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Joyce Clark Unfiltered

For "the rest of the story"

The Glendale Monthly Arena Report for February, 2014 is now available. The $3 qualified ticket surcharge for hockey events is reported by IceArizona at $163,082. Divide that number by the $3 ticket surcharge and the qualified ticket attendance for the month is 54,360. The number of hockey events for the month was 4. Divide the 54,360 by 4 and the average qualified ticket attendance per game is 13,590. The publicly announced attendance figures are higher. If a game was sold out at 17,750 that means that approximately 4,000 tickets would be non-qualified, either comped or sold at a discounted price and the city does not receive the surcharge.

IceArizona, by comping and selling discounted tickets, is not generating the revenue it needs. Publicly they have announced that some of the games are the highest revenue generators to date. True enough but if they had sold more qualified tickets their bottom line would be stronger. How long before its losses reach the $50 million figure? Five years? Three years?

Let’s look at the non-hockey events. There were two in the month of February. The qualified ticket surcharge reported by IceArizona to the city is $59,884. Divide that figure by $5 per qualified ticket for a qualified ticket attendance of 11,976. Divide that figure by the 2 non-hockey events and there was an average of 5,988 of qualified ticket attendance per event. Again, the publicly announced attendance figures were higher but again, the balance of the tickets were either comped or sold at a discount, making them non-qualified ticket sales.

Parking figures are only reported by quarters of the year so the next parking revenue statement will be available at the end of April, 2014. The city continues to show a total loss of slightly over $3 million to date.

As has been reported, council budgeted $6 million in this Fiscal Year toward the payment of the $15 million annual management fee. The council meeting of March 25, 2014 will have council voting to transfer $6,680,160 from its Contingency account to cover the balance of the arena management fee due this year. The total management fee for this year is $13,551,370. It is not the full $15 million because the management deal did not become effective until August, 2013. The lower management fee for this year reflects the proration starting date in August. The city pays out $13.5 million and receives $3.2 million in “enhanced revenues” (that includes sales tax inside the arena) to date.  It looks like the city’s arena loss to date is about $10 million. This figure will drop with the reporting of revenues from the games played in March and April. Hopefully there will be some playoff game revenue as well. It is estimated that the city’s loss for the year will be in the $7 million range. Couple that with the $12 million annual arena construction debt payment. It isn’t a pretty picture, is it?

© Joyce Clark, 2014

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There are figures available for the first six months of the Jobing.Com management agreement covering from August, 2014 through January, 2014. No figures are available for February, 2014 even though we are in March of 2014. We can expect them at the end of March. Why it takes a full month to publish the figures is a mystery. After all, the city is directly reporting the figures supplied to it by IceArizona. The agreement took effect in August of 2014 and there were no ticket sales that month.

The monthly arena report reflects numbers supplied by IceArizona, manager of the arena. It reflects ticket revenues to the city on qualified ticket sales only. Non-qualified tickets could be anything from discounted to comped tickets. The qualified tickets per game do not reflect total per game attendance as reported publicly by IceArizona. The arena has a seating capacity of approximately 17,700. Some of the games were reported as sold out – standing room only. A portion of the ticket sales for those sold out games must have been discounted or comped and therefore not counted as qualified tickets requiring the surcharge of $3 per ticket.  It appears as if the city is not earning the revenue it could. Perhaps more of these tickets should be considered as qualified. Here is a summary of the qualified tickets that actually earned the city revenue month by month:

               # of hockey           Ticket Surcharge divided            Average number

                          events                  by $3 per game                        of Qualified tickets/game

August, 2013                0                             0                                                 0

September, 2013         1                       $16,413 ÷ $3                             5,471      (1 game)

October, 2013              7                     $203,289 ÷ $3                            9,680      (7 games)

November, 2013          6                     $193,517  ÷ $3                          10,751      (6 games)

December, 2013          4                      $153,975  ÷ $3                         12,831      (4 games)

January, 2014              10                    $355,135  ÷ $3                        11,837     (10 games)

A question that has never been answered satisfactorily is how come the Interest Income on the Escrow Account was posted at $4,620 as of September 30, 2013 and that number has not changed to this day? There is no posting of any accrual to that account in Oct.- Nov.- Dec. or Jan.

As of January 31, 2014 the city has spent $6,502,055 toward the $15,500,000 owed this year per the arena agreement. Offsetting revenues earned of $2.7 million have not covered the $6.5 million spent and to date the city has a loss of $3,705,324.

If there are no playoff games the total revenues for the city for FY 2013-14 which ends June 30, 2014 can be estimated at $6 to $7 million dollars. Add another approximate $1 million in Supplemental Ticket Surcharges ($1.50 per qualified ticket) for a total revenue estimate of $7 to $8 million dollars. The city will pay out $15.5 million this year. It is estimated that the loss will be somewhere in the neighborhood of $7.5 million dollars on the arena this year.

Then there is the annual arena construction debt payment at an estimated $12 million a year. It is offset by the sales taxes earned at Northern Crossing, Cabela’s, Tanger Outlets and the businesses in surrounding Westgate. It does not include sales tax earned inside the arena as that is counted as part of the arena revenue of $2.7 million to date. The estimate of the amount of annual sales tax earned from these sources is approximately $4million. That means the city will have to find an estimated additional $8 million to cover the shortfall on the arena construction debt.

The underperformance of both revenue sources: arena revenues and Westgate/Northern Crossing/Cabelas sales tax revenues will fall short and cause the city to pay an estimated $15 million this year over and above all revenues earned. The only ways the city can continue to subsidize arena expenses is to: raise the temporary sales tax and make it permanent; increase property taxes and reduce city services by eliminating some or privatizing. The question for every Glendale resident is, is it wise to continue to subsidize arena losses by raising taxes and reducing/eliminating city services?

© 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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This will be my last posting until after Christmas Day. With less than a week before Christmas family and friends, last minute shopping and baking consume my time. Here goes. This council is often disappointing because of their lack of substantive engagement. Their December 17, 2013 council workshop had a myriad of issues, some of them quite important.

When it came to the presentation on the Monthly Arena Reports we learned some new or corroborating information. The figures that are used by the city are figures provided by IceArizona.  Mr. Duensing, Executive Director of Financial Services, stated that the expected annual arena revenue for this fiscal year will be $6,791,540 and the expected deficiency will be $7.1M. He indicated that as of November 30, 2013 (covers period from Aug. 5 to Nov. 30, 2013) the amount of revenue accruing to the city is $1,168,880. This means the enhanced IceArizona revenues to cover the $9M unbudgeted will be short by approximately $2M by June 30, 2014 (end of current Fiscal Year). I find it amazing that his forecasted estimate of annual revenue is so precise, down to the penny. Nevertheless, it portends that the city will be short a boat load of arena revenue this year.

The city budgeted $6 million dollars for arena management of the $15 million dollar total fee and expected IceArizona’s enhanced revenues to cover the $9 million dollars unbudgeted. Looks like that ain’t gonna happen.  Mr. Duensing also answered a question posed in one of my latest blogs regarding the Supplemental Ticket surcharge of $1.50 per qualified ticket. He said we won’t see this total until the end of this fiscal year per the agreement. Fine but why isn’t a monthly amount being offered to the city in the monthly reports? After all, it’s their specific line item. I’ve been told that an escrow account has been established. It would be nice if the city received confirmation that X amount of dollars is being deposited monthly into that account. After all, it is an interest bearing account and the entire amount, including interest, could very well end up going to the city.

It also raises the question of the definition of what is a qualified ticket. Here is the agreement’s definition: “Qualified Ticket” means a Ticket to a Fee Activity for which (i) the Team Owner, with respect to Hockey Events; (ii) The Arena Manager or sponsor or promoter, with respect to Team Revenue Events, City Revenue Events and other Fee Activities that are not Events; or (iii) the City, with respect to City Sponsored Events, receives valuable consideration (whether in money, services, foods or other value). Any Ticket for which (i) the Team Owner, with respect to Hockey Events; (ii) the Arena Manager or the sponsor or promoter with respect to Team Revenue Events, City Revenue Events and other Fee Activities that are not Events; or (iii) the City with respect to city Sponsored Events, (a) receives no value, or (b) receives money (but not any other services, goods or other value) for such Ticket in an amount less than 25% of the retail priced stated on the face of such Ticket, shall not be a “Qualified Ticket”; provided, however, that, if the aggregate number of Tickets described in the immediately preceding clauses (a) and (b) that are distributed by the Team Owner for a given Hockey Event (other than a Hockey-Related Event) exceeds 1,750 then the Tickets described in the immediately preceding clauses (a) and (b) distributed by the Team Owner for such Hockey Event that exceed 1,750 shall be deemed “Qualified Tickets” for such Hockey Event, unless the City and the Team Owner mutually agree otherwise.”

I suspect the city has one interpretation of this paragraph in mind and IceArizona has another. I’ve learned that arena employee tickets purchased at a discount were counted as qualified tickets in previous years. Apparently now they are not by IceArizona.  Is it because the discount is greater than 25%? What other categories of purchased tickets are no longer considered as qualified by IceArizona? Is IceArizona discounting a large number of tickets? If so, as a result, how much surcharge money is the city not receiving?

Apparently there is some sort of agreement that the number of complimentary tickets to be given away would average no more than 1,000 per game. It appears that IceArizona has far surpassed that average and in one case gave out 3,500 complimentary tickets for one game. The rationale for capping the number of complimentary tickets per game is that it frees up a greater number of qualified tickets to earn the city surcharge. I am hopeful that a Fiscal Year- end audit commissioned by the city will clear up many of these questions.

What was council’s reaction to the dismaying news that arena revenues will experience an approximate $7M deficit? Not a word. Not one single question asking how the projected deficit would be covered. Instead there was a chorus of “thank yous” to staff for bringing this information forward and making it publicly available.

The other substantive issue on council agenda was the Five Year Forecast. As presented by Mr. Duensing the bottom line is that the city faces everything from a minimal deficit of approximately $250,000 next Fiscal Year up to a substantial deficit of $30 million dollars within 5 years. He asked council to approve staff’s development of a short term plan and a long term plan to deal with these expected deficits.  He received council approval to do so along with a chorus of confidence from councilmembers that the deficit can be overcome. Mayor Weiers said it best by asking everything be placed on the table and he hopes council has the courage to make some very difficult decisions. Every citizen of Glendale hopes council has that courage. What better Christmas present could there be?

© Joyce Clark, 2013

FAIR USE NOTICE
This site contains copyrighted material the use of which has. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those 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, democracy, 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 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.