I want to commend attorneys for both Glendale and RSE. When I received the original June 26th draft of the Agreement consisting of 93 pages it took me quite a few hours to review it line by line. I ended with 18 pages of notes and they have been quite handy and well worth my time. I had quite a few issues with the original document. In reviewing the latest version dated June 28th I am quite pleased to see that many – not all – but many of my issues have been addressed. One that made me laugh out loud was the provision that Glendale would receive 100% of the Naming Rights for a future theater/stage space to be constructed within the bowl. Further along in the original document it specified that Glendale must pay for its construction or the Arena Manager would receive the proceeds of Naming Rights and apply them as reimbursement for construction costs. That provision, thankfully, has been changed and it is no longer Glendale’s responsibility to fund its construction but it still has the right to receive 100% of the Naming Rights. It appears that cooperation and communication by both sides has gone a long way to resolve many of the issues.
However, there remain several major, outstanding issues. One of those issues is that of the Noncompetition/Non-Relocation Agreement. The original June 26th agreement refers often and specifically to the dual concepts of non-competition and non-relocation although the document was never provided publicly. So there was no companion document to review. This, in conjunction with the absence of any exhibits accompanying the release of the original version, is troubling but that is for another time. In the new version of the agreement reference is now made solely to a Non-Relocation Agreement. The concept of non-competition has been removed in its entirety. Is this positive or negative? There is no way of knowing since there is nothing with which to compare the current Non-Relocation Agreement.
Another major shift from previous deals is the concept of mediation vs. arbitration. In previous deals arbitration was the “Dispute Remedy.” In all versions of the RSE Agreement mediation is the dispute resolution mechanism. There is a difference between the two procedures. In mediation a neutral third party acts as a facilitator but is not a decision maker. Neither party is required to complete the process nor is it legally binding. The mediation resolution can be appealed through the legal system. In arbitration the neutral party acts as judge and jury. The decision is generally binding and cannot be appealed, except under very special circumstances. Mediation can be more expensive because it allows for legal appeal as opposed to arbitration which is legally binding. So the question becomes why RSE’s insistence on mediation for it seems to be upon their insistence and not that of the city.
We now know that RSE used a figure of 23 non-hockey events with attendance of 15,000 per event. Those numbers are a component of their calculations in determining the revenues from the parking surcharge and ticket/supplemental surcharges. It appears to be over inflated but it is their number, not mine, not the city’s. That goal should be acknowledged within the Agreement by incorporating accompanying performance penalties and incentives. If RSE meets less than its self-proclaimed goal of 23 non-hockey events there should be a monetary penalty. It is a concept only used in the Agreement in conjunction with hockey games. If less than 41 games are played in the arena, there is a $150,000 penalty per game paid to the city. However, if RSE overachieves or underachieves in booking non-hockey events, it should be rewarded/penalized for doing so but there is no mention of such a concept within the Agreement. Fairness dictates that non-performance be penalized and success rewarded.
Another interesting concept within the Agreement is language that exempts the Arena Manager from governmentally imposed lease taxes on the property. If, for some reason, the Arena Manager does have to pay them, that amount will be deducted from the City’s total annual revenue to be received. Hmmmm. Should there be lease property taxes imposed that have to be paid the city is required to pay them.
It also appears that instead of allowing the city’s contribution to the Capital Improvement Fund to accumulate year over year, the Capital Improvement Fund is set to “0” every year and the funds within it revert to the Renewal and Replacement Fund that is spent solely at the Arena Manager’s discretion.
The last major change to the document is the city addition of its own opt-out provision. The city views this action as entirely appropriate. Their assumption may be based on the notion that the city has more “skin in the game” than does RSE. $15M for each of 5 years equals $75M. It has been widely reported that RSE’s equity (or “skin”) is $45M. The proposal is that after 5 years, each side should have the option of deciding whether to continue, especially if one side or the other has accumulated over $50M in debt. That option, if it remains in the Agreement, would signal that RSE’s “enhanced revenue streams” did not perform as advertised. The city’s financial shortfall in this deal is of its own making. The current council will either be comfortable in its assumption that it can weather the effects of the shortfall or it will not. Continued insistence by the city on this provision destroys RSE’s ability to secure loans because it nullifies the very element they MUST have, which is a guaranteed $15M from the city.
In my notes I have probably identified another two dozen minor issues that require further negotiation. Listing all would turn this blog into a book. I will not inflict that agony on you. It appears that with some further negotiation and communication this Agreement could work but it does not resolve Glendale’s fundamental issue of covering a monetary shortfall of $3M annually.
Many have asked me to reveal my position on this issue. That I will not do. I have provided you with financial information on the “enhanced revenue streams” as well as information on Glendale’s precarious financial position and Agreement points that need further resolution. Many of you reading this blog have expertise in business budgets and corporate negotiating. My role is to offer municipal expertise and to provide context to balance that. It is up to you to decide if this is a good deal for Glendale. This is exactly what every current councilmember is wrestling with. As leaders of this city they have the prime responsibility of insuring the continued financial health of the city. My feeling is that some are now struggling with recent decisions and recent votes and beginning to realize the effects of those decisions.
Will this Agreement help or hinder Glendale’s continued financial health? Of course there is the overwhelming element of politics. Some councilmembers’ positions will be taken as a result of ego; others simply wouldn’t say ‘yes’ even if God invited them into the Pearly Gates; still others have only a partial grasp of the entirety of the deal. But it is not my call. I am no longer a sitting councilmember. Whatever their collective decision I will accept it and abide by it, as everyone should reasonably do.
Fasten your seat belts — if past history is any indication we are in for a bumpy ride. I hope that I am wrong but there may very well be challenges to this Agreement.
For the challenge do you mean GWI.I would say not ..For one the cubs new stadium looks very nice.But there main problem Right now..Is a gift of there own of 1mil $ the feds are looking for that money as we speak..You can’t be a 501 c and do that..How funny would that be for Karma if they got taken down for a gift.. If I was the nhl I woulkd say to glendale.Your not getting a out clause period.There is no other city in the world that has a out clause.The mayor has goin to far,I am sure bettman isw Mad..Jerry and the council may not vote yes.But if theyn donb’t by westgate good bye superbowl..The arena,hotel and rest and bars will be boared up in at least 5yrs.Mazybe even shorter and that is sad..Glendale and ther people of glendale wanted the arena.It like any other company.everyone new the risk.For some on the council and in the city to be c rying about this .Is Just crazy.Being from chicago I know crazy in govtment.The diferense is chicago takes care of the people first.Then steals the money…Glendale steals the money and put it’s midddle finger to the people…Well I hope they stay but if they go ton seattle.My sister lives there plus it’s cooler and it does rain there.Well it would be real sad to see the coyotes go.I would feel b ad for a city that would have to go back to per 2002.not a pretty picture!!!
I think I am going to wear a helmet too! Great writing Joyce!
Joyce,
One thing that never gets mentioned …. Are you able to discuss the original lease … the one that Mr. Ellman and subsequently Mr. Moyes had requested be renegotiated. Could it be argued that the General Fund grew to a greater extent because the city refused to negotiate a new lease at that time? If true, perhaps the depletion of the fund was simply magnified because of a failure of the city to be proactive all those years ago. I understand that failure was likely given the ownership of the team anyway along with many other issues. However, no one ever seems to implicate the city position on renegotiating a lease that was probably non-sustainable. Is there any truth to this? Thanks for your analysis and reason.
Who going to challenge the deal but Ken Jones in 114 degree heat good luck with that.Gwi won’t they have lost ever case to glendale but one.Not such a good recored.Ken Jones is down to 25 days now and needs over 9,000 to be safe.The tax hired people and got only 4300 and paid big money…
One last thing why did sherwood put the arena out for bid.Thats easy to stop gwi dog and pony show.But very smart they have nothing to stand on.Unless they want to go after the cubs and dbacks as well…
I have to say this as my final comment on the lease and coyotes…Like I said back in oct 2012 that there where concern with jams deal.The majior one was him not running the team day to day operations…Everybody worked hard on this..,People ddid not like this lease why that easy revenue..But I Know and so do you Joyce ..That they new and bettman and the nhl new of tv money from Canada..These guys all of the ownere never failed in there business that they took on.So from the get go I said there would be no problem with paying glendale..But people said your wrong,glad I wasn’t..They are getting parking attendence is up will be over 16,301 this year.We saw chicago come in sellout.Boston,leafs,montrol,pitt,flyers,chicago again,even calargyNj,vancover in the winter snow birds…Those will all be “SELLOUTS…So like I did say glendale will get there money.I will say this to in the next three yrs they will buy the arena..To get glendale out of the way or therer pain in the butt..Well to a the people that said they will move the team not pay well you people where wrong this was the best deal these guys rock..Tailgating..Games on channel 3 local tv contract over ten yrs..same with there food partners..As the slogan goes “HERE TO STAY” is a fact.Nobody can dispute that now…I read all the post from the naysayers.There where some of us that had no worries at all we new there back ground..Gossbe got money they have money..I smell a cup..So my predition is are attendence will be 16,301,1000 away from 100%..Go Coyotes!!!
Darrold, I respect your right to have your opinions on this. I agree with some of your statements and not with others. Merry Christmas!!