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Phoenix Coyotes goalie Ilya Bryzgalov (30), of Russia, stops a shot by the Anaheim Ducks in the second period of an NHL hockey game in Anaheim, Calif., Sunday, March 13, 2011. The Coyotes won 5-2. (Lori Shepler)
Phoenix Coyotes goalie Ilya Bryzgalov (30), of Russia, stops a shot by the Anaheim Ducks in the second period of an NHL hockey game in Anaheim, Calif., Sunday, March 13, 2011. The Coyotes won 5-2. (Lori Shepler)

Glendale facing lawsuit, Winnipeg watching closely Add to ...

Hopes of seeing its old NHL team come home were raised in Winnipeg when the Goldwater Institute ended months of threats with the announcement it will file a lawsuit to block the sale of the Phoenix Coyotes to Chicago businessman Matthew Hulsizer.

True North Sports and Entertainment, which owns the MTS Centre in Winnipeg, wants to buy the Coyotes if the Hulsizer sale collapses. The Winnipeg Jets became the Coyotes in 1996 when they moved south.

Glendale city councillor Phil Lieberman, the most prominent opponent of the bond deal on council, thinks Goldwater's announcement will sink the $116-million municipal bond deal that is supposed to finance the NHL's $170-million sale of the Coyotes. Hulsizer is to get $100-million from the bond sale up front. Goldwater said it will file the lawsuit as soon as the bond deal closes.

NHL commissioner Gary Bettman said previously that Glendale will try to get the municipal bonds issued despite Goldwater's opposition with the league's assistance.

"I don't know when the bond deal will close because no bond company will buy bonds if there is a lawsuit right after," Lieberman said. "There is no way we can justify the $100-million to Hulsizer."

In a statement released Tuesday, Goldwater said it determined the sale of $116-million of municipal bonds by the suburban City of Glendale violates "two prohibitions of the Arizona Constitution, which requires that no Arizona government 'shall ever give or loan its credit in aid of, or make any donation or grant, by subsidy or otherwise, to any individual, association, or corporation.' "

NHL deputy commissioner Bill Daly did not respond to a request for comment but told the Arizona Republic the announcement will not stop the bond sale.

"From our perspective, Goldwater's announcement doesn't change a thing," Daly said. "We are still pursuing a sale of the bonds. Hopefully, the announcement will not negatively affect that."

Goldwater, a privately funded watchdog group, said the city's decision to use its credit to provide Hulsizer with $100-million through the bond sale is the first violation. The institute noted the bond deal caused Moody's Investor Services to lower Glendale's credit rating, which will increase the city's borrowing costs.

The second violation is that Hulsizer is not providing similar value to the city in exchange for the money he receives from Glendale. Under the deal, Hulsizer will get the $100-million up front in order to buy the Coyotes from the NHL for $170-million. In return, Glendale gets the right to sell the parking spaces around the Coyotes arena for the 30 years of the lease and other considerations such as advertising signage.

Hulsizer could not immediately be reached for comment but he has argued in the past that Glendale will get fair value for its payment over the life of the lease.

Lieberman does not agree. He says the city is already using excise taxes, which were also pledged to be used for bond payments if there were any shortfalls in parking revenue, to cover shortfalls in sales taxes for the debt on Jobing.com Arena. The city is also facing the same problem in covering the debt for a spring-training facility built for the use of major-league baseball teams.

Lieberman said the Coyotes' arena only provided $5.1-million last year to cover the $13.2-million annual debt service on it. The rest came from excise taxes.

"There is no possible way parking [revenue]can pay for [the bonds]" Lieberman said. "We can't afford it."

Representatives of Glendale Mayor Elaine Scruggs did not respond to a request for comment.

Darcy Olsen, the president and chief executive officer of Goldwater, said Hulsizer should buy the club with his own money, not the public's.

"Deals of this size and scope happen all the time in the private marketplace without putting taxpayers on the line," Olsen said. "Mr. Hulsizer certainly appears better equipped to buy this team with his own funds than the taxpayers of Glendale."

In the statement, Goldwater said, "the deal poses enormous risks to Glendale taxpayers, who will have to repay the bonds if the team fails again or if parking revenues are insufficient to repay the bonds."

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