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Joyce Clark Unfiltered

For "the rest of the story"

It has been 18 years and 75 days since the city’s pledge to build the West Branch Library.

On February 26, 2016 Arizona Sports ran a story on Anthony LeBlanc’s reaction to Mayor Jerry Weiers’ remarks at his State of the City address. Here is the link:  http://arizonasports.com/story/566510/arizona-coyotes-ceo-glendale-may-want-us-to-stay-but-not-being-realistic/ .

In his prepared remarks with reference to the Coyotes the Mayor said, “I need to be clear about this. I want the Coyotes to stay in Glendale. The city wants the Coyotes to remain in Glendale. We have, since day-one, invited them to remain engaged in this process.”  In his recent remarks Mr. LeBlanc said this about the Coyotes’ refusal to engage in the bid process to manage Glendale’s arena, “…the team did not submit a bid to manage the arena because it refused to participate in a ‘flawed process’.” LeBlanc did not elaborate on his characterization of a “flawed process.”

Mr. LeBlanc went on to say, “I think they do want us to stay, but I don’t think they’re looking through a realistic lens of what that means.” Translate this statement to read that in his view “a realistic lens of what that means” is the Coyotes would only stay if Glendale continues to subsidize a portion of their annual loss. LeBlanc, et. al., may have retired their Fortress loan by adding additional owners but don’t forget they still owe a boat load of money to the NHL for another loan that covered buying the team.

What governmental entity is not only going to build a new hockey arena but also subsidize the Coyotes’ annual loss? It’s Glendale all over again. Tempe? Scottsdale? Probably not. Phoenix? Perhaps it can bury its subsidization of the Coyotes within possible plans to build a new facility for joint use by the Suns and the Coyotes.

The Coyotes want to manage their own facility. Then they collect all of the revenue generated by non-hockey events and they can claim a management fee that not only covers their cost to manage but off-sets their annual loss.

LeBlanc praised a recently approved deal between Broward County, Florida and the NHL Florida Panthers. The deal allows the Panthers to get nearly all of the arena revenue and reduces any profit-sharing between the Panthers and the county. Since the Panthers first season in 1993-94 the Broward county’s public subsidy of the team has been $342 million (an estimated $14 million a year). It should be noted that the Panthers lost $36 million last year and another $27 million the previous year. Of course LeBlanc would think that’s a wonderful deal. Reality is that the majority of NHL teams can’t survive without public financial support. That has been the model for years but many governmental entities are under financial pressure and can no longer afford this type of model. It is a model destined to die in the future as the public clamors for sports franchises to pay their own way.

LeBlanc said three options are still being discussed. They are a shared arena with the Phoenix Suns in downtown, a partnership with Arizona State University or an arena in Scottsdale’s Loop 101 corridor. Hey, if the City of Phoenix wants to pony up and pay the Coyotes to play downtown, congratulations to all. Previously the Suns and the Coyotes shared an arena downtown and it was the fans who suffered with terrible sight lines while watching the games.

Is the Arizona State Legislature delusional? It has budget problems. Will it allow a portion of its allocation of state public money to be used to pay for a new hockey arena instead of educational purposes? It seems doubtful that Scottsdale will wish to pay the Coyotes to play in their town. It would be déjà vu as they refused to do so in 2001.

LeBlanc said if a new arena is built it will take at least three years. He went on to say they would “rather not move twice in five years.” Here is where the situation becomes problematical. Glendale and IceArizona currently have a two year agreement that allows IceArizona to manage the arena for $6 million per year. The first year of that agreement is nearly up leaving only one more year of IceArizona’s management. After that it is assumed AEG, the presumed new arena manager, and IceArizona will have to negotiate short-term tenancy for two more years. Will they be able to craft a mutually satisfactory tenancy arrangement? Then the question becomes if IceArizona can live with the deal for two years, why can’t it live with the deal permanently? Can LeBlanc and company afford to rebuild its fan base in another part of the Valley while it continues to rebuild the team?

No matter what the outcome I continue to have greatest respect and admiration for the players. They have endured a great deal since Jerry Moyes put the team into bankruptcy in 2009. They are a great group of men who certainly deserve more stability than they have had. They deserve better. Let’s see if cooler heads can prevail and a deal that benefits all entities can be achieved permanently. Isn’t it time?

© Joyce Clark, 2016

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A casino in Phoenix?

Posted by Joyce Clark on July 23, 2013
Posted in Casino  | Tagged With: , , , , , , | 3 Comments

There is a story in the Arizona Republic of July 23, 2013 entitled Feds might retake prime parcel written by Eugene Scott. There is a 15 acre parcel of land that the federal government, in a very complicated land deal, sold to Barron Collier Development. It is located on the northeast corner of Central Avenue and Indian School Road. Barron Collier has stopped making $60 million in payments to the feds for that parcel. Ownership may revert back to the federal government.

casino 1Justin Johnson, a candidate for Phoenix City Council and the son of former Mayor Paul Johnson, recently said, “My concern is that if the federal government takes over, that they can develop something without public input and it won’t go through local control, and it won’t fit inside the city’s general plan.” He also offered the worst case scenario for that parcel, “We don’t have to look any further than what is going on in Glendale to see the nightmare scenario which could transpire. A potential casino in downtown Phoenix is not a compatible use in this urban area near neighborhoods and schools.”

As has been repeatedly pointed out, if the Tohono O’odham Tribe legally prevails in its quest to place a casino on a county island within an incorporated city, as it is attempting to do in Glendale,the state gaming compact is destroyed. It becomes null and void. As you can see, now one of the Phoenix council candidates has voiced concern with regard to this 15 acre parcel that will end up in federal ownership. Since it would once again become federal land Phoenix would have absolutely no control over what is developed and how it looks.

 It would be ironic if a Tribe created a secret shell company and bought the parcel, waited a few years, and then announced that they were building a casino on the site – shades of Glendale. This is a lesson for all Valley communities. Watch out if you have a county island within your city.  If the Tohono O’odham are successful in Glendale you could be next as casino development warfare erupts.

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Some of those on council believe that all of Jobing.com’s problems regarding increasing its revenue can be solved by finding a management company that will book a ton of non-hockey events, especially major concerts.  I thought it would be interesting to take an Internet walk through the entertainment promotion industry. I don’t pretend to be an expert on this issue and I am sure somebody will correct me on something!

prop 202The gorilla in the room is LiveNation. In 2005 (last year for which I could find numbers) earned $1.3 billion dollars world-wide. It has relationships (contracts) with 135 venue sites world-wide and 92 of those are in the United States. It has relationships with Desert Sky Pavilion, Talking Stick, Comerica and Celebrity Theater (as of 2005) in the Phoenix Metropolitan area. It, like other promoters, also has a roster of national, well known artists that perform exclusively at LiveNation venues.

enter 1 The second largest is Anschutz Entertainment Live (AEG). In 2005 it earned $417 million dollars—only 20% to 30% of LiveNation’s income.  In September, 2012 AEG announced it was selling off its Entertainment Live subsidiary only to reverse that action in March, 2013. AEG is the company that currently manages Glendale’s Jobing.com Arena. The third largest company is the House of Blues Entertainment. In 2005 it earned $245 million dollars—about 10% of LiveNation’s income. But wait…the following year, 2006, LiveNation acquired the House of Blues and picked up Casino Arizona as another contract in the Phoenix area. There are many small firms (less than a handful in the Phoenix area) whose annual income is less than $20 million dollars a year.

Let’s look at the two most comparable venue sites to Jobing.com Arena. One is US Airways, home to the Phoenix Suns. It is run and events are booked by Phoenix Arena Development (one of the two bidders to be considered by Glendale). It is also the home of the Arizona Rattlers and Phoenix Mercury. In essence, it has 3 anchor tenants. Between June and December, 2013 there are 10 major concerts booked. The other comparable site is Chase Field, home to the Arizona Diamondbacks, its only major anchor tenant. SMG World manages this venue (and is also a finalist in Glendale’s bidding process) and uses Select Artists Associates of Scottsdale as its event promoter. It has 3 major concerts booked between June and December, 2013. It will be very interesting to see what each of these companies want in terms of an annual management contract. Will there be penalties in the contracts if a named minimum number of events is not achieved? Will there be an incentive if the company exceeds a mutually agreed upon goal?

As you can see, the Phoenix Metro area is a highly competitive market. There many venues from which to choose and LiveNation have contracts with many of them. You can be sure LiveNation, with a virtual monopoly in this country, dictates the terms and fees for the major events it books.

enter 3Just to give you an idea of how competitive our market is, here are just some of the sites that can and do host major concerts: ASU Gammage, Desert Sky Pavilion, Celebrity Theater, Chandler Center for the Arts, Chase Field, Comerica Theatre, Fort McDowell Casino, Herberger Theatre, Grand Canyon University Arena, Jobing.com Arena, Mesa Arts Center, Scottsdale Center for the Performing Arts, Orpheum Theatre, Talking Stick Resort, Tempe Center for the Arts, US Airways Center and University of Phoenix Stadium. This list is by no means complete and does not include dozens of smaller venues. This market is not an easy one. Steve Ellman, when he controlled Jobing.com Arena was highly successful in booking major concerts. When Jerry Moyes and the NHL took control of the arena that was not their focus and so we saw fewer and fewer major events at Jobing. This year the number of major events booked was so few that it is embarrassing.

What can a venue manager do in this highly competitive market of at least 17 major venue sites if there is no relationship with LiveNation or AEG? They host smaller, less lucrative events such as rodeos, religious groups and family events. That works well if your venue is small but large ones like Jobing.com Arena need large events to offset the costs associated with hosting. Note than even the UofP Stadium hosts RV and car sales nearly every weekend in addition to gun shows in an attempt to shore up its bottom line. I suppose a venue manager could undercut the big boys and offer the venue for rock bottom rental fees and hope to cover all or part of the loss with concession and parking revenue but that is risky on so many levels.

Hiring a non hockey arena manager has never been in the best interests of the arena or Glendale. A permanent team owner hired to manage the arena guarantees 41 nights of hockey with “butts in seats.” It will be in the owner’s best interest to mount a strong marketing campaign for the Coyotes and put even more butts in seats as well as to work to acquire as many non-hockey events as possible to increase the bottom line of profitability. This is not a difficult concept to understand and yet there are those on Glendale’s city council who refuse to acknowledge this concept—out of sheer stubbornness or because of another agenda?

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