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Joyce Clark Unfiltered

For "the rest of the story"

Disclaimer: The comments in this blog are my personal opinion and may or may not reflect an adopted position of the city of Glendale and its city council.

On December 3, 2021, the State of Arizona’s Department of Revenue (DOR) filed a tax lien against the Arizona Coyotes in the amount of $1.3 million with approximately $250,000 being owed to the City of Glendale for unpaid taxes. The tax lien states the team owes taxes as far back as June 2020 (that’s a year and a half). In the City of Glendale letter sent to Xavier Gutierrez, President and CEO of the Arizona Coyotes, advising the organization if payment on back taxes as well as monies owed to ASM Global, manager of the Gila River Arena, were not paid in full by close of business on December 20, 2021, not only would the organization be locked out of the building, but their Glendale business license would be terminated. See the correspondence below:

 

 

 

 

 

 

 

 

This latest development should come as no surprise if you had read Katie Strang’s Athletic story, Dysfunction in the desert: Finger-pointing, fear and financial woes roil the Coyotes organization published in February 16, 2021. Here is the link: https://theathletic.com/2390146/2021/02/16/arizona-coyotes-investigation-toxic/ . Be forewarned, you must subscribe to the Athletic to read the full article.  It is well researched,   in-depth and a fascinating read. Ms. Strang also provides strong coverage of the organizations’ structural disfunction. Excerpts from her story referring to the organization’s past financial issues include the following:

  • “Meruelo’s acquisition of the Coyotes was supposed to portend a new era for the team. Instead, people within the organization and across the NHL are now wondering if the league erred in approving his purchase.”
  • “In April, the team announced it was furloughing half of its staff due to pandemic-related financial issues. In May, the Arizona Republic reported that promises to pay the arena’s part-time and hourly staff members had not been met. The team and arena management company, in response to the report, said they would ‘finalize our support plan that will be executed within the next 30 days’.”
  • “In September, The Athletic reported that a handful of players did not receive their signing bonuses on time.”
  • “The Athletic identified and spoke with eight vendors with whom the Coyotes had outstanding or past due balances or negotiated their debt to a lower amount.”
  • The Seyfarth Shaw law firm has been retained to investigate various allegations associated with the organization. “Among them, Seyfarth Shaw representatives have asked about:

           The accuracy of financial documents provided to third parties, such as banks and private  lenders, required to meet specific loan obligations. The accuracy of financial reports the organization sent to the league, which reflect team revenues and can potentially impact player salaries and the salary cap.”

It was Ms. Strang who broke the December 8, 2021, Athletic story regarding the Coyotes’ unpaid taxes. Here is the link: https://theathletic.com/news/coyotes-could-be-locked-out-of-home-arena-by-city-of-glendale-for-unpaid-arena-charges-delinquent-tax-bills/ArAVPFTj0LId/ . I imagine Garry Bettman’s (President of the National Hockey League) call to Mr. Meruelo, after the story broke about unpaid taxes was short and sweet…Pay those @#$%&* taxes now!

On December 9, 2021, the Coyotes organization issued the following statement saying they have launched an investigation to determine “how this could have happened.” In their press release they state, “Initial indications are that it appears to be the result of an unfortunate human error. Regardless, we deeply regret the inconvenience this has caused. We will make sure that by tomorrow morning, the Arizona Coyotes are current on all of our bills and owe no state or local taxes whatsoever. And we will take immediate steps to ensure that nothing like this can ever possibly happen again.”

If this sounds familiar, it should. According to Katie Strang’s February 16, 2021, article, when asked about paying players, “Gutierrez described both of these snafus as ‘process’ failures.”

Once again, Gutierrez seems to be pointing the finger at “process failures” implying it wasn’t deliberate but rather a glitch in the system. Maybe if it had happened once and in isolation with no background of financial questions it would be accepted as a plausible answer but there seems to be an ongoing pattern of “process failures.”

It is also no small matter to possibly lose the organization’s business license. It’s not just a matter of possibly being locked out but without a business license even if an alternate venue were found, it couldn’t be used without having a license to do business.

Today, December 9, 2021, the media is reporting that a short while ago, the Coyotes wired the entire amount to the State DOR. We do not know if they have also paid their arrears with ASM Global. I would advise Glendale to double check and to make sure all unpaid amounts are now current. One would expect no less considering the avalanche of negative publicity they generated yesterday and today.

I suspect there is more to the Arizona Coyotes’ story that will have to unfold shortly. Right now, the most pressing issue is meeting the NHL’s schedule deadline to submit the team’s play dates and their location to the League by a January, 2022 date. This early date is because the League has to juggle all teams’ schedules and craft a League schedule that satisfies all.

Forget the possibility of a new arena in Tempe. The immediate and most critical question is where will the Coyotes play while waiting 3 to 5 years for a new arena? That is, IF Tempe accepts their RFP. The only word coming out of Tempe is that they are doing extensive due diligence.

I have found over the years that a deal is best crafted when both parties can trust each other. That may be the most seminal question that Tempe will have to decide. Can they trust the Coyotes to be good, reliable financial partners?

Let me make clear, the City of Glendale is done with the Coyotes. Their absolute refusal to negotiate a long-term, 20 year lease simply made the City’s decision clear. They will not be playing in Glendale for their 2022-23 season or in any future season. That door is closed.

While Glendale has no interest in where they play in the future, I think it’s fun to speculate and the rest of this blog is pure speculation. It is not based in fact or any insider knowledge.

The only viable location is the Arizona Veteran’s Memorial Coliseum. Keep in mind pursing this location as a temporary venue is dependent upon Tempe’s awarding the RFP to the Coyotes. Then it would make some sense to pursue a lease of the Coliseum. My guess it’s a 50/50 proposition as to whether Tempe accepts the Coyotes’ RFP. What if Tempe declines to award the Coyotes an RFP? For many that is an unthinkable outcome, but it is possible. If that were to happen, there would be no need of a temporary location and I would imagine a sale of the team would be imminent. This is the only play the Coyotes have. Forget all other locations. Each has a solid reason to be unworkable.

Here are the problems with the Coliseum. It’s now December, 2021. The work and the expense involved in renovating the building are extensive and even if work on the building started tomorrow, it is doubtful the building would be ready in a mere 10 months in time for the new season in October of 2022.

According to a recent Craig Morgan story of December 8, 2021, entitled Back to the future: Coliseum makes most sense as Coyotes’ interim arena solution, he, too, thinks the only temporary solution for the Coyotes is the Coliseum. Craig Morgan has always been very friendly and supportive of the Coyotes’ ownership over the years. One can speculate that he has sources within the organization and he is reflective of their thinking process.

The Coliseum has major structural problems. The building needs a need roof, new flooring and an additional ice plant for starters. Even with a new roof it can not accommodate a centrally hung scoreboard. There are no suites and maximum attendance would be in the 13,000 to 14,000 range. If the Coyotes do use the building they will continue to bleed financially.

I had heard that it would cost $40 to $50 million to get the building in shape for hockey but Morgan, in his article, cites a construction expert who said a more realistic number is in the $100 million range.

If Tempe awards the RFP to the Coyotes everything becomes a political calculation from that point forward. We can speculate that the Coyotes will go to Governor Doug Ducey and ask to rent the building (maybe for $1 a year?) and having a great deal of Chutzpah, demand that the state pay the cost of renovating the building for them…and, oh, by the way, you have 10 months to do so. Here’s where it really gets political. Ducey is a lame duck Governor, termed out. There are rumors that he intends to run for the U.S. Senate. He will have to make a political calculation as to how such action would play with his voter base. While he might win the support of 17,000 to 20,000 Coyotes fans there are far more voters that would not take kindly to any kind of financial give away to yet another sports franchise using taxpayer dollars. It could become the albatross that makes him unelectable.

The next few months will be very interesting as we watch this play out. My personal take is that the Coyotes will be sold. Alex Meruelo has become a liability to the NHL and especially to Gary Bettman.

© Joyce Clark, 2021       

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 336 days since the city’s pledge to build the West Branch Library.

It seems that Thanksgiving got in the way of much blog writing recently. I hope your Thanksgiving Day with family and friends was enjoyable. I hope you ate too much, laughed too much and watched too much football.

It was announced that the Coyotes hired Mitchell Ziets, CEO of Tipping Point Sports, LLC, to assist in an exploration of options for the team including a move to another venue from the Gila River Arena in Glendale. Let’s explore the reality of this option.

In a November 2, 2015 story by Craig Morgan several possible venues are offered for consideration by the Coyotes. Here is the link: http://arizonasports.com/story/436156/coyotes-in-discussions-with-at-least-three-separate-groups-for-new-valley-arena/ .

In his story Morgan offers this comment from Anthony LeBlanc, “At some point you have to make a decision that you can’t continue to talk to a wall, Coyotes co-owner, president and CEO Anthony LeBlanc said. You have to accept reality and look at what your alternatives are. That’s where we are right now.” From the time LeBlanc’s group, IceArizona, commenced its deal with Glendale for the use of its arena the Coyotes simply refused to talk to and to share information with Glendale. They were decidedly off the reservation. It has only been since the new, two-year deal was inked that IceArizona has decided to play nice with Glendale.

IceArizona may very well leave Gila River Arena in two years but options to play elsewhere in the Valley are more limited than current speculation would lead one to believe. LeBlanc admits to “conversations” with Phoenix about the possibility of a shared arena with the Phoenix Suns. Out of curiosity I checked the 2015-2016 playing schedules for both teams. Here are some comparisons:

                                                            Phoenix Suns                 Arizona Coyotes

Season                                                10/28/2015-4/13/2016     10/9/2015-4/13/2016

Number of total games                                     82                                        82

Number of home games                                   40                                        41

Out of the 40+ plus home games each team plays at its current venue, if they currently played at the same shared venue, 12 playing dates would conflict. That is ¼ or 25% of their home games. To be fair, we know that can be remedied by the leagues with a gnashing of teeth and the pulling of hair. It has worked before when the Coyotes and Suns shared a venue. One would think the Coyotes fans have warm memories of their experiences in sharing a venue with the Suns and are eagerly looking forward to do so again.

In a recent December 2, 2015 Paul Giblin story in the Arizona Republic, he cites issues that Phoenix would have to consider. Here is the link: http://www.azcentral.com/story/news/local/glendale/2015/12/02/arizona-coyotes-arizona-cardinals-wont-bid-manage-glendale-gila-river-arena/76564718/ .

  •  How much would a new arena cost? The Milwaukee Bucks’ planned new arena is pegged at $500 million.
  • How much would be privately funded? How much publicly funded? Would the public-funding source be municipal, state or some combination?
  • Can voters be sold on the idea of picking up any portion of the bill?
  • Where specifically would an arena be built?
  • When would it open?
  • Can the Suns and Coyotes work out an agreement to split revenues?

Let’s look at other possible venues. Tempe and/or Scottsdale are possible candidates. Would the voters of Tempe and/or Scottsdale approve the construction of a $180 million dollar building (cost of Gila River Arena construction in 2005) and agree to subsidize, year after year, a team that is not profitable? Remember those who do not read history are doomed to repeat it. I would think many voters would be very aware of Glendale’s history and that could certainly cause them to think twice about such a proposal.

Arizona State University has been mentioned as well. ASU receives substantial funding from the Arizona State Legislature. It is conceivable that a majority of legislators may balk at the idea of state taxpayer money being used to subsidize a for-profit company.  If ASU can fund and subsidize such a project with new, private dollars and not divert private dollars already committed for existent programs then it is possible. But wait, didn’t ASU Hockey just commit to playing its games at Gila River Arena? If that is the case, wouldn’t ASU have to build a new venue?

The last location on the menu of possibles is Talking Stick. That is certainly do-able. An Indian reservation is not subject to federal, state, county or local laws. The tribe is free to build what it wants to build on reservation land.  One has to wonder if this tribe would be willing to invest in the construction of another major venue as well as subsidizing the team in perpetuity.

There was an interesting article published on October 20,2015 by the Flordia’s Sun Sentinel regarding the NHL Florida Panthers and a Broward County proposed deal. Here is the link: http://www.sun-sentinel.com/local/broward/fl-panthers-subsidy-debate-20151020-story.html .

In some ways their deal is like comparing apples and oranges for Broward County has a population of 1.87 million people and includes 24 cities. That in itself is much different from Glendale’s population of approximately 240,000 and the fact that it is one city having to deal with a hockey arena. Some elements of their proposed deal are eerily similar to the Glendale/Coyotes deal. As of this date their deal has yet to be approved but here are some of the deal points which would expire in 2028:

  • The Panthers would continue making $5.3 million annual debt payments toward the county’s $15.3 million obligation.
  • Receive $86 million from the county, or $6.6 million a year on average, but in a schedule of front-loaded payments that starts at $12 million a year. Of the total, $39 million must be used for capital expenses at the arena, $45.5 million for operating expenses like paying the electric bill or property insurance, and $1.5 million to lure a “high impact event.”
  • Provide an irrevocable letter of credit to protect the county’s financial investment if the team defaults, files bankruptcy or relocates.
  • Grant the county development rights on land surrounding the arena, where a mixed-use entertainment complex could be considered.
  • Share proceeds with the county if the NHL expands between 2015 and 2021 and gives teams expansion proceeds. After the Panthers’ losses are covered, the county would get the remainder of the one-time expansion payment.
  • Give the county 10 percent of profits if the team, made more valuable by this new deal, were sold.
  • Give the county authority to approve where the money for capital projects is spent, and authority to replace the Panthers’ Arena Operating Company with another arena manager if needed.
  • Allow the Panthers to get out of the contract in eight years if it’s not working out. They’d have to give a year’s notice, show losses of $100 million over seven years, and pay a termination amount. For example, if the Panthers leave in year 8, they’d pay back the full $72 million the county would have given them by then.

No matter where the Coyotes end up in the Valley, whether they remain in Glendale or move to another location, their quest to be subsidized by a governmental entity is surely a public policy question deserving of much public discussion. The people of any city have a right to weigh in on the question of their tax dollars being used to subsidize a private, for-profit company.

© 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 ‘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 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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