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Joyce Clark Unfiltered

For "the rest of the story"

Mar 16

1

Coyotes want another short term lease

Posted by Joyce Clark on March 1, 2016
Posted in Arizona Coyotes • City Council Actions • City issue and actions • City of Glendale • Gila River Arena • Glendale elected officials • Glendale finances  | Tagged With: , , , , , , , , , , | 6 Comments

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

 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.

Mar 15

16

IceArizona submits audit to Glendale

Posted by Joyce Clark on March 16, 2015
Posted in Arizona Coyotes • City issue and actions • City of Glendale • Gila River Arena • Glendale finances  | Tagged With: , , , , , | 13 Comments

On Friday, March 13, 2015 we learned that the Coyotes had finally finished their audit and submitted it to the City of Glendale. What is troublesome is the fact that the results were submitted to Glendale five months late. The first question is, why? IceArizona’s rationale is sure to be that the Barroway purchase was the cause of the delay. But his purchase was in December and it is now March. Audits do take time but not this much time.

Another troublesome aspect is IceArizona’s inability to abide by the arena management agreement stipulation 8.16.1 (c) Annual Financial Reports, “Not later than 90 days after the end of each Fiscal Year (June 30), provided, that if all necessary information from the NHL related to the following items (a), (b) and (c) shall not have been received by the date which is 30 days after the end of each Fiscal Year, then interim reports shall be provided within the normal time frame and final reports shall be provided within 60 days after the receipt of all necessary information from the NHL related thereto): (a) a balance sheet relating to Arena Facility operations as to the end of such Fiscal Year, (b) a statement of profit or less for Arena Facility operations during such Fiscal Year, and (c) a statement of charge of financial condition for Arena Facility operations during such Fiscal Year, each prepared in accordance with GAAP as consistently applied (if there are multiple interpretations of the application of GAAP, GAAP as traditionally interpreted by the Arena Manager and the Team Owner shall apply) (collectively, the “Annual Financial Reports”), and accompanied by a report containing an opinion of the Arena Manager’s accountants, stating that such Annual Financial Reports relate, that such Annual Financial Reports have been prepared in accordance with GAAP as consistently applied and that the examination by the Arena Manager’s accountants in connection with such financial reports was made in accordance with GAAP.” The agreement then states in 8.17.1. Audits, “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 the City Staff or by an independent certified public accounting firm selected by the City.”

The City should have received an Interim Audit about October 1, 2014. Instead it received the Final Audit on March 13, 2015, five months late. On November 4, 2014 in anticipation of receiving the expected Audit, the City hired Proeminent Sports, LLC, and a Nevada limited liability company, to audit the information IceArizona was supposed to provide in a timely fashion and to present its findings by December 15, 2014.

Note that the City’s expectation was that the audit would take about Coyotes Audit contract_Page_26 weeks, not months and months and months. Tony Tavares, former president of the Anaheim Mighty Ducks and Los Angeles Angels and Managing Member of Proeminent Sports, is the lead in conducting the audit. Tavares just happened to have been involved with Chicago White Sox owner Jerry Reinsdorf in 2011 when Reinsdorf was trying to purchase the Coyotes from the NHL. Is there any conflict of interest?

On March 13, 2015 the media began sharing leaked results of the audit. Since the city has not publicly posted the audit results the leaking appeared to have been on the IceArizona side. What has been reported by some media traditionally sympathetic to the Coyotes is a total loss figure of $34,831,000.  It breaks out into operating losses of $16,458,000 and one time charges of $18,373,000. Their argument is that one should only look at the operating losses of nearly $16.5 million dollars and should not consider the nearly $18.4 million dollars in additional losses because they are one time charges and will not recur. They are correct in stating those specific charges will not recur but it is reasonable to assume that there will be other, onetime charges each and every year. While they will not be the specific ones attributed to this Fiscal Year, there are bound to be other onetime charges annually.

I attended the Blackhawks game last week and couldn’t help but notice that the majority of attendees were Hawks fans. The robust chants for the Hawks in our house were downright embarrassing. It appeared as if nearly every Coyotes ticket holder had sold their seats to Hawks fans. With a team that is not performing well it is not surprising to see the fan base shrink. Fans are fickle. Everyone loves a winner…a losing team? Not so much.  It may well be that operations and team revenue earnings will reflect this downward trend this Fiscal Year.

That brings us to the troublesome “out” clause that IceArizona may exercise after 5 years of losses totaling $50 million dollars or more. There has been considerable past discussion that lingers to this day over that particular clause. Many fans asked why the stipulation was necessary if the owners’ intent is to keep the team in Arizona. Others, from the Glendale resident side, called for the very same stipulation for the city. Quietly, oh so quietly, the IceArizona owners retained the “out” clause and the city never received such a stipulation in its favor. Is it any wonder that speculation about the owners’ long term intent has surfaced again upon learning that first year losses are $38.4 million dollars? After all, that figure is more than half of the $50 million dollars required in demonstrated loss before the owners can exercise the “out” clause.  

In a March 13, 2015 Craig Morgan story for FoxSports Arizona CEO Anthony LeBlanc stated, “Naysayers will try and bring up the out clause at every opportunity… It leads to a simple question: If the franchise is successful financially, why would you even consider exercising it? The out clause was a protection mechanism.” The better question is…if the franchise is successful financially, why are you, Mr. LeBlanc et.al, keeping it? There would be no speculation every time Las Vegas or Seattle is mentioned if there was no “out” clause.

© 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.

Oct 14

14

Monopoly: I’ll give you a casino for my arena

Posted by Joyce Clark on October 14, 2014
Posted in Arizona Coyotes • Casino • City Council Actions • City issue and actions • City of Glendale • Glendale elected officials  | Tagged With: , , , , , , | 9 Comments

Sadly, real life should not be played like a Monopoly game although it often is, especially in politics. Horse trading deals seem to be a way of life for many politicians.  Councilmember Gary Sherwood penned a My Turn article entitled, Barrett is wrong, Franks is right: Casino means trouble for the Arizona Republic on April 20, 2013. Eighteen months ago he said:

    •  “Tohono O’odham’s massive casino is too close to residences and schools.”
    • “It denies tens of million (sic) of dollars of future development, construction and sales-tax revenues to our state and local community.”
    • “The casino will have a massive impact on Glendale’s already overwhelmed infrastructure – our police and fire departments and our roads — forever.”
    • “Crime is already up. Does anyone believe that putting a mega-casino in a neighborhood will improve the situation?”
    • “Franks is doing the right thing, and he is not alone.”
    • “The tribe has disregarded our city’s well-being and wishes for years. Now we should simply trust them?”
    • “Sadly, the Tohono O’odham Nation deliberately misled the public and even other tribal nations about this project and their casino-expansion plans for years. What kind of community leaders would willingly welcome such an unwelcome kind of neighbor?”                           

What caused Sherwood to do his flip-flop? Eighteen months ago Gary Sherwood was opposed to the Tohono O’odham casino. Sherwood has been asked repeatedly why he changed from anti-casino to pro-casino. His answers have been all over the place from, I was misinformed by others to Glendale staffers didn’t do their homework.

On September 17, 2014 Gary Sherwood testified at the Senate Committee on Indian Affairs. In his testimony he said, “I was stunned to learn that the prior Glendale administration had failed to make any effort to learn more about this proposal before it rushed to oppose it.” When questioned further by Senator McCain on his change of stance he said, “Umm, when I campaigned I had campaigned against this proposed based on information I had and I had read deal…quite a bit of information on it. Umm, the thing that was distressing to me though, that in the very beginning there was a half hour conversation when the city first found out about it in April of 2009 and that was the only conversation the previous administration had and I was, was always quite upset by the fact that we didn’t have the dialogue.” His reasons for changing his position are not only weak but mainly fantasy.

The city first learned of the casino project in January of 2009 when the TO simultaneously issued a press release and appeared at City Hall to reveal their plans. City staffers tried mightily at several subsequent meetings to get meaningful information from the Tohono O’odham about their plans. The TO repeatedly offered their conceptual plans but offered no concrete facts about their proposed project.  They were arrogant and their position was that they were coming and there was nothing the city could do. If Sherwood couldn’t get the date correct about Glendale’s learning of the TO’s plans, how many other statements of his that day played fast and loose with the facts?

His reasons for doing a 180 on his casino position should not be considered as satisfactory. Sherwood’s position remained opposed until the fall of 2013 when at several city council workshops he suddenly supported Alvarez, Hugh and Chavira in their call for “dialogue” with the Tohono O’odham. What other dynamic could have occurred?

Gary Sherwood and Sammy Chavira took office as councilmembers in January of 2013. Sammy ran on his opposition to the casino deals that had been presented to the city prior to his taking office. He said in an October, 2013 campaign mailing, ““Too many sweetheart arena deals for out-of-state corporations have left us deeply in debt.” Sammy outdid himself in supporting not just an out-of-state corporation sweetheart arena deal but out-of-country owners (mostly Canadian) sweetheart deal. He was opposed to any proposed casino deal. He went on to say publicly and repeatedly, “The city needs to be a tough negotiator, making smart planning decisions that preserve Glendale’s future.” Sammy, while running, was in no mood to accept any Coyotes deal. Inexplicably, after 6 months in office he becomes the 4th (and majority) vote to accept the IceArizona deal. Sherwood becomes the 4th councilmember (a majority) to support a dialogue with the TO after 8 months into his term. Coincidence? You must decide for yourselves. Did these councilmembers play a game of Monopoly?

© 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.

Oct 14

8

It’s a Coyotes kind of day

Posted by Joyce Clark on October 8, 2014
Posted in Arizona Coyotes • City Council Actions • City issue and actions • City of Glendale • Gila River Arena • Glendale finances  | Tagged With: , , , , , , , | 7 Comments

Today, October 8, 2014 is a grey, overcast day in the Phoenix metro area…a rarity to be sure. Anywhere else it would portend a day of steady rain but Phoenix is a desert and because it looks like rain, it doesn’t necessarily mean it will happen. It’s a good day to let thoughts rumble around.

A blog reader recently sent me two news stories of interest. One is from the October 5, 2014 Seattle Times entitled Key Arena turns a bigger profit than it ever did with the Sonics by Ashley Scoby. Here is the link: http://seattletimes.com/html/localnews/2024708723_keyarena05xml.html. The other is a Deadspin article entitled The Coyotes were damned close to moving to Seattle by Barry Petchesky dated October 8, 2014. Here is the link: http://deadspin.com/the-coyotes-were-damned-close-to-moving-to-seattle-1643791488 . Each article compliments the other.

In the Deadspin story three sources confirm that the Coyotes were a hair’s breadth from moving to Seattle. Ray Bartoszek and Anthony Lanza had formed a buyers’ group with plans to move the Coyotes to Seattle’s Key Arena the day following the Glendale City Council vote on the IceArizona arena management agreement if it had failed to gain approval. The new information in the story is confirmation that the NHL had blessed the scheme. Everyone knew how imminent the move could be….the NHL knew; the presumed buyers had moving trucks on standby; Glendale senior management knew; the Glendale City Council knew; and IceArizona knew. The only ones in the dark were Glendale residents.

Which leads to the second news story about Seattle’s Key Arena. Everyone presumed in 2009 without the Sonics as an anchor tenant the arena would die a pitiful death. How wrong. An average annual loss to Seattle with the Sonics was $1.5 million. In 2013, without the Sonics, the arena generated $1.2 million in profit. The loss of the team didn’t hurt for it opened up more desirable dates for performing artists to utilize the arena. Artists such as Kanye West, Rihanna, Maroon 5 and Bruno Mars performed at the Key in 2013.

I had always supported keeping a professional sports team at the Gila River Hockey Arena because it was my belief that the arena and Westgate could not survive without one. Seattle’s Key Arena disproves that belief. If the Coyotes arena management agreement had failed on that fateful July, 2013 day Glendale would have moved on, just as Seattle did. Glendale would have joined with an AEG-type partner and could have enjoyed the same kind of success that we see today at Seattle’s Key Arena.

P.S. Here’s a link to yet another Seattle Times news story about an almost move to Seattle: http://seattletimes.com/html/hockey/2024716050_seattlenhl07xml.html#.VDWTTHFMEBI.twitter

© 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.

Oct 14

2

Coyotes’ saga continues

Posted by Joyce Clark on October 2, 2014
Posted in Arizona Coyotes • City issue and actions • City of Glendale • Gila River Arena • Glendale finances  | Tagged With: , , , , | 12 Comments

On October 2, 2014 Larry Brooks, a reporter for the New York Post, reported that a 51% interest in the Coyotes is in the process of being acquired by Andrew Barroway. Barroway is managing partner and founder of Merion Investment Management LP based in Radnor, PA. He is a failed suitor in the purchase of the Devils and Islanders.  At this point the story is speculation as neither the NHL nor the Coyotes’ owners have confirmed the deal. Here is the link: http://nypost.com/2014/10/02/spurned-islanders-buyer-to-purchase-coyotes-instead/. As an exercise, let’s speculate some more.

Why is Barroway acquiring a majority interest in the team? He wants to own a hockey team. That is evident in his two failed attempts. But he wants more than that. He wants to be in control and to make the ultimate and final decisions about the team’s fate at a future date. The team cannot and will not leave for 5 years. We can enjoy hockey in the Valley through the 2018-2019 season. After that you will need to consult your crystal ball.  Although I would expect that when the fans finally realize the team’s days may be numbered attendance will drop like a stone.

According to the agreement the team cannot leave for 5 hockey seasons and must demonstrate $50 million in operating losses. Here is the exact language in the management agreement: Section 3. Term. 3.3. Early Termination by Arena Manager/Team Owner. “Notwithstanding the other terms and provisions of this Agreement, Team Owner and Arena Manager jointly shall have the right to terminate this agreement without penalty or cost by delivery of written notice to the City at any time within 180 days following the end of the fifth (5th) hockey season year after the execution date if (a) neither terminating Party is in material default of any term or condition of this Agreement, and (b)Team Owner has incurred a cumulative Operating Loss of $50,000,000 or more, calculated as the sum of Team Owner’s operating income/loss for each the Fiscal Year periods then ended, provided that if such notice is given during any NHL hockey season, the termination shall not be effective until the end of the applicable hockey season, including all Home Games associated with the season. In this regard, Team Owner shall deliver to the City, not later than ninety (90) days following the end of each Fiscal Year, a statement (certified to the City by the Team Owner’s chief financial officer or the Team Owner’s certified public accountants, at the option of Team Owner) of the Team Owner’s claimed operating income or loss for such Fiscal Year, which statement shall be subject to audit by the City and the result f such audit shall thereafter be conclusive upon team Owner with respect to the determination of Operating Losses.” This exact same provision applies to the city as well.

The New York Post story cites the team loss in its first year of operation at $24 million. Educated rumors are that it’s on the low side and could be more. As long as we’re speculating, let’s peg their losses at $20 million a year. At the end of 5 years the team’s losses will be north of $100 million and will meet the terms of the agreement.  Barroway’s investment in the team now will cover those expected losses and he will be in the cat bird’s seat to decide the team’s future move.

Let’s wait to see if a majority interest is indeed sold to Barroway. That will deliver a strong message to everyone and you can then decide how much of an emotional investment you wish to make in the team. And just when we thought the Coyotes saga was closed…so it continues.

© 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.

Apr 14

7

Jamison deal vs. IceArizona deal…answers

Posted by Joyce Clark on April 7, 2014
Posted in City Council Actions • City issue and actions • City of Glendale • Glendale finances • Jobing.com arena  | Tagged With: , , , , , | 17 Comments

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

© Joyce Clark, 2014

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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.

Dec 13

16

Arena numbers confusion

Posted by Joyce Clark on December 16, 2013
Posted in City issue and actions • City of Glendale • Glendale finances • Jobing.com arena  | Tagged With: , , , , , | 5 Comments

My blog produced a raft of emails indicating that I wasn’t very clear in my recitation of arena numbers. Here’s an attempt to clarify:

We will not know about parking revenues until January 31, 2014 because that number is due quarterly per the arena management agreement and will reflect October-November-December (4th quarter of Fiscal Year 2013-14) parking surcharges.

However, there is a line item on these monthly reports that troubles me. In none of the monthly reports does it indicate that IceArizona is depositing Supplemental Ticket surcharge revenue ($1.50 per ticket) into an escrow account.  It is an escrow account designed to supplement revenues to the city (If needed) to try to make the city whole for $9 million dollars. You see, this Fiscal Year 2013-14, the city council budgeted $6 million for arena management (keep in mind nothing is budgeted for FY 2014-15 because the budget has not been set or approved  by council and will not be until June 2014). Since the city only budgeted $6 million dollars of the $15 million dollars needed to pay IceArizona the arena management fee, the idea behind the surcharges and fees was to earn an additional $9 million dollars for the city. That would hopefully make the city whole for the $15 million dollars a year to IceArizona. If the $9 million wasn’t generated the Supplemental Ticket surcharge of $1.50 per ticket was to be given to the city to cover the short fall.  Here is the exact verbage:

Supplemental Surcharge

“9.1.3 Supplemental Surcharge. In addition, throughout the Term, a Supplemental Surcharge of $1.50 per Qualified Ticket (“Supplemental Surcharge”) shall be imposed by the Arena Manager for all Hockey and non-Hockey Events. The Supplemental Surcharge shall be deposited by Arena Manager into one or more an escrow accounts in the name of Arena Manager and the City, and shall be the property of each Party to the extent each is entitled to such monies under this Agreement as determined by Arena Manager and the City jointly (the Supplemental Surcharge Escrow Account”): provided that such deposits shall be held in accordance with and subject to audit pursuant to the procedures described on Exhibit “N” attached hereto (the “Supplemental Surcharge Procedures”). City shall have the right to draw upon the Supplemental Escrow Account within 60 days following the last day of each Fiscal Year, to the extent City received less than $9,000,000 in total revenue from operations at the Arena pursuant to this Agreement during the immediately preceding Fiscal Year (the “Deficit Amount”), as further described in the Supplemental Surcharge Procedures and in an amount not to exceed the total funds available in the Supplemental Surcharge Escrow Account at the end of such Fiscal Year. The funds remaining in the Supplemental Surcharge Escrow Account following payment of the Deficit Amount, if any, to City shall belong to Arena Manager free and clear of all claims of City and shall be disbursed to Arena Manager such that said escrow account is reset to a zero balance following the reconciliation pursuant to the Supplemental Surcharge Procedures at the beginning of each Fiscal Year. The Supplemental Surcharge amounts imposed by the Arena Manager which are the property of Arena Manager pursuant to this Section 9.1.3 are pledged to the City, as more fully described in the Supplemental Surcharge Procedures, to the extent of the City’s interest, with the City claiming no interest in the balance of such account. The Supplemental Surcharge Escrow Account shall be held in one or more (FDIC insured) accounts of the Arena Manager and the City jointly, at one or more Third Party financial institutions agreed to by the City and the Arena Manager. To the extent of any inconsistency between this Section 9.1.3 and the terms of the Supplemental Surcharge Procedures, the terms of this Section 9.1.3 shall control.”

Where are the Supplemental Ticket Surcharge numbers per month? There should be $8,206 for October; $101,644 for November; and $96,758 for December for a total of $206, 608 to date. So, where’s the money? Why no accounting in the monthly report? Why is there no indication that these funds have been deposited in an interest bearing escrow account? Could this be considered a breach of contract?

According to the Monthly Arena Revenues & Expenditures, Arena Lease and Safety & Security Agreements, a public document that will be used by staff in its presentation at the December 17, 2013 city council workshop on this issue, here are the monthly ticket surcharge revenues that are to be paid to the city. These are public figures provided by the city based on figures  provided by IceArizona. Here is the link: http://www.glendaleaz.com/Clerk/agendasandminutes/Workshops/Agendas/121713-W05.pdf .

Month ending Sept 30, 2013:

Ticket surcharge Hockey ($3 per ticket)     $16,413 total revenue surcharge for 1 hockey game.

Divide $16,413 by $3 and attendance for this one game was 5,471.

Month ending October 31, 2013:

Ticket surcharge Hockey ($3 per ticket)    $203,289 total revenue surcharge for 7 hockey games.

Divide $203,289 by $3 and attendance total for all 7 games was 67,756.

Divide 67,756 by 7 games and average attendance per game was 9,679.

Month ending November 30, 2013:

Ticket surcharge Hockey ($3 per ticket)    $193,517 total revenue surcharge for 5 hockey games.

Divide $193,517 by $3 and attendance total for all 5 games was  64,505.

Divide 64,505 by 5 games and average attendance per game was 12,901.

Oops. I just checked the Coyotes website and it lists SIX games in November. Whose mistake is it? If it’s the city’s incompetence perhaps City Manager Fischer should fire someone else in the Finance Department. If it’s IceArizona’s mistake was it deliberate?

We’ve all heard the rumors about Anthony LeBlanc handing out 2,000 complementary tickets per game. Whether it’s true or not has no bearing on ticket revenues because they would be free tickets there would be no ticket surcharge. You attendance gurus out there better check your attendance figures because these are the numbers that come from IceArizona. After all, IceArizona wouldn’t low ball the numbers to the city only to exaggerate them for the media, would they? Nah-h-h-h-h.

By the way I ran into Mr. LeBlanc at a Coyotes game and had a few minute to quiz him on the numbers of the Coyotes deal. Mr. LeBlanc quite clearly stated to me that they needed attendance of 15,500 per game to “make it.” His number, not mine.

© Joyce Clark, 2013

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

Dec 13

16

Council workshop agenda bears no Christmas presents

Posted by Joyce Clark on December 16, 2013
Posted in City issue and actions • City of Glendale • Glendale and the NFL Super Bowl • Glendale elected officials • Glendale finances • Jobing.com arena  | Tagged With: , , , , , , | No Comments yet, please leave one

The Glendale City Council workshop scheduled for Tuesday, December 17, 2013 will finally force this council to declare its financial intentions for the future. It is a jam packed agenda but there are several items that are especially important to each and every citizen in Glendale. One is a presentation of Monthly Arena Reports and the other is the Five Year Financial Forecast.

The Monthly Arena Reports were a request of Councilmember Alvarez. We know her motive and that is to show how much the city is bleeding from the current management agreement. Staff will prepare and post online each monthly arena report. The December 31, 2013 report is to be public by January 31, 2014.

Unfortunately based upon the material offered at workshop the city does appear to be bleeding as a result, in part, of the latest arena management agreement. Here is what each of the monthly arena reports will include:

Revenues to the city

  • Sales tax collected inside the arena
  • Base rent ($500,000 annually)
  • Ticket surcharge for hockey events ($3 per ticket)
  • Ticket surcharge for non-hockey events ($5 per ticket)
  • Supplemental surcharge ($1 per ticket)
  • Parking revenue for hockey events ($10 per car)
  • Parking revenue for non-hockey events ($15 per car)
  • Naming rights (20% to city)
  • Naming rights for indoor stage (100% to city)
  • City sponsored events (revenues minus expenses)
  • Safety & Security Fee ($174,122 a year)
  • Hourly security costs for police
  • Hourly security costs for fire
  • Interest income placed in an escrow account

Expenses to be paid by the city

  • Arena capital improvements ($500,000 annually for now)
  • Quarterly management fee ($3,750,000 per quarter; $15M annually)

What does all of this mean? The sales tax collection, ticket surcharges and public safety revenues are not new revenues.  The only new revenues, courtesy of IceArizona, are the rent of half a million a year, naming rights and parking revenue. IceArizona has paid $219,702 to date of its annual rent. There is no new contract on naming rights as the current contract has not yet expired. As for parking revenue we will not see the first revenue number until January 31, 2014. It will be an interesting number for IceArizona keeps the first $20,000 (that’s 2,000 cars at $10 each) per game in parking revenue. Tom Duensing, Executive Director of Financial Services, in a recent article forecast(http://www.azcentral.com/community/glendale/articles/20131213glendale-fiscal-forecast-grim.html) that the Coyotes deal will cost the city an estimated $8.1 million next year, after the city receives its revenue associated with the deal. That’s one Christmas present denied.

The second major agenda item, the Five Year Forecast, is even worse. What it boils down to is that Glendale is spending more than it takes in. The annual amount that the city is short in revenue averages $14M a year until 2017 when the temporary sales tax increase disappears. Then the average deficit balloons to $30M a year. Do you smell the temporary sales tax increase becoming permanent? If it occurs it is a major promise broken and will have consequences the next time the city asks Glendale voters to approve anything.

While operating expenses continue not to be controlled as effectively as they could be there are other obligations that put in the city in trouble. The city’s debt service (of about $30M a year) is 17% of its operating budget. It is way too high and according to Moody’s it should be in the 10% to 12% range. Add the city’s contractual obligations (of about $25M a year) at 13% of its operating budget. Fully 30% of the city’s operating budget is used to pay debt service and contractual obligations. Add to that figure, personnel costs of over 50%. There isn’t enough money to cover all of this. No Christmas present here either.

Also of note is the projected expense for the Super Bowl of $1.7 million dollars with expected revenue of $200,000. It appears that this expense is greatly underestimated. In 2008 the city’s expenses were over $2 million dollars with a loss of about $1 million dollars. In 7 years every expense has gone up, not down and the expectation was, until now, that it could easily cost the city $4 million to host. The city has only factored in the $1.7 million it must pay to the Host Committee. It has not accounted for any additional costs including staff time.

Staff will be asking council to provide direction for the upcoming FY 14-15 council budget workshops. Their choices are: fix the deficit for the coming fiscal year or fix the deficit long term. If they wish to send a strong, positive signal they will embrace a long term fix. If they are still in hopeful mode they will choose to solve the ongoing problem short term and like chicken little, put it off as long as possible. Which way will they go?

© Joyce Clark, 2013

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

Aug 13

19

To pray or not to pray…that is the question

Posted by Joyce Clark on August 19, 2013
Posted in City Council Actions • City of Glendale • Glendale elected officials  | Tagged With: , , , , , , , , , | 7 Comments

Instead of its regular meeting time of 1:30 PM the Tuesday, August 20, 2013 council workshop meeting will convene at 9 AM. The 64 million dollar question is will Councilmember Alvarez show up or call in? She’s on the injured reserve list once again. If she does show will pain medication affect her performance or lack thereof?

They will begin with an Executive Session to meet the candidates for the City Attorney’s position. Do we know how many finalists? Do we know who they are? At least when the City Manager’s position was up for grabs we knew a smidgeon about the finalists. This time there is a cone of silence.

prayerThe most interesting and possibly contentious issue for open workshop discussion is to pray or not to pray at the start of the evening meeting. FYI: Only Phoenix has prayer before its council meeting. The cities of Gila Bend, Winslow, Apache Junction, Litchfield Park, Benson and Florence have invocations before their meetings. What’s the difference between an invocation and a prayer? According to the dictionary an invocation is the act of asking for help or support from anyone or anything.  A prayer is a spiritual communion with God or an object of worship. Is it appropriate to start council meetings with a prayer? You can weigh in by participating in my unscientific poll to the left of this article. This issue could become a moot point of discussion as this fall the Supreme Court will take up the issue of prayer at town meetings as it hears the Greece, New York case.

After their discussion of prayer council will move into another Executive Session where once again they will receive information about the external audit. Apparently the audit has been completed. If that is the case, it’s time to let the citizens of Glendale review the result. After all, taxpayers paid a hefty price for it – a half million dollars. It should be presented to all on a gold plated serving tray! Come on, council, it’s time to give it up and direct staff to post the results on the city’s website.

The other item of note in Esession is discussion of the IceArizona management agreement. What could this be about? The council approved the contract with IceArizona with its public vote on July 2, 2013 followed by the sale of the team by the NHL to IceArizona.  Is the contract still under negotiation?  That is the only way it can be discussed in Esession. Here is the exact verbiage used: “Discussion and consultation with the City Attorney and the City Manager to receive an update, consider its position and provide instruction and direction to the City Attorney and the City Manager regarding Glendale’s position in connection with agreements associated with arena management, the Arena, and the Hockey Team, which are the subject of negotiations (bold emphasis mine). [A.R.S 38-431.03(A)(3)(4)(7)].” Note that discussion is permitted in Esession while the negotiations are in progress but negotiations were concluded with council’s vote on July 2nd. Hmmmm…

©Joyce Clark, 2013

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This site contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a ‘fair use’ of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those 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.