Glendale city council approved only one of two arena-lease proposals for the Phoenix Coyotes on the eve of their first playoff game in eight years.
The group headed by Chicago White Sox and Chicago Bulls owner Jerry Reinsdorf was approved unanimously while the group of businessmen known as Ice Edge Holdings LLC saw their proposal rejected by a 5-1 vote by the suburban councillors.
This falls in line with what NHL sources have been saying - that Reinsdorf is the league's preferred bidder. Ice Edge was pitching hard going into last night's meeting - sending out an open letter to Glendale taxpayers pitching its virtues - but failed to make an impression with city council.
It now falls to the NHL to cut a deal with Reinsdorf. NHL deputy commissioner Bill Daly said last night that the league has to act quickly, although he said there is no deadline even if the league can legally break the team's lease on June 30 and move it.
"No, we don't have a drop-dead date but we do have a timeline that is important," Daly said shortly after he appeared on TSN to conduct the NHL's entry draft lottery. "We have to work diligently. We'll have to work quickly and try to bring one of those deals to fruition."
Sources said the NHL preferred Reinsdorf's bid, which is conditional on squeezing almost $47-million (all currency U.S.) per year in bonds and other revenue out of a "community facilities district" around the Jobing.com Arena. The money is to cover operating losses and part of the purchase price of the team (the NHL is asking for $160-million).
However, Daly declined to say which bidder had the inside track with the league, which bought the Coyotes from the U.S. Bankruptcy Court last October.
"I've heard that as well," he said of the talk that Reinsdorf is the preferred bidder. "We've not made that judgment. If we have to make that judgment, we will make it in due course."
The lease proposal is not binding on the suburban city of Glendale or on Reinsdorf's group, which includes former Anaheim Ducks president Tony Tavares and controversial Phoenix lawyer and former politician John Kaites. The proposal is officially called a memorandum of understanding and a full lease agreement must be worked out between the city and Reinsdorf, although Daly said the group may negotiate the lease at the same time as it is negotiating with the NHL.
There is no guarantee his lease proposal will succeed even if it is worked out with the city. The Goldwater Institute, a conservative watchdog group that tracks public subsidies to private corporations, served notice it is not impressed with the Reinsdorf proposal.
Carrie Ann Sitren, a Goldwater lawyer, said the Reinsdorf lease places way too much burden on the Glendale taxpayers and not enough on Reinsdorf. Aside from the large amounts of money he is looking to raise from the special district to pay for the team and its operating cost, Sitren said the clause that allows Reinsdorf to sell the team and move it after five years is also a problem.
"He really seems to have insulated himself completely from any financial liability," Sitren said. "It is not a certain prospect for the team to stick around in the long-term. The Ice Edge deal looks more hard-working, as in let's be creative and see how this can work."
The Ice Edge proposal expects to raise most of its operating capital from parking revenue (the Coyotes do not charge for parking at present) and ticket surcharges for all events at the arena.
While the Goldwater Institute has successfully sued Arizona municipalities for violating state laws on public subsidies, which must show a clear benefit for taxpayers, Sitren said the group will not take action until there is a final lease agreement.
"Ultimately, we've got to wait until we see the details of a deal the city is ready to sign," she said. "I don't expect we'll have that until the NHL picks a buyer."
This season the Coyotes were as successful on the ice as they were unsuccessful in the boardroom. General manager Don Maloney said nothing has changed on his side - he will focus on hockey operations and let the rest take care of itself.
"In all candor, we don't think about it; we don't talk about it; and we don't focus on it," said Maloney. "This process has been drawn out for so long. Rather than worry about it, if that's the right word, we just say 'it is what it is.' We think we're doing a good job on the ice. We know if we continue to have success on the ice, then we feel the franchise issues will work out."
The Coyotes were a financial basket case at the start of the season, but their unexpected 107-point regular-season, which brought home-ice advantage in the opening round of the playoffs, will mitigate the losses to an extent.
With a file from Eric Duhatschek