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Joyce Clark Unfiltered

For "the rest of the story"

Disclaimer: I am presenting my views as a private citizen who blogs about Glendale issues. The thoughts and opinions expressed do not represent the Glendale city council or its leadership staff.

As I write this blog, news has just been issued that ASU has pulled out of the plan to allow the Coyotes to use property within their athletic district. Never the less, the information below may help shed some light on why legislation introduced on February 1, 2017 would not have passed. Here are links to stories just published: http://www.azcentral.com/story/sports/nhl/coyotes/2017/02/03/asu-pulls-out-plan-bring-arizona-coyotes-tempe/97460974/ and http://www.abc15.com//sports/sports-blogs-local/arizona-state-backs-out-of-tempe-arena-deal-with-arizona-coyotes?utm_source=SilverpopMailing

Don’t ya just love it? SB 1474 was introduced to the Arizona legislature this Tuesday, February 1, 2017. The media announced the proposed legislation today, Friday. Fridays are always good days to introduce anything controversial as this is sure to be. It gets buried amidst a weekend, filled with fun activities and is generally ignored by the media, much less noticed by the general public.

SB 1474 is a proposed amendment to well established state tax code. The amendment proposes the creation of a “community engagement district.” Here is the link to the bill’s full text:

https://apps.azleg.gov/BillStatus/GetDocumentPdf/447123 .  Who introduced this bill?

  • Senator Kate Brophy McGee, Republican, representing District 28 in Phoenix
  • Senator Sonny Borelli, Republican, representing District 5 of Lake Havasu City
  • Senator Karin Fann, Republican, representing District 1 of Prescott
  • Senator Frank Pratt, Republican, representing District 8 of Pinal County
  • Senator Bob Worsley, Republican, representing District 25 of Mesa
  • Representative Douglas Coleman, Republican, representing District 16 of Apache Junction and Pinal County
  • Representative Thomas Shope, Republican, representing District 8 of Coolidge
  • Representative Bob Thorpe, Republican, representing District 6 of Flagstaff                                                                    

Please note that with the exception of Senator McGee (Phoenix) and Senator Worsley (Mesa), all of these legislators represent areas outside Maricopa County…hmmm.

It proposes the establishment of a “community engagement district pursuant to Section 48-3802.”  What’s in Section 48-3802? It sets the parameters under which this community engagement district may be established. Under A. it says, “The governing body of a city in which a university athletic facilities district has been established (read ASU’s district) pursuant to Section 48-4202, Subsection C may also establish a community engagement district in the city pursuant to this section if the governing body (Tempe) determines that the public convenience, necessity or welfare will be promoted by the district’s establishment…but must satisfy both of the following requirements:

  1. On the petition of the owner or owners of all of the real property on which a public facility will be located, the governing body of the city in which the property is located, on or before December 31, 2018, must adopt a resolution as described in this section.”

Most interesting is, “The district board of governors must have received, from the municipality in which the district is located (Tempe) or from any lawful nongovernmental source (ASU? Coyotes?), a financial commitment in an aggregate amount equal to or greater than the total amount to be distributed to the district under this section…” That aggregate amount has been stated publicly as $200 million dollars toward a $400 million dollar facility.

Lastly, the district will levy and excise tax on business activity in the district of no more than 2%. This is in addition to regular, state, county and city taxes.

I’m no lawyer but upon reading this proposed bill it seems to call for Tempe to pass by resolution a community engagement district since it is the jurisdiction in which the Coyotes arena would be built. Tempe must hold a public hearing on the matter. Bring your seat cushions because that promises to be one heck of a long public hearing.

Under this proposed legislation it appears that if Tempe creates such a district, “…that the establishment of the district may result in the levy of taxes to pay the costs of improvements constructed by the district and for their operation and maintenance.” It seems as if Tempe could have the authority to levy taxes upon every resident in Tempe if there is an annual deficit in revenues produced by this community engagement district. Beware of those bearing gifts in Coyotes’ clothing…the team sold Glendale by promising that the “enhanced revenues” it would receive would cover the costs to the city annually. Never happened.

The proposed bill also seems to require some entity to put up a bond (sort of) to be held in a separate account equal to the $200 million dollars the Coyotes want from the taxpayers…you. Well, we all know it won’t be the Coyotes. So that leaves Tempe or ASU to put up the money. Most likely ASU’s money would come from private donations rather than the annual public subsidy granted by the state legislature to all 3 of Arizona’s universities. I suspect private donors expect their money to go toward improving student education. I’m not so sure they’d be happy to learn that their money is actually going to guarantee the development of a private, for-profit entity such as the Coyotes.

I believe there is a good case to make for why the Coyotes belong in Glendale:

  • The Gila River Arena was built in 2003…specifically for the Coyotes.
  • The arena is 14 years old and is still one of the best, state-of-the-art arenas in the National Hockey League.
  • Glendale has proven its loyalty to the Coyotes by paying the NHL $50 million dollars to run the arena after Jerry Moyes declared bankruptcy in 2009. That act of loyalty nearly drove the city into bankruptcy. You would think that NHL Commissioner Gary Bettman would be loyal to Glendale and stand behind keeping the Coyotes in Glendale.
  • The Coyotes pay $500,000 in rent annually and have the use of the arena for all practice games. This is a unique to the Coyotes. Most NHL teams own and operate their own separate practice facilities at their own expense.
  • The Coyotes have the second sweetest arena deal in the entire Hockey League. The team gets 100% of the parking revenue, merchandise sales, concession sales and ticket surcharges as well as 80% of the naming rights.
  • Between 2015 and 2050, the West Valley will have an estimated population of 1.2 million; Phoenix will have an est. population of nearly 700,000 and the East Valley nearly 650,000. Between 2000 to 2010, the West Valley added about 300,000 people, Phoenix added about 125,000 people and the East Valley almost 250,000 people. MAG predicts future population growth in the West Valley will be nearly equal to the combined population growth of both Phoenix and the East Valley.
  • Well respected economic analyst Elliot Pollack predicted that Glendale will become the geographical center of the entire Valley
  • The new loop 202 bypass route known as the South Mountain Freeway will be completed by 2019 providing a significantly improved connection between the East and West Valleys

Anthony LeBlanc decided to teach Glendale a lesson when the city cancelled the contract that included a direct subsidy to the team. He is not acting in the team’s best long-term interests. While he gets short-term revenge, he fails to acknowledge and recognize the tremendous long-term growth of the West Valley and that is where his customers will come from. How long before he decides that the East Valley was a mistake because a booming West Valley customer base doesn’t want to commute eastward? After all, that is, in large part, his rationale for trying to move to the East Valley.

There have been many chapters written in the on-going Coyotes’ story. Some of those chapters were written by the National Hockey League; some of those chapters were written by the City of Glendale. But the latest chapters of turmoil and uncertainty about the Coyotes’ fate were written by the Coyotes themselves. The team attributes its lousy attendance to East Valley fans unwilling to commute to the West Valley. Perhaps they should acknowledge that the team’s performance is driving the lack of attendance these days.

There is no doubt that the Coyotes should remain in Glendale, Glendale has paid the price to keep them (something that the most rabid of Coyotes fans and LeBlanc fail to acknowledge). The Gila River Arena is a Class A hockey facility. The Coyotes have a very good revenue deal. With the explosion of growth occurring in the West Valley, this is the best location…for now and into the future.

It’s time for LeBlanc to make peace…not war…with the arena manager, AEG, and the City of Glendale. Glendale has proven its commitment to the Coyotes. It’s time for the Coyotes to prove its commitment to Glendale.

© Joyce Clark, 2017        

FAIR USE NOTICE

This site contains copyrighted material the use of which is in accordance with Title 17 U.S. C., Section 107. The ‘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 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 material. 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.

It has been 18 years and 53 days since the city’s pledge to build the West Branch Library.

Otherwise occupied, I paid very little attention to the NHL hockey game until I checked Twitter later in the day and saw a friend’s tweet that said “Year of the outsiders #JohnScottMVP.” I was struck by that, called the friend and she shared her thought that John Scott was the sports equivalent of the current political scene of the outsiders.

It is undeniably the year of the “outsiders.” Let’s look at two: this one in the world of sports and one in the world of politics.

For many of you not familiar with the world of National League Hockey you will not have heard about the NHL’s most recent All Star game and the extraordinary events that occurred.

John Scott is an enforcer and was a player for the Arizona Coyotes hockey team. He’s the six foot eight inch designated guy to fight other players on behalf of his teammates. He’s never been a star and bounced around among four teams before landing with the Arizona Coyotes. I don’t know if he ever scored any goals in his entire professional career. He is not a star but a steady, constant player, devoted to the game and thankful that he is considered good enough to play in the NHL. He is like our mail men and women, invisible, delivering our mail daily without us giving a thought to their service.

The NHL All-star players are selected by the fans through voting. It began as a joke. He was nominated for the All Star game but a funny thing happened. Fans and his peers voted for him in overwhelming numbers. As we now know he was asked by the NHL to decline and he reluctantly did so telling the fans he wasn’t a star and they should select another. No one listened. The next thing he knew he was voted Team Captain and he would be playing for the Pacific Division in the All Star game. He was excited and proud. The NHL was not.

Then a not-so-funny thing happened. The NHL establishment didn’t want John Scott to play. After all, they had to preserve their image. It was not one of a 4th liner playing in the nationally televised All-star game. Once again John Scott was asked to state he was not playing but this time according to his very endearing written article ( Here is the link: http://www.theplayerstribune.com/a-guy-like-me/), he was asked if his children would be proud of him. Like other institutions the NHL showed the same tone deaf attitude having no clue what children mean to parents so from that moment on John Scott was determined to play.

The NHL establishment concocted a scheme apparently pressuring the Coyotes owners. After all, it was because of Bettman and a very large NHL loan they were able to buy the team. Don Maloney, Coyotes’ General Manager, became the establishment’s enforcer telling Scott that he had been suddenly and inexplicitly traded to the Montreal Canadians who immediately sent him down to minor league team in Newfoundland. There isn’t any NHL rule that says once a man has been demoted he can’t play in an All Star game but they figured they had sent the message to Scott…don’t play, don’t even think about it.

But Scott did think about it. Players from around the league told him, “You have to play.” So John Scott played.

It was both a time of magic for John Scott and a repudiation of the NHL by most fans and many players. He enjoyed a stellar day with his wife and two tutu/Coyotes sweater clad

SANTA CLARA, CA - FEBRUARY 20: John Scott #20 of the San Jose Sharks participates in the family skate during the practice day for the 2015 Coors Light Stadium Series game between Los Angeles Kings and the San Jose Sharks at Levi's Stadium on February 20, 2015 in Santa Clara, California. (Photo by Dave Sandford/NHLI via Getty Images)

Photo by Dave Sandford/NHLI via Getty Images

tiny daughters in attendance and scored two All Star goals that evening…Two. At the end of the game three names were tweeted by the NHL for the game MVP. None of the three names were John Scott. Online Twitter erupted with John Scott MPV hashtags and fans in the Arena began chanting Scott’s name for MVP. In five minutes the NHL establishment capitulated and John Scott was named the MVP of the2016 All Star game.

John Scott represents “everyman.” He represents the men and women on the assembly line, the invisible and silent workers that keep our country running. In this one extraordinary moment of time John Scott and “everyman” prevailed over the establishment. The “outsiders”…the John Scott caliber of player who ignored the establishment’s threats and intimidation and the fans who have silently in anger and frustration  watched game play diminish as it became buried in an avalanche of rules, regulations and insensitivity…made their voices heard. In sports John Scott epitomizes the common man’s disgust of the establishment’s unethical behavior.

Trump is the creation by an establishment that embodies a corrupt political system, a biased media and a Washington, D.C. awash in self-absorption and self-aggrandizement. Oddly, he too, speaks for “everyman.” He speaks for a shrinking middle-class that no matter how hard it works, no longer ever gets ahead and who fears its children and grandchildren will be left worse off. He speaks for the millions who are demoralized by a great county that is no longer respected by the world. He speaks for those who fear the possibility of catastrophic terrorist acts on our soil. He speaks for a county that is economically anemic and needs a transfusion not a “transformation”. His political incorrectness speaks against those in power who think they know better but have made things worse.

He says what he really thinks without the traditional political filter. Or any filter actually. Whether you think he is right or wrong it is refreshing. He offers hope to the silent majority that there is a chance to reclaim America, a great and prosperous and yes, entitled county; the county for which so many have sacrificed to get to its shores.

Deep down in the nation’s gut it is implicit that establishment politicians lie. They spoon feed their base what they believe they must say to remain popular and electable. However the national psyche is flexing its forgotten muscles. They are no longer silent while establishment politicians fail to serve the people but rather calculatingly work to retain their power and privilege. Trump has stripped away their politically correct veil. Every time he says something the establishment considers totally outrageous, sure to alienate all he defies their conventional wisdom and his poll numbers rise.

Trump has tapped a nerve, a sentiment, a longing. He has given voice to concerns too long unspoken. He is most certainly a political “outsider,” hated, admired or feared dependent upon one’s political persuasion. Can he win a presidential race or really change the country for the

Photo courtesy of sourcefed.com

Photo courtesy of sourcefed.com

better? Who knows? But to put it bluntly in the primary he is boxing the GOP establishment’s ears. Average folks are cheering him on with pleasure.

I chose these two men as the epitome of the “outsider.” In sports John Scott is symbolic of a true underdog who prevailed over an old, tradition riddled elitist establishment.

In politics Donald Trump is symbolic of a reactionary who has the potential to prevail over an elitist political establishment that will do whatever is necessary to preserve its power.

Let’s hear it for outsiders…#2016

© Joyce Clark, 2016

FAIR USE NOTICE

This site contains copyrighted material the use of which is in accordance with Title 17 U.S. C., Section 107. The ‘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 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 material. 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.

It has been 17 years and 195 days since the city’s pledge to build the West Branch Library.

Recently ‘thevintageguy,’ one of the regular commenters to my blog posts, offered an interesting idea. He calculated that if every hockey ticket for every game had a surcharge of $24 it would generate $15M annually in revenue. If that surcharge were applied IceArizona would not need the City of Glendale to pay $15M a year for a management fee.

I decided to explore that idea but first, some history. The city owned arena opened in December of 2003. Let me remind you there was no arena management fee that the city had to pay. Steve Ellman led a group of investors who bought the Coyotes. Ellman may be many things to many people but he took immense pride in the arena, the Coyotes and the events he booked. Back then concerts were far more frequent. Bette Midler, Britney Spears, Elton John and U2, to name just a few performers, played at the arena in its early years. During the years of his ownership of the team the Arizona Sting (now defunct) also played all of its games at the arena. While the Arizona Sting was probably not a money maker during the years of its existence from 2003-07, each year it successfully increased its fan base. It certainly was not a deterrent to Jerry Moyes’ acquisition of Ellman’s interests.

Ellman realized how important it was to his bottom line to keep the arena busy all year long. Ellman’s downfall was his inability to develop a substantial amount of commercial and retail surrounding the arena quickly enough. To focus on that aspect of his business he sold his interest in the hockey team to Jerry Moyes. Then the national recession hit and he was unable to hold on to his interests within Westgate.

Under Moyes there was no arena management fee that the city had to pay. Moyes seemed not to be as committed to the health of the team and its bottom line as Ellman had been. Unfortunately Moyes ran the team’s finances into the ground. Apparently he diverted team revenue to his other businesses and subsidiaries. By 2009, Moyes asked the city to begin payment of a management fee of $12M a year. The city refused. Moyes declared team bankruptcy all the while working a secret deal with Jim Balsillie to buy the team out of bankruptcy. The court stopped that scheme and the NHL assumed control of the team. The NHL demanded an annual management fee of $25M knowing that the city needed to buy time until a new team owner was secured. It was precedent setting. From that point forward any potential owner of the team had a green light to require that the city pay a management fee.

In 2013, IceArizona bought the team with the NHL’s blessing and so the management fee scheme was retained with the city paying $15M annually. The IA management agreement has a revenue sharing component but the revenues generated annually and paid to the city have been approximately $8M short every year in covering the annual $15M payment.

Recently the city council voted to cancel the contract with IceArizona (IA) alleging a conflict of interest by two former city employees. IA immediately went to court and obtained a Temporary Restraining Order (TRO). The judge required the city to make its quarterly payment of $3.75M on July 1, 2015 to pay for services already rendered and the city has done so. The court also required IA to post a bond of $1M and IA has done so. On July 29, 2015 both parties will be back in court and the judge will make a determination if the TRO should become permanent pending the outcome of the suit regarding the contract cancellation.

On Monday, July 13, 2015, the Glendale city council met in executive session. It is my strong belief that the subject of that meeting was the litigation between IA and the city. I suspect IA made an offer amending the existing contract and their offer was rejected. It appears as if the city council is convinced that its allegations are solid and provable in a court of law. Just think about it. If there had been a desire on the part of council to accept an offer from IA there would have been a press release issued after executive session. That has not occurred.

Back to the ‘vintageguy’s’ idea. Basic research reveals the following annual attendance figures for the Coyotes, courtesy of hockeyDB.com at http://www.hockeydb.com/nhl-attendance/att_graph.php?tmi=7450 .

“Phoenix Coyotes Yearly Attendance Graph. This is a graph of the home attendance of the Phoenix Coyotes, a hockey team playing in the National Hockey League from 1996 to 2015. Attendance is based on numbers from a team or league, either released as an official yearly per-game average figure, or compiled into an average from individual boxscore attendance. In some cases when boxscore attendance is unavailable for a small number of games, the attendance is computed omitting the missing games and annotated as approximate. Clicking on a season’s bar will bring you to a graph of all teams in the league.”

The average attendance figure for the Coyotes for the last 5 years is 13,133. Multiply that figure by 41 games a year and the average total attendance for a season of 41 games is 538,453. If you divide $15M (annual city payment of management fee) by 538,453 each ticket for each and every game would require an additional $27.85. If a hockey fan were to buy a ticket for each of the 41 games per year the additional annual amount he/she would pay would be $1,141.85. What do all of these numbers mean? If hockey fans paid more for every ticket IceArizona would not need the $15M a year from the city. Now that sounds like a plan.

Let’s look at it another way. Each year even with IA’s revenue sharing the city is in deficit for the $15M annual payment by about $8M a year. If revenue sharing were to remain and the same ticket increase scheme were used to cover the $8M a year deficit, each ticket would need to be increased by $14.85 which comes to a total increase for a fan attending all 41 games of $608.85 a year.

I believe my figures are correct but even if they are off a bit don’t get bogged down in the numbers. Instead consider the concept. If fans were charged more per ticket per game with or without IA revenue sharing there would be no need for the city to pay an annual management fee of $15M. That would surely solve the city’s annual Coyotes related deficit. Whether it is $27.85 or $14.85 per ticket per game the sixty four dollar question is are Coyotes fans willing to pay either extra amount to keep the team in Glendale? Is it possible for them to redirect their negative anger to a more positive action – that of paying more to keep their team?

© Joyce Clark, 2015

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.

Ever since the news of Andrew Barroway’s purchase of a 51% interest in the Coyotes (expected to be ratified by the NHL’s Board of Governors) there have been questions about the original management agreement between IceArizona and the City of Glendale.

One of the questions that surfaced was would there be an opportunity to renegotiate the agreement. In reading the contract there does not appear such an opportunity.  Technically Barroway is becoming the majority owner of the team and for now the arena manager remains the same.

The arena manager is responsible for the operation of the arena and for leasing space to the team. The issue is addressed in Section 5. Demise of Arena and Use Rights. In 5.1, Demise of the Arena it states, “The City hereby demises and lets to the Arena Manager, and the Arena Manager hereby takes and leases from the City, effective on the Closing Date, for the Term and upon the provisions (i) The Arena Facility…” In Section 5.2, Grant Use of Rights, it says, “In addition to the rights granted by the City to the Arena Manager in the other provisions of this Agreement, the City hereby grants to the Arena Manager, and approves the right of the Arena Manager to grant to the Team Owner, during the Term, the exclusive right and obligation to use and occupy the Hockey Event Spaces…”

In Section 6.2., Sublease of Exclusive Team Spaces, it says, “The Team Manager hereby subleases the Exclusive Team Spaces to the Team Owner…”  The team is a subtenant of the arena. We know that Barroway is securing a 51% interest in the team but we do not know if he is also acquiring a majority interest in the arena management company.

Even if Barroway became a majority owner of the arena management company in Section 4.2.3, Arena Sub-Manager, “The Arena Manager may, from time to time, delegate all or a portion of its duties and responsibilities to an Arena Sub-Manager…” There is no provision that I can find whereby a change in team ownership requires a renegotiation of the lease since: (1) the lease is with the arena management company and (2) the arena management company can sub-lease to an arena sub-manager without city approval as long as all duties and responsibilities continue to be met satisfactorily.

The other question that has been raised is the city’s ability to audit. A little background is in order. Under the team ownership of Ellman and Moyes the city received financial reports but had to accept them without any corroboration. This eventually became problematical for the city. City Council wanted a mechanism whereby it could verify what the arena manager was reporting in terms of revenues and costs associated with the arena’s management and operation. Hence Section 8.16, Financial Reports and Section 8.17, Audits were incorporated into the agreement. Financial reports must be submitted to the city monthly, quarterly and annually. To ensure the veracity of the reports submitted, in Section 8.17.1, “The City shall have the right to conduct an independent audit of the management and operation of the Arena (or any part thereof) and the Account Records (or any part thereof) and the Team Owner Records (or any part thereof) by City Staff or by an independent certified public accounting firm selected by the City.” This section clearly grants the city the right to audit not just arena manager financial records but financial records of the team as well.

Keep in mind that this agreement was devised by attorneys and as a result, their interpretations of the terms can vary. That’s how they earn their fees…by arguing exactly what a term or provision of a contract actually means. They could argue how many gnats are on the head of a pin.  

As a result you can be sure that every sentence within the agreement can be disputed and argued by attorneys. On the face of it, it appears the city has no legal right to renegotiate the management agreement with IceArizona. IceArizona would have to agree to do so voluntarily and that’s not going to happen. However, the city does have a legal right to audit manager and team financial records and to thereby confirm the revenues and expenses that are reported to it.

© 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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Anthony LeBlanc

I’ve always wondered about the NHL’s Board of Governors. Who are they? Where do they meet? What do they do? And how do they do it? Their mantle is one of secrecy. Google and you may, or may not, be able to come up with a list of all of the members. I did just that and pieced together a list of current Governors and Alternates. I offer my list at the end of this article. If I have erred, I hope readers will advise me so that I can correct the list.

Recently, I reached out to Rich Nairn, VP of Communications, with my questions. He arranged an opportunity to visit with Anthony LeBlanc, one of the Arizona Coyotes Alternates to the Board of Governors. I want to thank Mr. LeBlanc for graciously giving of his time amid a very busy schedule and patiently answering my questions. It was a good discussion and I learned a great deal.

There are 30 NHL teams. All have different ownership situations and the Arizona Coyotes are no different. In the Coyotes case they have 9 owners.  Who is the team’s Governor or Alternates on the Board of Governors? How were they chosen? There was never a formal vote by the team’s owners. George Gosbee is the largest equity partner and was charged with securing the rest of the equity partners and it was generally understood and accepted by all that he would be Governor. There are three alternates. They are Anthony LeBlanc, Craig Stewart, and Don Maloney. All have essential roles with the team. Again, there was no formal vote by the Board of Directors. These men assumed their positions because of the responsibilities they bear.

The Board of Governors meets three times a year. They typically meet in New York City in September; in Pebble Beach, California (or some other warm clime) in December; and in New York City again in June. If every team’s full compliment were to attend the same meeting there would be 123 Governors and Alternates representing the 30 teams. Some teams have as few as a Governor and 1 alternate but many have a Governor and 4 or 5 Alternates.

Since August of 2013 when the team was acquired by IceArizona, Gosbee as Coyotes Governor and two of the three Alternates, LeBlanc and Stuart, have attended the September 2013 meeting, the December 2013 meeting, and the June 2014 meeting. Due to the demands of his schedule Don Maloney attended one meeting. I asked LeBlanc if there were ever any emergency meetings of the Board of Governors. He said they do occur from time to time and used the example of the Board’s ratification of the purchase of the Coyotes by IceArizona. Since he has been attending board meetings no such special or emergency meeting has been necessary.

I also asked if any members of the Coyotes salaried management team attended in order to staff the Governor and Alternates. The answer was “no.” I asked if family members were usually taken on these trips. The answer again was “no.” Do the players’ union representatives or referees’ union representatives ever attend? Mr. LeBlanc indicated that he had not seen that, but that did not mean it didn’t happen. No one participates telephonically. If a Governor cannot attend, the team’s Alternates are charged with representing the team’s interests.

So how do these meetings work? They usually last one day in New York City and two days in a warmer location like Pebble Beach. These meetings are for the purpose of determining policy for the league. The meetings are formal with a written agenda. The agenda is prepared and distributed several weeks in advance giving each Governor and the team’s Board of Directors time to prepare. In the case of the Coyotes their Board of Director meetings are quarterly and usually occur just before the Board of Governors meeting. That gives the owners time to discuss the items on the agenda and to come to consensus on the position they want their Governor to take. As a side note, LeBlanc shared that he has informal, telephonic Coyotes Board of Directors meetings every Friday morning with as many owners participating as are available.

The Board of Governors meetings have become formal due to Bettman’s leadership. The NHL administrative staff or others make presentations and/or reports on agenda items. There can, and often is, discussion by the owners after each presentation. Robert’s Rules of Order are followed with recognition of each speaker. Each agenda item is decided by a roll call vote. Minutes are taken and distributed to each of the Governors. The meeting agendas are created by Gary Bettman, NHL Commissioner, and his staff. Bettman was the very first NHL Commissioner and has been at the helm since 1993, a period of 21 years. Bettman does not have a vote but as NHL Commissioner he often controls the flow of the meeting and requires that all Governors and Alternates defer to him with regard to press releases about any and all important decisions that flow from a Governors’ meeting. All of the Board of Governors meetings’ content remains confidential unless a public policy statement issued.

I asked Anthony if there are any opportunities for the Governors and Alternates to socialize with one another at these meetings. In the days before the Gary Bettman era the meetings had the flavor of a good ole boys meeting. Today social opportunities arise at luncheons or dinners. Breaking bread together gives the Governors and Alternates time to talk shop, share stories about their teams and renew acquaintances. It also can provide an opportunity for a Governor to gather support (or opposition) on an agenda item.

The Governors meetings are similar to what is experienced at any Executive Session of a corporate Board of Directors meeting or city council meeting. All contain the same elements; formal agendas, presentations, discussion and vote on policy items with confidentiality required. Socializations occur outside the meeting room.

Again, I want to express my thanks to Anthony LeBlanc for allowing me to take a peek into the world of the NHL’s Board of Governors meetings. He provided a rare glimpse into a world we hear very little about.

The National Hockey League Board of Governors

Chairman of the Board: Jeremy M. Jacobs

  • Anaheim Ducks
  • Governor:                         Henry Samueli
  • Alternate Governor:        Susan Samueli
  • Alternate Governor:        Michael Schulman
  • Alternate Governor:        Tim Ryan
  • Alternate Governor:        Bob Murray
  • Boston Bruins
  • Governor:                        Jeremy M. Jacobs
  • Alternate Governor:       Charles Jacobs
  • Alternate Governor:       Jeremy M. Jacobs Jr.
  • Alternate Governor:       Louis Jacobs
  • Alternate Governor:       Jarry J. Sinden
  • Alternate Governor:       Cam Neely
  • Alternate Governor:       Peter Chiarelli
  •  
  • Buffalo Sabres
  • Governor:                        Terry Pegula
  • Alternate Governor:        TedBlack
  • Alternate Governor:        Darcy Regier
  • Alternate Governor:        Ken Sawyer
  • Alternate Governor:        Cliff Benson
  •  
  • Calgary Flames
  • Governor:                         N. Murray Edwards
  • Alternate Governor:        Ken King
  • Alternate Governor:        Alvin Libin
  •  
  • Carolina Hurricanes
  • Governor:                         Peter Karmanos, Jr.
  • Alternate Governor:        Jim Rutherford
  • Alternate Governor:        Michael Amendola
  • Alternate Governor:        Jason Karmanos
  • Alternate Governor:        Ron Francis
  •  
  • Chicago Blackhawks
  • Governor:                         W. Rockwell Wirtz.
  • Alternate Governor:        Robert J. Pulford
  • Alternate Governor:        John A. Ziegler, Jr.
  • Alternate Governor:        John McDonough
  •  
  • Colorado Avalanche
  • Governor:                         Josh Kronenke.
  • Alternate Governor:        Mark Waggoner
  • Alternate Governor:        Greg Sherman
  • Alternate Governor:        Joe Sakic
  •  
  • Columbus Blue Jackets
  • Governor:                         John P. McConnell
  • Alternate Governor:        Mark Priest
  • Alternate Governor:        John Davidson
  •  
  • Dallas Stars
  • Governor:                         Tom Gaglandi
  • Alternate Governor:        Jim Lites
  • Alternate Governor:        Jim Nill
  • Alternate Governor:        Mike Modeno
  •  
  • Detroit Red Wings
  • Governor:                        Michael Ilitch
  • Alternate Governor:       Jim Devellano
  • Alternate Governor:       Ken Holland.
  • Alternate Governor:       Cristopher Ilitch
  • Alternate Governor:       Rob Carr
  • Alternate Governor:       Tom Wilson
  •  
  • Edmonton Oilers
  • Governor:                        Daryl Katz
  • Alternate Governor:       Patrick LaForge
  • Alternate Governor:       Kevin Lowe
  •  
  • Florida Panthers
  • Governor:                        Cliff Viner
  • Alternate Governor:       Bill Torrey
  • Alternate Governor:       Michael Yormark
  •  
  • Los Angeles Kings
  • Governor:                        Philip F. Anschutz
  • Alternate Governor:       Dean Lombardi
  • Alternate Governor:       Dan Beckerman
  •  
  • Minnesota Wild
  • Governor:                         Craig Leopold
  • Alternate Governor:        Philip Falcone
  • Alternate Governor:        Jac Sperling
  • Alternate Governor:        Chuck Fletcher
  •  
  • Montreal Canadiens
  • Governor:                        Geoff Molson
  • Alternate Governor:       Kevin Gilmore
  • Alternate Governor:       Fred Steer
  • Alternate Governor:       Michael Andlauer
  • Alternate Governor:       Andrew T. Molson
  • Alternate Governor:       Marc Bergevin
  •  
  • Nashville Predators
  • Governor:                        Tom Cigarran
  • Alternate Governor:       Herbert Fritch
  • Alternate Governor:       David Pole
  • Alternate Governor:       Jeff Cogen
  • Alternate Governor:       Sean Henry
  • Alternate Governor:       Joel Dobberpuhl
  •  
  • New Jersey Devils
  • Governor:                         Joshua Harris
  • Alternate Governor:        David Biltzer
  • Alternate Governor:        Lou Lamoriello
  • Alternate Governor:        Scott O’Neil
  •  
  • New York Islanders
  • Governor:                        Charles Wang
  • Alternate Governor:       Roy Reichbach
  • Alternate Governor:       Arthur J. McCarthy
  • Alternate Governor:       Michael J. Picker
  • Alternate Governor:       Garth Snow
  •   
  • New York Rangers
  • Governor:                         James L. Dolan
  • Alternate Governor:        Glen Sather
  • Alternate Governor:        Hank Ratner
  • Alternate Governor:        Dave Howard
  •  
  • Ottawa Senators
  • Governor:                        Eugene Melnyk
  • Alternate Governor:       Sheldon Plener
  • Alternate Governor:       Cyril Leeder
  • Alternate Governor:       Erin Crowe
  • Alternate Governor:       Bryan Murray
  •  
  • Philadelphia Flyers
  • Governor:                         Edward M. Snider
  • Alternate Governor:        Philip I. Weinberg
  • Alternate Governor:        Peter Luukko
  • Alternate Governor:        Paul Holmgren
  •  
  • Arizona Coyotes
  • Governor:                         George Gosbee
  • Alternate Governor:        Don Maloney
  • Alternate Governor:        Anthony LeBlanc
  • Alternate Governor:        Craig Stewart
  •  
  • Pittsburgh Penguins
  • Governor:                        David Morehouse
  • Alternate Governor:       Ronald Burkle
  • Alternate Governor:       Anthony Liberati
  • Alternate Governor:       Ray Shero
  • Alternate Governor:       Travis Williams
  • Alternate Governor:       Mario Lemieux
  •  
  • St. Louis Blues
  • Governor:                         Thomas Stillman
  • Alternate Governor:        Doug Armstrong
  •  
  • San Jose Sharks
  • Governor:                         Hasso Plattner
  • Alternate Governor:        Doug Wilson
  • Alternate Governor:        John Tortora
  •   
  • Tampa Bay Lightning
  • Governor:                         Jeff Virik
  • Alternate Governor:        Steve Yzerman
  • Alternate Governor:        Tod Leiweke
  •   
  • Toronto Maple Leafs
  • Governor:                         Larry Yanenbaum
  • Alternate Governor:        Dale Lastman
  • Alternate Governor:        Dave Norris
  • Alternate Governor:        Tim Leiweke
  •  
  • Vancouver Canucks
  • Governor:                         Francesco Aquilini
  • Alternate Governor:        Paolo Aquilini
  • Alternate Governor:        Robert Aquilini
  • Alternate Governor:        Michael Gillis
  • Alternate Governor:        Victor de Boris
  •   
  • Washington Capitals
  • Governor:                         Ted Leonsis
  • Alternate Governor:        Richard M. Patrick
  • Alternate Governor:        George McPhee
  •   
  • Winnipeg Jets
  • Governor:                         Mark Chipman
  • Alternate Governor:        Kevin Cheveldayoff
  • Alternate Governor:        Patrick Phillips

© 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 other night I was surfing, trying to find the Coyotes/Blues game. I’m sure it was there but I simply couldn’t find it. The backup plan had me watching the Glendale City Council meeting. Now that council is allowing citizen comments at the beginning of the meeting we are seeing the usual citizen suspects resurfacing at the podium. Andy and Darcy Marwick, residents of Phoenix and dyed-in-the-wool Coyotes haters, opined on their usual complaints. Not to be missed was Glendale resident Bill Dempsky, a former City of Glendale employee, with his usual lament. Ken Sturgis, a Glendale resident, has also started to use this bully pulpit on a regular basis lately. Later in the council meeting Vice Mayor Knaack commented about these usual suspects and their constant references to past history. She felt it was time to stop referring to the past and she urged these citizens to look to Glendale’s future. She suggested that it was time to go back to the old agenda order and place citizen comments at the end of the meeting. We’ll see if that comes to pass.

Citizen Ken Sturgis offered some rather interesting comments. He referred to a “contract” between the city and IceArizona. He claimed that the city’s payment of $15 million dollars a year for arena management was going directly to Fortress and the NHL with IceArizona as merely a pass-through.. Those are the two groups who lent IceArizona the money to buy the team.

I decided to do some checking. Sure enough, I found the “contract.” Actually it’s a notification letter dated September 4, 2013 from IceArizona to the city declaring that as arena manager it had assigned its rights to Fortress and the NHL. Here is the link: http://www.glendaleaz.com/Clerk/Contracts.cfm  . It is C-8584. The letter is signed by Daryl Jones, Chief Operating Officer for the team.

In it IceArizona acknowledges that an assignment of the arena manager notice must be given within 30 days. The sale of the team was recorded on August 5, 2013 and we can assume the assignment of rights was executed the same day. IceArizona notified the city one day before the 30 notification period ended requiring Ice Arizona to formally do so.

What does it all mean? Well, Mr. Sturgis was correct. The assignment of rights, including the $15 million a year for arena management, goes to Fortress and the NHL. That raises other questions. If the $15 million a year is going to their lenders and not IceArizona, how is IceArizona earning enough revenue to cover the arena operations and maintenance costs? The money they borrowed from these two entities went to pay the purchase price of the team. That means IceArizona must rely on revenue sources of ticket sales, suite sales, a percentage of the concessions, the first $20K in every event’s parking revenues, NHL revenue sharing (which are rumored to be as much as $20M a year for the team) and media contracts. It will be difficult to plug in the numbers for these revenue streams as some of it is proprietary. We will not get a full picture until after the end of the Fiscal Year, June 30, 2014.  It is generally assumed that annual O&M costs are in the range of $20 million a year. Don’t forget that IceArizona also must come up with $9 million a year to be paid to the city. The city budgeted $6 million a year for arena management, not $15 million and IceArizona has pledged to cover the difference — $9 million a year. That $9M comes from the ticket surcharge, parking revenues after the first $20K per event and if necessary, the supplemental ticket surcharge. Are these revenue sources enough to cover IceArizona’s expenses? We, the public, don’t know. I suspect IceArizona knows.

© 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.

A disclaimer: I have not made a decision on the Renaissance Sports and Entertainment bid to manage the city’s arena. It is not possible until I have read the document. To date it is not available to the public.

I don’t usually post 3 blogs in one day but this appears to be one of those days that demands it.

On June 25, 2013, Paul Giblin, a reporter for the Arizona Republic issued the following story online, Glendale still unsure about Phoenix Coyotes deal. Here is the link: http://www.azcentral.com/community/glendale/articles/20130625glendale-unsure-phoenix-coyotes-deal.html . Several aspects of his story are troubling. One issue is that a vote is still scheduled for hidden agendaTuesday, July 2, 2013. It is my understanding that the council has requested another Executive Session for Thursday, June 27, 2013. The city had better made sure that notice of another Esession on June 27th is properly posted 24 hours in advance. Which means that the meeting notice has to be posted on Wednesday, June 26th…today. However, even more worrisome is that with an Esession scheduled for June 27 the very earliest the deal points could be posted publicly would be on Friday, June 28th or even as late as on Monday, July 1st. Could the city post as late as 24 hours before a scheduled vote? Yes, they could but would they? I hope not as suspicions will shoot through the roof if the public is given one day to review and understand any deal between Renaissance Sports and Entertainment (RSE) and the city.

city hall 2

Glendale City Hall Complex

Now, about that second $25M the NHL has offered (at the 11th hour) to take payments on of $5M over each of the next 5 years. Great…too little, too late and it doesn’t solve the city’s problems. The $30M leaseback of City Hall was designed to replenish the city’s Enterprise Funds, Vehicle Replacement Fund and Technology Replacement Fund.  Glendale staff crafted a brilliant strategy. Now that strategy has been tabled by council until after the scheduled Coyotes vote on July 2nd… Hmmmm…The $20M the city has held in an escrow account for the NHL payment simply isn’t enough to cover all of the city’s needs. It will pay back some of the loans leaving $5M still outstanding.  While a generous offer on the part of the NHL, it could have been done a long time ago and in fact, I and several former councilmembers called for just such an arrangement. Why now? I suspect it is in reaction to what they perceive as a very negative story about the city planning to enter a leaseback of City Hall to pay back loans directly related to the $50M partially paid and partially still owed to the NHL.

To discover that councilmembers are not on top of the revenues derived from either the Westgate area (remember those revenues are already being used to pay off the original construction debt on the arena and are NOT new found money) or the arena is disturbing to say the least. At least one of them has touted himself as an expert on the entire RSE deal.

Norma Alvarez

Norma Alvarez

Lastly, good old Councilmember Alvarez and her statements have got to have you snapping your heads in double-take mode. Alvarez said, “I called them knuckleheads, because they don’t get it. They don’t get it. They don’t get it. They’re going to continue discussions. Discussions of what? We’re selling City Hall because of paying $50 million. C’mon. C’mon.” Factually she is incorrect. The city is proposing a leaseback arrangement not an outright sale of City Hall with visions of employees moving out after a sale. As for continuing discussions, they should continue but they don’t have to result in acceptance of the deal…not if RSE cannot or will not guarantee “enhanced revenue streams” for the city.

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moyes

Jerry Moyes

It is time to review some previous ownership deal making history. Jerry Moyes threw the Coyotes into bankruptcy in late 2009. In 2010 Glendale and the NHL began to entertain offers for a buyer of the team. Everyone assumed that it would be a fairly quick process but that was not to be. One deal after another was rejected throughout 2010 and 2011. In order to continue the process the NHL held up the city to the tune of $25M a year. In 2012 Greg Jamison entered the picture and a majority of council (I being one of that majority) believed we had a solid deal that was in the best interest of the city.

In June 2012 a majority of council made two significant votes. One was to accept the Jamison deal after the management fee had been reduced and penalty/incentive clauses were added. During contentious council discussions Interim City Manager Skeete presented the council information about the financial impacts of keeping the Coyotes or losing them. One of the bullet points that I remember to this day stated that over the 20 year life of the deal Glendale was better off by some $20M by keeping the team. Skeete, at that time, had worked out a financial plan that called for budget cuts over 5 years. Many became confused and blamed those projected budget cuts on keeping the Coyotes. Not so. Those budget cuts were in anticipation of losing the sales tax increase in 5 years. His plan was solid, accommodated keeping the team and was in the best interest of the city.

That same month a majority of council voted to raise Glendale’s sales tax for a period of 5 years. A fire storm lasting 6 months erupted. Ken Jones, virtually single-handedly, although the Goldwater Institute was lurking about and seen helping Mr. Jones on occasion (later they would part ways), mounted a Referendum petition drive to reject council’s vote on the Coyote deal. He failed but it created unanticipated delay. Shortly on the heels of that effort another group began an Initiative petition drive to get rejection of the sales tax increase on the November, 2012 ballot. They were successful and the voters rejected their initiative in the November election. But it created further unanticipated delay. These folks were not working to further the best interest of the city.

Leblanc

Anthony LeBlanc

The city imposed a deadline of January 31, 2013 for Jamison. He failed to meet that deadline and that is a story for another time. In May of this year the NHL identified Renaissance Sports and Entertainment (RSE) as a buyer of the team and rejected the Pastor bid outright. Has it occurred to anyone that RSE is, in fact, the ONLY bidder the NHL has? To this day they have never made a formal announcement of RSE as the buyer. Is this deal in the best interest of the city?

There are some councilmembers who understand that keeping the team is vital to the city but they are having problems guaranteeing that $15M a year that RSE has said it must have. They are between “a rock and a hard place.” It reminds me of the original Ellman deal. At one point council was presented a “bucket list” graphically. One of the diagrams showed an enormous amount of revenue being literally poured into city buckets. Unfortunately those buckets filled with oodles of revenue to the city never materialized. “Fool me once, shame on you. Fool me twice, shame on me.” Now the current council is being presented with another version of a “bucket list.” This time RSE had identified additional revenue streams that will reimburse the city for its guaranteed pledge of $15M a year for a lease management fee. Some have asked why doesn’t the city just pay the $6M a year and RSE keeps ALL of the additional revenue streams itself. It accomplishes the same thing. The assumption is that to satisfy its lenders RSE must show that it has an annual guaranteed source of $15M. Who better to guarantee that amount than a city? The problem is, will those additional revenue stream buckets fill up as assumed? No one knows. Those additional revenue streams could bring $4M or $5M a year to the city or (hallelujah chorus) they could earn $11M a year. Yet the city will guarantee $15M a year. Why is it the city’s responsibility to assume this financial risk on behalf of RSE? Is it in the best interest of the city?

Let me be very, very clear. I want the team to remain in Glendale but not if it does further financial harm to a great city that I love. My frame of reference for any deal has been in terms of whether it meets the best interest of Glendale. I have demonstrated my commitment by voting in the affirmative for the Jamison deal and subsequently losing my council seat. If not for my vote and that of 3 others, there would be no RSE deal to consider today. I want a clean deal that the city can afford to pay and I suspect some councilmembers want that as well. Can they make that happen? We won’t know until the deal is made public. I, for one, will be reading every comma, period and paragraph. Only then will we truly know if this deal is in the best interest of Glendale.

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I wrote this blog on June 10, 2013 and have been sitting on it. Late this afternoon, June 13, 2013 Mike Sunnicks of the Phoenix Business Journal reported on Glendale’s concerns about the RSE bid. I share the city’s concerns. I see no reason to hold this back any longer.  Remember I am looking at the RSE deal having been a former councilmember. The fact that RSE is using borrowed money to finance this deal with very little of their own equity is disturbing. With such a small proportionality of investment it allows RSE a great deal of latitude to abandon Glendale and relocate in a few years.

I know how desperately fans want to keep the Coyotes here. I share that sentiment but not at any price. It’s time we all took an objective look at this deal before embracing it. There are those who will say if it’s not a Jamison deal I am against it. That is not true. If I were still on council I would have a fiduciary responsibility to make decisions that are in the best interest of Glendale based on the facts. Truthfully, if I were on council, I would not accept this deal based upon the facts that are publicly available about RSE’s deal at this time.

So please save your hate email and nasty tweets. I know that I have angered you but once you get past that initial anger, please take a hard look at this deal. Here goes what I wrote several days ago:

Everyone is well aware that the NHL blessed Renaissance Sports and Entertainment (RSE) as a legitimate contender for ownership of the Coyotes. They even chaperoned RSE’s first meeting with Glendale City officials. However, note that the NHL has NOT made a formal announcement to date stating that they are in fact, selling the team to RSE.

Coyotes logoMost of the Coyote fan base and the media seem enthralled with the news and are ready to embrace an NHL/RSE deal. But there are two factors that have so far been ignored. No one in the media has really “kicked the tires and looked under the hood” of this deal; and will Glendale be willing to pay a lease management fee greater than its budgeted and soon-to-be-approved $6M a year?

So why don’t you and I? Let’s take a closer look at this deal. RSE has raised $45M in equity ($10M coming from Gosbee). We will use these figures all of which have been widely publicized in the media and to date unquestioned by any journalist. RSE is getting $200M in loans. One loan from Fortress Investment Group is $120M. Sources say the interest rate is 8%. RSE is getting a loan from the NHL for another $80M. Sources say the interest rate is 5% and that payments start the first year – not in 5 years. The interest on these two debts could be as much as $13.6M a year. My goodness! $13.6M a year in interest! That’s WITHOUT any payment on the principle! Is it any wonder that RSE would like to get an annual lease management payment of $13M-$15M? This deal is heavily debt laden.

Let’s look at costs associated with Jobing.com. According to Coyotes Newco, LLC, the NHL entity that runs the arena, in their Annual Budget submission to the City of Glendale for Fiscal Year ending June 30, 2014, Total Annual Expenditures are projected at $12,468,912 and the Annual Net Cash Requirement as projected by the NHL is $9,088,193. Earned revenue from events will be in the $3.3M range. Based upon these figures submitted to the city by the NHL, the entity currently running the arena, RSE will spend a minimum of another $9M as a Net Cash Requirement. Who would know better what it costs than the NHL currently doing the job?

So we have $13.6M in annual interest payments and $9M in cash needed to operate the arena. Simple math says the minimum figure that RSE will spend every year is $22.6M. The $45M of equity that RSE raised will last almost two years. Where do they get the money to continue? Don’t say from the revenue generated by the arena events. That revenue will offset the total annual arena expenditures of $12M. Ok, tires kicked and the hood has been looked under.

Fortress is not in this deal out of the goodness of its heart. The reason Fortress has the option to purchase equity in the team is that they know darn good and well that when RSE flips the team, it will be much more profitable for them to be in the game and get their expansion check profits than just simply to be repaid at 8%. If RSE can get out of its lease in year 3 or 4 it’s a brilliant strategy. They will make a killing on expansion fees and will have essentially bought a team for only $45M in real equity.

Glendale City Council

Glendale City Council

That leads to the second question. Will Glendale be willing to pay a lease management fee greater than $6M a year? For the sake of argument let’s say Glendale is willing to go as high as $10M a year. How does it find the $4M it is short? Preliminary approval of the budget says monies within the budget may be reassigned to different departments/categories but overall budget expenditures are capped at the approved amount and may not be increased. One scenario could be that the NHL is willing to forgo the second $25M payment owed to it by the city. The city could then apply those funds and cover the $4M shortfall needed to pay a $10M annual lease management fee for 6 years. Or the city could ask for greater revenue sharing from the new owner in the form of a percentage of the concession revenue, a larger ticket surcharge, all of the naming rights revenue and have the team create a new revenue stream in the form of a parking charge. All seem counterproductive but could happen. Would it cover the $4M shortfall?  I am sure somebody somewhere will have created positive projections but there is no way to be sure until one sees the revenues generated in the first year of this scheme.

If the city were to agree to pay $10M a year that would cover RSE’s need for cash to operate the arena but obviously it does not cover RSE’s $13.6M (or thereabout) annual interest payment on their debt. It looks like RSE’s equity investment if used to cover only that debt would last about three years. Then what??

There are those who will be very unhappy reading this analysis because they will perceive the recitation of these facts based upon widely media reported numbers as “negative.” Why bother with facts and dash hopes of RSE becoming the new owner? These numbers are as reliable as possible using sources available. These concepts are known to the NHL and potential owners. Now the fan base should objectively analyze these numbers (or any other numbers revealed by the NHL, potential owners, the city or the media) as we hope and wait (not so patiently) for a final end to this misery of limbo regarding team ownership.

The obvious conclusion is that RSE will bleed money and that will be the rationale for their relocation of the team after a few, short years. Just the news no red-blooded Coyotes fan wants to hear.

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Leblanc

Anthony LeBlanc

Ever since the NHL principals and Renaissance Sports and Entertainment group (RSE) principals descended upon Glendale on Tuesday, May 28, 2013 new speculation blossoms. On May 30, 2013 Forbes online posted an article by Mike Ozanian entitled Phoenix Coyotes $170 million sale to be partially funded by NHL. Here’s the link: http://www.forbes.com/sites/mikeozanian/2013/05/30/phoenix-coyotes-170-million-sale-to-be-partially-funded-by-nhl/. The article appears to be factually correct and correlates with the information learned several days ago about the Renaissance deal. Thank God, at least it’s not a hatchet job from the Arizona Republic (or as it is fondly called in some circles, the Arizona Repulsive).

Bettman

Gary Bettman

Breaking it down RSE gets a $120M loan (or 70% of the purchase price of $170M) from Fortress Investment group. Unconfirmed sources say the interest rate is 9% but I have no information on the length of the loan.  It gets another loan from the NHL of $80M (50% but no info on rate or length of time) and RSE puts in $45M (26% equity investment). Sources indicate that George Gosbee’s participation is $10M with minor investors contributing approximately $4M – $5M each to cover the $35M balance. But those figures total $250M you say…more than the purchase price of $170M. What’s the extra $80M for? To cover losses incurred over several years. Oh, and by the way, RSE doesn’t have to start paying the NHL for five years and they have been assured by the NHL that their revenue sharing will be “healthy.” This is a very, very sweet deal for RSE.

The best analogy I can come up with is this. You buy a $1700 refrigerator. You put $1200 of it on your credit card and you kick in $450 cash. Oh, and by the way, the company you are buying the fridge from doesn’t require payment for 5 years (of course, the interest is piling up) AND it will rebate you $800 that you can use for repairs, etc.

Now, you have three cousins, Darin (Pastor), Greg (Jamison) and Matt (Hulsizer) but the dealer will only offer his spectacular deal to one of the four of you. Darin is willing to pay $500 in cash; Greg is willing to put up $550 in cash and Matt is willing to pay $600 in cash. You would think that one of your three cousins was a lock to get the refrigerator deal but that’s not the case. Perhaps you and the dealer have an “understanding” and you end up with the deal. Go figure.

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