Any celebrating by the NHL over its win in court against Jim Balsillie might be premature.
The league's plans to find a buyer willing to keep the Phoenix Coyotes out of the hands of the Canadian billionaire and in suburban Glendale might run into trouble on two fronts.
Any local buyer will likely depend on a large financial contribution from Glendale. Court documents indicated this could cost between $14-million and $20-million (all currency U.S.) a year for the city of 250,000 people.
But a controversy over what Glendale city manager Ed Beasley might or might not have told the Coyotes and the NHL about potential subsidies may scuttle any plans to help the ailing hockey team. City council would have to approve any concessions to the Coyotes and Beasley has not informed it of plans to offer any - which recently caused a uproar when his alleged promises to the Coyotes were revealed in U.S. Bankruptcy Court.
In a filed declaration, former Coyotes chief executive officer Jeff Shumway claims Beasley tried to keep a letter about the team's financial condition from becoming public. Coyotes officials also claimed Beasley agreed to $14.6-million in annual subsidies for a new team owner, while he was saying publicly there would be no such financial help.
Beasley has denied doing anything improper.
City council also has to worry about drawing a lawsuit from the Goldwater Institute, a non-profit watchdog group based in Phoenix. The group monitors public spending and has successfully sued municipalities that spend taxpayers' money improperly.
In a letter sent this month to Glendale Mayor Elaine Scruggs and Beasley, the Goldwater Institute said it will be watching what city council does with the Coyotes and warned of legal action. The letter noted that city revenue is expected to decrease by 12.5 per cent from 2008 to 2010, and it cannot afford to give large subsidies to private companies.
"If it comes down to it, we will do what we need to do," said Carrie Ann Sitren, a lawyer with the Goldwater Institute.
Things should remain complicated, as Balsillie's lawyer, Richard Rodier, said yesterday he expects to file a new motion to buy the NHL team after the initial bid was denied Monday by Judge Redfield T. Baum.
In the meantime, the NHL, which indicated no interest in the judge's suggestion to mediate a solution with Balsillie, will work toward finding some local bids for a court-directed auction for the team that will now probably take place in early September.
Chicago White Sox and Chicago Bulls owner Jerry Reinsdorf is moving ahead with due diligence on the team (confirmed yesterday by NHL deputy commissioner Bill Daly during a radio interview), but has not put in an official bid yet.
Tony Tavares, former president of the Anaheim Ducks, was appointed to conduct the due diligence for Reinsdorf. However, this is apparently not connected to Tavares's position as president of Sports Properties Acquisition Corp., which recently rejected overtures from the NHL to buy the Coyotes.
Lawyers for current Coyotes majority owner Jerry Moyes told the court last week that they expect one of the other groups the NHL claims are interested in buying the Coyotes to apply for due diligence, but that has yet to happen.
At this point, the court auction for the Coyotes will involve only bidders who pledge to keep the team in Glendale. If none can be found, an auction will be held for buyers who will relocate the team after negotiating a relocation fee with the NHL.
Two other groups were identified publicly last week as being willing to keep the Coyotes in Glendale: One is headed by Toronto Argonauts owners Howard Sokolowski and David Cynamon; the other by Coyotes minority owner John Breslow.
However, Sokolowski and Cynamon ran into problems when it was revealed they want to put a second NHL team in Toronto. Then, The Globe and Mail reported Monday that the pair received financial help from fellow CFL owner David Braley in operating the Argos, which could damage their credibility as potential NHL owners.
Balsillie could also make a bid in the second auction, or he could negotiate a sale and move with the league later this summer if a suitable local bid cannot be found.