subsidy to run its stadium or arena, sports executives and local government officials said. "It's very, very large relative to anything," said John Vrooman, a sports economist and Vanderbilt University professor. "It's probably a blanket fee that covers lots of other things." Glendale will also foot the bill for $24 million in capital improvements to the 9-year-old arena. Glendale officials expect to collect roughly $2.2 million in annual rent payments, ticket surcharges, sales taxes and other fees. They also cite the intangible benefits of keeping the team in Glendale, among them hundreds of jobs and thousands of visitors. Executives with the Suns, Diamondbacks and Cardinals declined to comment on the proposed deal between Glendale and Jamison. Privately, they say they want the hockey team to stay in the Valley because having four major professional-sports teams in one market contributes to community pride and notoriety. However, one executive said the city's arena-management payment to Jamison likely would also be used to offset operating losses in running the Coyotes. Two executives said they were unaware of any other professional-sports franchise in the country that received such a lucrative subsidy from a municipality. While Glendale Mayor Elaine Scruggs and two other council members have publicly questioned whether the proposed fee is too steep, other city leaders say the figure is supported by months of research on operation costs. "We believe the average of $15 million over the course of the term is a fair price," Glendale spokeswoman Julie Frisoni said. Jamison declined comment late Wednesday. Glendale Councilwoman Joyce Clark has said the benefits of keeping the Coyotes in Glendale outweigh the costs the city must bear to keep them. The sales-tax revenue generated by 41 game nights helps Glendale cover its long-term arena debt of about $12.6 million per year. The planned deal with Jamison contrasts with the city's previous deal with former owner Jerry Moyes, who covered operating costs and upgrades to the arena. Glendale officials said such a deal is no longer possible. Neither city officials nor Jamison has provided breakdowns on how the $10 million to $20 million payments will be spent. And despite repeated requests from council members, Glendale staffers have never provided an estimate of what it should cost to operate the arena or put the task up for public bid. Financial statements submitted to Glendale when Moyes owned the team show arena operators spent $10 million to $13 million on utilities, staffing and other costs in the five years before the trucking executive entered the team into bankruptcy. At the same time, the arena brought in $6 million to $7 million. The net cost to operate the arena never surpassed $6.5 million. The vote on the proposed agreement with Jamison, expected at an emergency council meeting at 10:15 a.m. Friday, will be four days after documents outlining elements of the deal were posted on the city's website. A related council workshop is at 10 a.m. today and is open to the public, but workshop policy does not allow for public comment. Comparing deals Phoenix Finance Director Jeff Dewitt said Glendale's offer to pay Jamison $17 million in 2013 to operate Jobing.com Arena is roughly $4 million more than the annual operating cost for the Phoenix Suns to manage US Airways Center in downtown Phoenix. "We don't pay them anything to operate it. We shared in the cost of building it, and we get fees from them," Dewitt said. "That is completely different than the Glendale deal, obviously." Dewitt said the Suns also pay roughly $9 million a year to service the debt on the team's portion for construction of the arena in 1992 and renovations in 2004. The NBA team also pays the city another $2.5 million annually in rent, revenue sharing and capital improvements. In total, the Suns' annual cost to play and manage the downtown Phoenix arena is about $24.5 million. Jamison also would receive at least $1 million a year from Glendale to pay for capital improvements. The Suns pay the city that amount for improvements. Dewitt said it's difficult to compare the operating costs between the arenas because the WNBA's Phoenix Mercury and the Arena Football League's Arizona Rattlers play in US Airways Center and having those two franchises increases costs. The Diamondbacks, who play at Chase Field in downtown Phoenix, do not receive a subsidy to manage the tax-funded stadium. The team pays between $4 million to $4.3 million annually to the Maricopa County Stadium District to play in the stadium. The amount varies depending on attendance, said Daren Frank, the stadium district's executive director. Taxpayer dollars do support the Arizona Sports and Tourism Authority, which owns and operates the Arizona Cardinals' home base in Glendale. Maricopa County tourism taxes cover about $10 million in annual operating costs at the University of Phoenix Stadium. The sports authority is set to pay arena manager Global Spectrum about $315,000 this year, plus up to $100,000 in incentives for bringing in more events or operating the arena efficiently, said Ron Minegar, the Cardinals' chief operating officer. The cost to operate the stadium has never reached what Glendale is poised to pay Jamison. The proposed Glendale subsidy also appears to be higher than that for other NHL teams. The Nashville Predators, a team that faced the Coyotes in the second round of the Stanley Cup Playoffs, are known across the league for a favorable deal with the city and Tennessee. Last year, the Predators collected $12.4 million in management fees, incentives and reimbursement for arena losses from both government entities. "It's probably the most favorable deal in the league, and here come the Coyotes with an even better one," said Vrooman, the sports economist. Glendale's subsidy offer to Jamison comes after City Manager Ed Beasley refused to provide former Coyotes owner Moyes a much smaller payout about four years ago. Moyes had sought roughly $12 million a year from the city but was rebuffed before he entered the team into bankruptcy. In addition, during the bankruptcy hearings, Beasley said the city never would provide a subsidy to the team's owner. Now it appears inevitable. If the intention is to subsidize, sports-industry experts say Glendale should be transparent about its intentions. "If it walks like a duck and talks like a duck, maybe it is a duck," said Don Schumacher, who spent years studying and operating sports arenas and now serves as executive director of the National Association of Sports Commissions. |