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Joyce Clark Unfiltered

For "the rest of the story"

From the second I posted my last blog on the topic of the most recent Glendale Monthly Arena Management Report I have been inundated with Facebook private messages, emails and Twitter DMs asking so many questions I’ve decided to answer many of them here and now.

I’ve been asked how the Ice AZ deal is different than the Jamison deal I supported. Why was that more beneficial and why did I support it? I received a flurry of offended IceArizona supporters demanding I announce why Jamison’s deal failed, why I “pick,” “target,” “harass” the new owners. I am not at liberty to discuss why the Jamison deal did not succeed due to confidentiality issues. I can, however, compare the two deals – Jamison’s and IceArizona’s. My only agenda throughout the entire process was to get what would be, in my opinion, the best deal possible for Glendale within the context of the financial environment as it existed at that time. Each deal had its strengths and weaknesses vis a vis Glendale.

 Then there’s the “interested-in-Glendale” crowd who want to know why I continually berate the new Council and is it because I’m running again in the future? Again, I categorically state that I will not run for any office, now or in the future. I have seen some councilmembers who remained well into their 80’s. One could see the diminishment in their faculties and abilities. It is a disservice to the constituents they represent. Instead I appreciate the gift I have been given to opine on Glendale issues and events using the benefit of my 16 years of service to the city. I am enjoying my retirement immensely and writing about Glendale is just plain fun.

Some asked, did I think individual councilmembers or the mayor personally benefit from deals? Then there are the few accusations of “I bet you benefitted just like these lousy politicians” implying that somehow I would financially benefit from a successful Jamison deal. Jamison never, ever made any offer of compensation of any sort and if he had it would have resulted in personal insult at the thought and would have insured my “no” vote on his bid.

Now…for the rest of the story as Paul Harvey would say…Let’s begin with the unsuccessful Jamison bid.  In page citations references with regard to the Jamison bid are the City Council Voting Meeting Presentation of November 27, 2012 or the Substantial Final Draft of the Arena Management Agreement dated October, 2012.

  • It was a long-term deal of 20 years with a 5 year option to renew with no opt out clause by either party (Council meeting of November, 2012).
  • Base rent was in years 1 to 5, $500,000; years 6 to 12, $650,000; and years 13 to 22, $800,000; (Final Substantial Draft of Arena Management Agreement, page 24, Section 6. Leasehold Interest. 6.6. Base Rent).
  • Stipulation if full 40+ games were not played it would be arena manager’s responsibility to book other events to compensate for lost games (Arena Management Agreement, page 29, Section 8. Arena Management. 8.1.0).
  • Minimum of 40 games per year with additional 30 events per year. Management fee reduced by $25,000 for each non-hockey event below 30 minimum. Reduction of $60,000 per game below 40 minimum (Council meeting of November, 2012).
  • Parking Rights belonged to team owner/manager (page 30, Section 8.2).
  • Stipulation of 15% of the gross from naming rights would go to the city (page 35, Section 8.5).
  • City surcharge on qualified tickets was years 1 to 5, $2.75; and years 6 to 22, $3.00 (page 51, Section 9. Charges and Fees. 9.1. City Surcharge).
  • Arena Management Fee: In year 1, $11M; year 2, $14M; years 3 to 4, $15M; year 5, $16M; years 6 to 10, $18M; and year 11, $17M; years 12 to 15, $16m; year 16, $14M; and years 17 to 20, $13M (Council meeting of November, 2012).
  • Stipulation of 5 year option to purchase the arena (page 89, Section 23. Arena Purchase Option).
  • City offered a bonus incentive of $500,000 for every additional 20 events over 30 minimum required (Council meeting of November, 2012).

Was it a perfect deal? Of course not but I supported it for several reasons. Mr. Jamison continually demonstrated his willingness to compromise during the negotiations with the city. Every nuance of the Jamison deal was highly publicized.  There was no backroom negotiating amongst councilmembers.

A restructured arena management fee was crafted and the first year fee dropped from $17M to $11M. Penalties and bonuses were added — something not seen in any previous deals. The Five Year Scenario presented at the November, 2012 council meeting showed an ending City Fund Balance in 2017 of $63.2M if the team stayed and an ending Fund Balance in 2017 of $63.4M if the team left. The difference was negligible and seemed reasonable as both scenarios required General Fund expense reductions.

It was a deal that offered the city arena stability over 20 years and most importantly, there was an option to buy the arena in the first five years making the balance of the deal a moot point while relieving the city of further financial obligations. The “buy” option in the first five years would have removed the financial debt burden the city was facing at that time. Jamison provided a long term contractual commitment insuring an anchor tenant in the arena for 20 years. His deal was based upon having raised the necessary team purchase equity – no loans were involved.

Why didn’t it happen? Many of the reasons are not public and I am not at liberty to speak of them but I do know that at the eleventh hour the NHL demanded greater team purchase equity. Jamison was raising cash to purchase the team rather than relying upon loans. It was simply impossible to raise in two months the additional equity that the NHL suddenly required before the city’s imposed deadline of January 31, 2013. The originally requested equity amount had been raised but the new, last minute NHL demand was a deal killer. Why the sudden and unexpected requirement of more purchase equity? One would have to ask the NHL officers and they are not talking.

Now, let’s look at the IceArizona deal. Since it was the successful bid and of recent vintage, many of the deal points are already familiar to you. The IceArizona citations used are from the Professional Management Services and Arena Lease Agreement of June 28, 2013. The council approved the agreement on August 5, 2013.

  • The agreement is subject to an early termination right after 5 years (page 3, Arena Lease Agreement, Section 1. Statement of Intent. 1.1.1.)
  • Revenues to be received by the city include surcharge of $3 on qualified hockey tickets; a $5 surcharge on non-hockey qualified tickets; and a supplemental surcharge of $1.50 on every qualified ticket; parking revenues of $10 per vehicle for hockey events and $11.33 per vehicle for non-hockey events less $20,000.00 per event to the team owner; 20% of the sale of naming rights (page 4. Section 1. Statement of Intent. 1.1.5. a through j).
  • Arena Management Withdrawal grants the right of agreement default if there is an arena manager dissolution, bankruptcy or insolvency (page 7, Definitions. 1.2. a through e).
  • Definition of qualified ticket with a distribution limit of 1,000 per event (page 16. Section 1.)
  • Annual rent is in years 1 to 5, $500,000; years 6 to 12, $650,000; years 13 to 15, $800,000 (page 25. Section 6. Leasehold Interest. 6.6.1 to 6.6.3)
  • Penalty of $150,000 per hockey game less than the 40 games per year. There is no penalty for non-hockey events or any minimum of non-hockey events required (page 31. Section 8. Arena Management. 8.3. Event Requirements. 8.3.1. b and c).
  • Qualified hockey ticket surcharge based on attendance of less than 15,000 is $3 per ticket; 15,000 to 15,999 is $3.25 per ticket; 16,000 to 17,000 is $3.50 per ticket; more than 17,000 is $3.75. All non hockey events will be $3 per ticket regardless of attendance figures (page 49. Section 9. Charges and Fees. 9.1.2 a and b).
  • Supplemental ticket surcharge of $1.50 per qualified ticket imposed (page 49. Section 9. Charges and Fees. 9.1.3).
  • City receives 20% of arena naming rights (page 35. Section 8. Arena Management. 8.6.4.b.ii).

Is this a perfect deal? Of course not but it is one that is far more difficult to support. I cannot speak as to whether there was a spirit of compromise as I was not directly involved with the prospective team purchasers. There appeared to be “back room” negotiating amongst councilmembers in the search for the elusive 4th vote.  

Obviously there was no compromise on the annual management fee of $15M. There couldn’t be compromise because the team purchase relied heavily on loans from the Fortress Group and the NHL rather than on raising a large amount of purchase equity. I find it ironic that the NHL killed the Jamison deal by requesting even greater purchase equity than he has already acquired and now it is stuck with granting an $80M loan to the new owners. The $15M that the city pays for arena management is passed through by the team owners as interest payments on their loans. They quite simply must have that $15M for interest payments.

On the face of it the IceArizona deal speaks to a long-term commitment but that is not necessarily the case. There is an opt out clause after 5 years and that is extremely disturbing. It has been highly publicized that the opt-out trigger is losses aggregately of $50 million. Anyone who is under the assumption that the team owners will not suffer loss is dreaming. Business 101 classes teach that any new business venture can routinely expect losses in the first 2 to 3 years. The question becomes how much will the owners lose and how quickly will it reach the target of $50 million? Even though the city has and will exercise its right to audit at the end of every fiscal year that information will not be publicly available. P&L statements are usually proprietary. The public will not know until if and when the team owners choose to exercise their opt-out provision.

 The city could go through another exercise of crafting an agreement with another new owner but more likely, the team would be sold or relocated. There is also an Arena Manager Withdrawal clause that provides a default opportunity for sale or relocation.

Keep in mind in BOTH deals there are very few new revenue streams to the city. The city had been, in years previous, collecting all sales tax generated within and outside the arena. That is not new money. It also had been collecting a ticket surcharge on all events. That is not new money. These revenues were already going into the city’s General Fund and specifically used to pay the arena construction debt. In the IceArizona deal the revenues flow to the General Fund as well but there is no specific dedication of those revenues to fulfill the city’s arena debt obligations and may be used for any purpose.

In the Jamison deal the only new money was 15% of the revenue from naming rights. In the IceArizona deal the only new money is 20% of naming rights, the supplemental ticket surcharge and parking revenue. None of these revenues are predicted by the city’s Executive Finance Director as being substantial enough to recompense the annual $15M management fee.

In my judgment the better deal was the Jamison deal. He offered a long-term commitment to stay in Glendale with no opt out clause and an opportunity to buy the arena in the first five years. It would have relieved the city of the financial obligations of the arena. Not so with the IceArizona contract. While their advertising states, “Here to stay” there is always that pesky 5 year opt out clause lurking.

Because of the Jamison group’s purchase equity position there was flexibility in pegging the annual management fee to accommodate the city’s needs at the time. Make no mistake. Each deal placed a tremendous annual financial burden upon the city. Coupled with the Jamison deal staff recommended city expense reductions and instituted other strategies such as restructuring city debt that would have offset that burden.  With the IceArizona deal there is too much reliance upon promised revenues that may or may not be realized.  With so little owner equity, their reliance upon large loans and the 5 year opt out clause I wouldn’t take a bet about their future. Would you?

 I am sure that in expressing my POV on the two deals I will raise a great deal of protestation along with, “your facts are flawed” or “you have no faith” or “once again you have delivered an IceArizona hate piece.” There is no doubt that the subject is divisive and highly polarizing. Please remember that my conclusions are based upon publicly available information. It is my best attempt to share my reasoning regarding the many questions received. My initial vote to accept the Jamison deal while still on council resulted in leaving the door open for consideration of other bids resulting in IceArizona’s success. I have never been anti-Coyotes. I have always been pro-Glendale. My prism has always been the best interests of Glendale. It is fair to question whether accepting the IceArizona deal the best choice for Glendale. You decide.

© Joyce Clark, 2014

FAIR USE NOTICE

This site contains copyrighted material the use of which is in accordance with Title 17 U.S. C., Section 107. The material on this site is distributed without profit to those who have not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of environmental, political, human rights, economic, democratic, scientific and social justice issues, etc. We believe this constitutes a ‘fair use’ of any such copyrighted material as provided for in Section 107 of the US Copyright Law and who have expressed a prior interest in receiving the included information for research and educational purposes. For more information go to http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond ‘fair use,’ you must obtain permission from the copyright owner.

Recently the Arizona Republic started a new item, West Valley Sound Off. They are contacting West Valley elected to get their positions on issues of the day. Their first foray question was, “Do you support the development of this proposed casino? Why or why not?” Those from Avondale, Buckeye, Goodyear, El Mirage, Litchfield Park, Peoria, Surprise, Tolleson and Youngtown declined to answer. Not so with our brave, intrepid leaders in Glendale. Three of them did respond.

Councilmember Manny Martinez has consistently opposed the casino since it was first proposed in 2009. He gets it. He said, “I do not support the proposed Tohono O’odham reservation and casino. I am very concerned for Westgate’s well-being if the casino is opened. How do casinos attract customers? Cheap booze, cheap food, and the cost of rooms are minimal. At Westgate, we have hotels and restaurants that pay taxes and help us pay off our debts. If the reservation and casino come in, as a sovereign nation, they would pay no federal, state, county or city taxes. Governor William R. Rhodes of the Gila River Indian Community said, ‘We believe the Tohono O’odham Nation, with the assistance of the federal government, has disrespected the rule of law, the balance so carefully struck among Indian gaming tribes, our community, Glendale and every Arizonan.”

Then we have words, signifying nothing, from Councilmember Chavira. He doesn’t get it and he is not representing the majority sentiment of the residents of West Glendale and the Yucca district, who will feel the direct impacts of the proposed casino. He mimics the same, old, tired rhetoric that the Tohono O’odham have used ad nausea, “Yes, I do support the development of the proposed West Valley casino and resort. The benefits of the development will be significant not only for Glendale, but for the entire West Valley. Positive economic impacts such as job creation and an additional tourist attraction in our sports and entertainment district are among the benefits.” I’m sure he knows, uhmmm, well, perhaps he knows…that 25% of the jobs must be filled with Native Americans.

Lastly, Councilmember Sherwood responded. This is a guy who, less than two years ago, ran on a platform of opposition to the casino. Now, not so much. He did a flip-flop at a very recent council meeting voting with Councilmembers Hugh, Alvarez and Chavira to reject U.S. Representative Franks’ HB 1410 and to begin negotiations with the Tohono O’odham (TO). Many suspect his affirmative vote was pay back to Chavira for Chavira’s vote in support of the arena management deal. “Neither – I will support the project if the Tohono O’odham Nation can be treated as close to a private entity as possible and having some form of revenue stream into the city’s general fund. Additionally, infrastructure including any street improvements, public-safety agreements, et al. would have to be included and enforceable in federal courts. Thus far, in fact-finding sessions, the Nation appears to be very amenable to this. Businesses such as Westgate, Renaissance Hotel, Coyotes and Tanger Outlets, to name a few, are also in support of proposed project. The sports and entertainment district could very well capitalize on a project of this size if it meets the city’s criteria.” He appears to be back-pedaling as he straddles a very narrow  fence, by adding his list of caveats. His declaration that,” Westgate, Renaissance Hotel, Coyotes and Tanger Outlets…are also in support” is downright laughable. There has never been a declaration of public support for the proposed casino from these entities. Have you seen it? I haven’t. Remember when the possibility of losing the Coyotes as an anchor tenant at the arena loomed? Bar and restaurant owners were beside themselves and declared without 40 nights of hockey games they couldn’t make it. They are not going to support a casino that will draw customers away from them knowing that potential consumers will spend disposable income on gambling, subsidized meals and booze and cheap room rates. If they are so willing to commit financial suicide, let’s see them do it publicly. Not one representative of these entities went to the last council meeting when TO negotiations was on the agenda and expressed public support of the project. Sherwood had no public letters of support from these entities that he could read into the record that evening. It’s time for Sherwood to cease making declarations that may not be accurate. Just because he said it, doesn’t make it true.

© Joyce Clark, 2014

FAIR USE NOTICE

This site contains copyrighted material the use of which is in accordance with Title 17 U.S. C., Section 107. The material on this site is distributed without profit to those who have not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of environmental, political, human rights, economic, democratic, scientific and social justice issues, etc. We believe this constitutes a ‘fair use’ of any such copyrighted material as provided for in Section 107 of the US Copyright Law and who have expressed a prior interest in receiving the included information for research and educational purposes. For more information go to http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond ‘fair use,’ you must obtain permission from the copyright owner.

The City Council Workshop occurred on April Fools’ Day. Councilmember Alvarez was not physically present but did participate telephonically. Does this signal another medical issue and another long period of absences? The 3 items up for discussion were: the Risk Management Trust Fund and Workers’ Compensation Trust Fund; Downtown Parking and the Procurement Process.

Upper management is recommending that the Risk Management Trust Fund and Workers’ Compensation Trust Fund be separated. It’s a rearrangement of the deck chairs which in this case does no harm. Many of the proposed changes had been recommended by the citizen Risk Management and Workers’ Compensation Trust Fund Board as a result of the audit and were made just before I retired and while I was still chairperson.

Downtown parking was up next. A survey had been distributed to the downtown merchants about the issue. The response was underwhelming. The conclusion by staff was that the 2 hour parking restriction at some locations is a non-issue and recommended no change to the current policy. Mayor Weiers and Councilmember Hugh, as a minority, expressed continued concern and believe that all 2 hour parking restrictions should be lifted.

The last item was a presentation by Tom Duensing, Executive Director of Finance and Michael Bailey, City Attorney, on the procurement process. There is no question that current policies are fuzzy, at best. It most certainly is time to tighten up policies in this area. However, the recommendations offered by staff still preserve a lot of discretion (read in staff terms, flexibility) for the City Manager. Not good enough. City council needs to be fully informed about every type of procurement which has not been a past practice. Practices that need reformation include the policy of not requiring bids or quotes on purchases less than $5,000. This is a practice that can bleed the city of dollars by a thousand paper cuts. These purchases are cumulative and can add up quickly. At the very least written memorialization of these purchases should be made and provided to council periodically even though no bids or quotes are required. Purchases between $5,000 and $10,000 allow the policy of verbal quotes. There should be no verbal quotes allowed.

There may be reason for an emergency purchase greater than $50,000. Currently the policy requires city manager approval and council confirmation after the fact.  This practice should be revised to inform the council (at the time of occurrence) of the city manager’s approval of such purchases. The city manager currently requires written determination from the materials manager justifying such purchases. The code should be revised to require the city manager to provide council with the determination the city manager receives from the materials manager.

Upper management continues to advocate for the provision allowing the city manager to allow exemptions and exceptions. It is time to end this practice. There should be no exemptions or exceptions for it can, and often does, lead to misinterpretation and misconception.

Under Council Special Items of Interest, Councilmember Alvarez asked for further clarification on city policy regarding irrigation. She also asked for a discussion on diversity. She was as clear as mud as to what about diversity she wanted discussed. The city already has very strong diversity policies. Councilmember Martinez requested that the issue of short term rentals be taken up. Councilmember Sherwood asked that the policy of traffic signals flashing at midnight be revised to begin at 10 PM. Vice Mayor Knaack asked that the city consider electronic voting for city council meetings.

It was another meeting short and sweet. So many questions to be asked and so few actually offered.

© Joyce Clark, 2014

FAIR USE NOTICE

This site contains copyrighted material the use of which is in accordance with Title 17 U.S. C., Section 107. The material on this site is distributed without profit to those who have not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of environmental, political, human rights, economic, democratic, scientific and social justice issues, etc. We believe this constitutes a ‘fair use’ of any such copyrighted material as provided for in Section 107 of the US Copyright Law and who have expressed a prior interest in receiving the included information for research and educational purposes. For more information go to http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond ‘fair use,’ you must obtain permission from the copyright owner.

The Glendale City Council meeting of March 25, 2014 was reminiscent of many meetings I attended. It was one of those marathon sessions, lasting well over 4 hours, attracting many public speakers. The council approved a contingency fund transfer of over $6 million for the arena management fee and accepted staff’s recommendation that retirees will now pay the full liability for their medical insurance. Curiously current city personnel will remain heavily subsided by the city (read, you, the taxpayer).

However, the two big issues were billboards along the Loop 101 and Bell Road and the resolution to officially rescind city support for U.S. Representative Trent Franks’ legislation, HR 1410.

One could see a sea of yellow t-shirts in support of allowing billboards adjacent to the Loop 101 and Bell Road. Jordan Rose of the Rose Law Group delivered a strong, and very, very long presentation on behalf of Becker Boards. Yet speakers against the proposal outnumbered those supporting 2 to 1. It was assumed by many that it was a done deal and would win approval. After all, Councilmember Sherwood had publicly announced that he had the four votes needed for its passage. Can you say, “blind-sided?” The ultimate vote was 5 to 2 against. Only Councilmembers Sherwood and Alvarez voted in favor of Becker Billboards.

Sherwood’s advocacy for the billboards may be more easily understood as one of the speakers questioned his support in terms of the campaign contributions he had received from the stakeholders. A quick pass of his campaign finance reports reveals at least $1,960 received from members of the Rose Law Group and another $1,720 received from members of the Becker family. Approximately 1/5 of his total campaign contributions came from these two entities.  

As a side note, seeing the large campaign contributions from fire unions, fire PACs and union firefighters in Sherwood’s campaign filings has piqued my interest. Look for a future blog that details how much money these fire union entities poured into Glendale’s last election cycle in 2012 and to whom. I suspect it will surprise us all except for the fire unions who probably know to the penny.

Councilmember Alvarez, on the other hand, cast a spite vote in favor of the billboards. After all, if her district must suffer their blight, why shouldn’t North Glendale suffer too?

The other hot issue was a vote by a majority of council to reject Representative Trent Franks legislation (HB 1410) to prohibit casino construction in the Phoenix Metro area after August of 2013. Council’s vote on this issue was much closer this time, 4 to 3, with Councilmembers Alvarez, Hugh, Chavira and Sherwood (perhaps as payback to Chavira) voting in the affirmative. The result of this congressional bill would be to stop the Tohono O’odham in their tracks. You can be sure it will result in another court battle. In the meantime court decisions are not yet settled in the 9th Circuit Court and in the Supreme Court.

Plain and simple, the Glendale City Council should not have done this. It is a slap in the face of a supportive bipartisan congressional coalition made up of the likes of Franks (R), McCain (R), Pastor (D) and others—virtually the entire Arizona Congressional delegation is in support of Franks’ legislation. The State of Arizona has a law on the books—the voter approved Gaming Compact of 2002. Since when can a city council pick and choose which laws it will uphold? It is a premature action that can result in futility should the court cases be resolved against the Tohono O’odham or Franks’ bill become law.

Mayor Weiers read a letter from Representative Franks expressing his disappointment with this council’s action and his pledge to continue to move this legislation forward. The Mayor also expressed concern that should the Tohono O’odham prevail the State Legislature will move to allow gambling state-wide, no holds barred. Many neighborhoods, state-wide, not just in the Phoenix Metro area, may become victims of new casino construction, not just by state tribes but by gaming interests throughout the country.

I, the former Yucca district councilmember, along with many, many Glendale residents, especially in the district affected, the Yucca district, urge the Gila River Indian Community and the Salt River-Pima-Maricopa Indian Communities to stay the course. Continue to fight this deception perpetrated by the Tohono O’odham on you, its sister tribes.

I urge Representative Franks to also stay the course. The 4 current councilmembers who voted to pass this resolution do not represent the majority – Glendale residents opposed to this intrusion. They are misguided–swayed by the promises made to them by the Tohono O’odham. Yet how can we trust a tribe that used deception to buy the land and keep it a secret for 7 years? How can other tribes trust the tribe that used deception and secretly was planning to build a casino while advocating for a state compact that promised no new casinos in the Phoenix Metro area? Anyone who relies upon the Tohono O’odham’s word after having seen their deceptions is a fool. It looks like we’ve got at least 4 fools on the Glendale City Council. Sigh…

© Joyce Clark, 2014

FAIR USE NOTICE

This site contains copyrighted material the use of which is in accordance with Title 17 U.S. C., Section 107. The material on this site is distributed without profit to those who have not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of environmental, political, human rights, economic, democratic, scientific and social justice issues, etc. We believe this constitutes a ‘fair use’ of any such copyrighted material as provided for in Section 107 of the US Copyright Law and who have expressed a prior interest in receiving the included information for research and educational purposes. For more information go to http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond ‘fair use,’ you must obtain permission from the copyright owner.

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