There are some interesting numbers flying around in the negotiations between the NHL, the city of Glendale and prospective buyer Greg Jamison for the Phoenix Coyotes.
While the numbers, which include a sale price, $40-million (all currency U.S.) in up-front money from Glendale plus annual fees as high as $16-million paid to Jamison for operating Jobing.com Arena, could not be confirmed, they do not support the optimism that once again surrounds the long-running soap opera. The proposed sale price of $140-million calls for a bigger haircut than the NHL was ever willing to concede and the money Glendale is expected to kick in is much more than the cash-strapped city can afford.
Glendale city councillor Phil Lieberman said Friday he has heard the suburban city is being asked to contribute $40-million up front plus the annual management fees but will never vote for it. A spokeswoman for city manager Ed Beasley, Glendale’s chief negotiator, said there will be no comments during the negotiations. NHL deputy commissioner Bill Daly also declined to comment and said in an e-mail message he is “not sure” the numbers and the scenario of how the money will be raised is accurate.
Glendale officials goosed the optimism meter this week by telling council that Jamison, the former president of the San Jose Sharks, is now the preferred bidder. Council responded by telling Beasley to keep negotiating only with Jamison. NHL commissioner Gary Bettman said there is no deadline for a deal but Glendale needs to have the budget for its 2013 fiscal year in place by mid-June.
As those who have followed this story for far too long know, whenever a prospective owner shows up the practice is for him to negotiate a lease with Glendale and then sit down to cut a deal with the NHL. The league bought the Coyotes out of bankruptcy in October, 2009 for $140-million. Since then, paying for the team’s annual losses plus legal fees for the various court actions have driven the NHL’s costs to at least $200-million, according to sources familiar with the situation.
According to one source, the plan to give Jamison $40-million up front comes from a section of the prospective lease agreement reached in December, 2010 with Chicago businessman Matthew Hulsizer. He eventually walked away from the negotiations when the city would not agree to his terms.
In section 19.3 of that lease, the city agreed to give Hulsizer $40-million in exchange for his agreement to buy Jobing.com Arena from the city for the same figure at the end of the 30-year lease. The plan was that represented fair value and did not violate the gift clause of the Arizona constitution that prohibits excessive public subsidies of private enterprises. In turn, that might prevent opposition from the Goldwater Institute, the conservative watchdog group that scuttled attempts to buy the team on grounds the gift clause was violated.
The theory is a lease with Jamison will employ the same language to provide him with $40-million. The city may borrow the money through its Enterprise Fund, which is for sewers and water, and pay $1-million per year back into that fund for 40 years from its General Fund.
In addition, the city would pay $16-million per year to Jamison as a management fee for the arena. The argument would be it is keeping the Coyotes for only $17-million per year (the loan payment plus the management fee) compared to the $25-million it paid for the 2010-11 season and this season.
A source familiar with Arionza's gift clause said he does not think the $40-million payment would pass muster legally. He also questioned the management fee on the same grounds, saying it was above fair market value. Lieberman said another problem is the interest costs on the $40-million over 40 years would be prohibitive.
Last week, outgoing Glendale Mayor Elaine Scruggs said during a diatribe against the NHL she would never vote for a management fee of more than $11-million. Lieberman said he would never vote for it either, although he fears “there are three or four councillors who would insist on robbing any fund they can to keep the Coyotes.”
However, the city is facing a deficit of as much as $30-million for the upcoming budget. Unpaid furloughs for city workers and cutbacks to public services are likely in the next year, which makes big payments for the Coyotes a tough sell to taxpayers.
Finally, the amount put into the deal by Jamison is said to be $100-million, which means the purchase price has to be $140-million. Since the NHL previously demanded $170-million and Bettman promised the league owners they would not lose money on the Coyotes, it would be difficult for the league to accept that offer. Not when there are prospective owners willing to pay as much as $200-million if they can move the team to another city.
Lieberman is skeptical that Jamison has raised the money he needs and said Beasley refused a request for Jamison to meet with council to discuss his plans.
There is also news that the arena deal between the NBA’s Sacramento Kings and the city of Sacramento is falling apart and the team owners, the Maloof family, are prepared to move the team. One of the main candidates is Seattle, which is putting together an arena plan. If an NBA team is headed there, it increases the possibility of an NHL team coming as well.