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Glendale set to determine Coyotes future in the desert

A lone pedestrian walks past Jobing.com Arena, Wednesday, June 13, 2012, in Glendale, Ariz., where the Phoenix Coyotes NHL hockey team plays home games.

Ross D. Franklin/AP

The fate of the Phoenix Coyotes is now in the hands of the (mostly) new city council of suburban Glendale.

A tentative lease agreement with Renaissance Sports & Entertainment, headed by Canadian businessmen George Gosbee and Anthony LeBlanc, for Jobing.com Arena will be presented to the seven-member council at its regular in-camera meeting on Tuesday. Sources familiar with the negotiations say the deal will produce something close to the $15-million (all currency U.S.) annually Renaissance was seeking, although it may not be structured strictly as an arena management fee.

Glendale council, which includes four new members who were elected late last year, will have a week to study the agreement and ask questions before a vote for approval is expected at its regularly scheduled public meeting on June 25.

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If the lease is rejected, the NHL is expected to turn to its backup plan, which will see the Coyotes move to Seattle in time for next season. Hockey Night in Canada reported last weekend that the NHL is prepared to sell the Coyotes for $220-million to Ray Bartoszek and Anthony Lanza, the principals in a Connecticut-based private investment company. They have a conditional deal with the City of Seattle to operate an NHL team at KeyArena until the city's new arena is built.

Renaissance already has a conditional purchase agreement with the NHL for the Coyotes for $170-million, although the sale price is open to interpretation. The major condition is that a lease agreement for the arena is reached with Glendale, which has been grappling with severe financial problems along with the Coyotes for years.

Like all of the previous failed bids for the Coyotes, the one from Renaissance is made up mostly of borrowed money, including a loan of more than $80-million from the NHL, which is why a large chunk of annual revenue from Glendale is needed to make it work. The city council may agree to pay it because many of the local politicians and bureaucrats believe that an NHL team is needed to attract enough revenue to the arena and the shopping and entertainment district next to it to allow the city to cover its $180-million in debt on the arena.

Despite the fact the city has set aside only $6.5-million in its tentative 2013-14 budget, which must be in place by July 1, for arena-management fees and upkeep, and the four new councillors were elected on promises of cutting off excessive subsidies for sports teams, Gosbee and LeBlanc are hopeful their lease deal will be approved.

The crucial part of the prospective owners' argument is that under their agreement, they are responsible for any annual losses on the arena plus the operating costs. If the Coyotes leave, the city will then be responsible for any losses plus the operating costs (which some estimate to be between $8-million and $12-million per year) plus paying someone else to manage the arena. And the city will be out an additional $5-million per year in ticket surcharges and rent from the Coyotes along with a few other revenue streams from the team. This is being sold to the city as a potential loss of close to $20-million per year if the team leaves.

Also playing a big role in the new lease is parking, which has always been free at Coyotes games except for a few premium spots. Gosbee and LeBlanc hope to raise almost $2.5-million per year in parking fees, which will go to the city.

The argument is that somehow, out of the existing Coyotes revenue that comes to the city plus the new-found parking revenue, enough money will be found to bring the budgeted arena number of $6.5-million closer to $15-million. For example, the city could keep the $5-million in ticket surcharges and rent, which goes to servicing the arena debt, and Renaissance would get all the other revenue plus parking.

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If this does not fly with city council, then Seattle becomes the preferred destination.

@dshoalts

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About the Author
Hockey columnist

A native of Wainfleet, Ont., David Shoalts joined The Globe in 1984 after working at the Calgary Herald, Calgary Sun and Toronto Sun. He graduated in 1978 from Conestoga College and also attended the University of Waterloo. More

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