CXL - UPDATE 12/9 - Coyotes settle bills after unpaid taxes come to light

[MNNumbers]

I agree with this. The guy basically carved out a living bashing every sports deal ever and never factors in local dynamics. I got into it with him when Missouri was trying to keep the Rams and showed that the annual bond payments in what the state offered (it was like $12 million) was very small in terms of the states budget (like over $30 billion) and would have been covered by just income tax on Rams players. He argued that people spending money elsewhere would result in jobs generating income taxes. People going out to dinner and movies isn't going to generate that much payroll.

On your other point about Forbes being trash. I agree with that as well. Once the old man died it went downhill.

I have to admit I like the FoS website. His main idea, of course, is that every economic study which has been done neutrally suggests there is no economic benefit in the government agencies (state, city, etc....) building places to play for sports teams. *****(see footnote) The corollary to that is that there is obviously some other reason that city councils and state governments decide to build them, and of course, there is.....it's the emotional high that people get from feeling connected to the team that plays in their city, especially when that team is winning. It is obvious that this happens, because if some team which is usually middle of the pack has a couple of years of championship play, the ticket sales go up, the viewership goes up, and the memorabilia sales go up. The problem is, of course, that it is very difficult to quantify what that does for a community and weigh it against the cost of the team.

Footnote: What these studies miss, and what is the one place where they err, is in football. And, that is for reasons you describe. NFL is so huge nationally, with so much money coming from national broadcasts, that the kind of thing you describe does outweigh the costs. But I don't believe you can make the same argument for either NBA or MLB, and I know that is doesn't work for NHL.

In the particular case of Glendale.....
About 180M to build GRA
Approx 50M to NHL in the 2 years the league owned the team
Approx 20M to IA in the years of the 15MM/yr AMF
Approx 3M in the next year, when the AMF was 6M, but there were surcharges.

This makes ~250M dollars from the city to the team. Obviously there is no city income tax, so the city gets nothing from the players. The only thing the city gets back from this set up is sales tax on things which happen in the nearby development. The period we are discussing is from 2003 - 2018 or so, so let's call it 16 years. The city would have to get a return of about 15M a year on such sales taxes to make this work. Considering that attendance might average 15000, then yearly attendance might average 600K, that means that every fan through the door has to buy things that produce $25 of sales tax every night. If local sales tax is 3%, that means those people would have to be spending $800 each (including kids) on things besides tickets, every time they came to the arena. This is clearly not the case. Ergo, Glendale would be been better off not building.

 

[Boris Zubov]

I suppose that....

1- They have considered Houston.
2- The league doesn't want them to move to another market until they have exhausted all opportunities in Phoenix. This is clearly a good strategy by the league. You don't want cities thinking you might leave, or you'll never get any help in any form.
3- I think it's worthwhile to assume that in Tempe, there are certain advantages that may not be seen in Houston. Among these might be:
a) Free land (the site is available, and they don't need to buy it)
b) The city might offer tax incentives (200M please?)
c) Staying in Arizona allows you to keep the sportsbook license, since that is lost if you go to Texas.

I don't think anyone who's paid attention can say with a straight face that they haven't exhausted every possible opportunity in the Phoenix area if Tempe falls through. This is the polar opposite of the Rams leaving St Louis.

 

[hockeyguy0022]

In Arizona, what's the actual temp options (besides paying Glendale a ridiculous amount of money)

Play at old AVMC (which im sure costs XX million to renovate, and would need to be started yesterday) I don't even think there's enough time to get this up to a decent standard.

Play at chase field - 3-4 years and is basically the purchase of a portable rink system, much like the winter classic/outdoor games rig. (once again XX million im sure) weird sight line, weird temperature, im sure tickets will be super cheap. Can only play like nov-mar. then have to play away games for 3-4 months a year at the start and end.

These both sound like terrible money losing options and aren't likely to attract fans, or sponsors for that matter. Many would just say "see you in the new rink"

Then have to build Tempe on-top of all that.

 

[ponder719]

In Arizona, what's the actual temp options (besides paying Glendale a ridiculous amount of money)

Play at old AVMC (which im sure costs XX million to renovate, and would need to be started yesterday) I don't even think there's enough time to get this up to a decent standard.

Play at chase field - 3-4 years and is basically the purchase of a portable rink system, much like the winter classic/outdoor games rig. (once again XX million im sure) weird sight line, weird temperature, im sure tickets will be super cheap. Can only play like nov-mar. then have to play away games for 3-4 months a year at the start and end.

These both sound like terrible money losing options and aren't likely to attract fans, or sponsors for that matter. Many would just say "see you in the new rink"

Then have to build Tempe on-top of all that.

The one (also terrible) option they have aside from "schedule the team exclusively away once the Dbacks start up" is to move home games that coincide with the baseball season to Tucson for the first year, until AVMC is renovated. Obviously you don't want to do that, since Tucson seats sub-10K and you have to coordinate scheduling more closely with the AHL, but it at least provides a modicum of coverage from a scheduling perspective.

 

[MNNumbers]

In Arizona, what's the actual temp options (besides paying Glendale a ridiculous amount of money)

Play at old AVMC (which im sure costs XX million to renovate, and would need to be started yesterday) I don't even think there's enough time to get this up to a decent standard.

Play at chase field - 3-4 years and is basically the purchase of a portable rink system, much like the winter classic/outdoor games rig. (once again XX million im sure) weird sight line, weird temperature, im sure tickets will be super cheap. Can only play like nov-mar. then have to play away games for 3-4 months a year at the start and end.

These both sound like terrible money losing options and aren't likely to attract fans, or sponsors for that matter. Many would just say "see you in the new rink"

Then have to build Tempe on-top of all that.

There is some talk in various places on the "internet", whatever and however trustworthy that is....that Meruelo and Gutierrez have said something like:
Glendale is done with us and we are done with them.

There is also something about the 'good relationship' that the team has with the D-Backs.

So, one option that has some 'float' so it right now it to start and end with a road trip and play at Chase Field, with temp seats in one section.

Personally, I suspect that to be a one-year option only, because it has no room for playoff play. One could reasonably guess that 22-23 would not have much playoff chances, but you wouldn't want to do that for a few years, and especially not in the year before the new arena opens. Ideally, you would want to have an exciting, playoff team the spring before you open your new palace, for the sake of maximizing excitement.

So, maybe....one year at Chase while the final negotiations happen, and after that AMVC?

 

[sh724]

I have to admit I like the FoS website. His main idea, of course, is that every economic study which has been done neutrally suggests there is no economic benefit in the government agencies (state, city, etc....) building places to play for sports teams. *****(see footnote) The corollary to that is that there is obviously some other reason that city councils and state governments decide to build them, and of course, there is.....it's the emotional high that people get from feeling connected to the team that plays in their city, especially when that team is winning. It is obvious that this happens, because if some team which is usually middle of the pack has a couple of years of championship play, the ticket sales go up, the viewership goes up, and the memorabilia sales go up. The problem is, of course, that it is very difficult to quantify what that does for a community and weigh it against the cost of the team.

Footnote: What these studies miss, and what is the one place where they err, is in football. And, that is for reasons you describe. NFL is so huge nationally, with so much money coming from national broadcasts, that the kind of thing you describe does outweigh the costs. But I don't believe you can make the same argument for either NBA or MLB, and I know that is doesn't work for NHL.

In the particular case of Glendale.....
About 180M to build GRA
Approx 50M to NHL in the 2 years the league owned the team
Approx 20M to IA in the years of the 15MM/yr AMF
Approx 3M in the next year, when the AMF was 6M, but there were surcharges.

This makes ~250M dollars from the city to the team. Obviously there is no city income tax, so the city gets nothing from the players. The only thing the city gets back from this set up is sales tax on things which happen in the nearby development. The period we are discussing is from 2003 - 2018 or so, so let's call it 16 years. The city would have to get a return of about 15M a year on such sales taxes to make this work. Considering that attendance might average 15000, then yearly attendance might average 600K, that means that every fan through the door has to buy things that produce $25 of sales tax every night. If local sales tax is 3%, that means those people would have to be spending $800 each (including kids) on things besides tickets, every time they came to the arena. This is clearly not the case. Ergo, Glendale would be been better off not building.

The problem with this scenario is it leaves out every event that is not a hockey game. It also doesnt take into account additional spending at bars, restaurants, parking, etc from people attending events at the arena. If you are going to take into account 100% of the building costs then you need to take into account 100% of revenues. You are also for some reason stopping at 2018 when the building is still operating and will continue to operate for many more years. If all the bonds were due at FYE 2018 a case could be made to only use revenues from that period but the bonds on the building are still outstanding, and wont be paid off for several years. The city agreed to finance a building that is expected to have X years of economic impact, you are saying the revenue from the Coyotes didnt pay for the arena in less than 1/2 of the useful life of the building so it wasnt worth it.

Not saying the math would show the arena was worth it, just saying its not a fair way of looking at it.

From the city's standpoint that have an asset that will have a useful life of say 40 years and have spent $250MM between the arena and the team. That equates to breaking even with 6.25MM in revenues/year across all revenues streams related to the building. Of course this way of looking at it still has its issues, primarily they will spend additional money to maintain the building, but is much more realistic then looking at only 15 years and only revenues from the Yotes.

Also, while the city itself doesnt have income taxes the state does and the city receives money from the state. Therefore there is still income tax benefits to having the team there. This is much harder to actually quantify but it still exists.

 

[MNNumbers]

The problem with this scenario is it leaves out every event that is not a hockey game. It also doesnt take into account additional spending at bars, restaurants, parking, etc from people attending events at the arena. If you are going to take into account 100% of the building costs then you need to take into account 100% of revenues. You are also for some reason stopping at 2018 when the building is still operating and will continue to operate for many more years. If all the bonds were due at FYE 2018 a case could be made to only use revenues from that period but the bonds on the building are still outstanding, and wont be paid off for several years. The city agreed to finance a building that is expected to have X years of economic impact, you are saying the revenue from the Coyotes didnt pay for the arena in less than 1/2 of the useful life of the building so it wasnt worth it.

Not saying the math would show the arena was worth it, just saying its not a fair way of looking at it.

From the city's standpoint that have an asset that will have a useful life of say 40 years and have spent $250MM between the arena and the team. That equates to breaking even with 6.25MM in revenues/year across all revenues streams related to the building. Of course this way of looking at it still has its issues, primarily they will spend additional money to maintain the building, but is much more realistic then looking at only 15 years and only revenues from the Yotes.

Also, while the city itself doesnt have income taxes the state does and the city receives money from the state. Therefore there is still income tax benefits to having the team there. This is much harder to actually quantify but it still exists.

Well, if you take into the entire building costs, then you have to figure out how it is financed, and what the financing costs. It was originally a 30 year lease, so maybe it's 30 year bonds. I think I read somewhere the city has about 12M/yr in bonds (this is totally back of napkin), but that doubles the building costs.

Then, if you want to include sales tax on every event in the building, then I would refer you to Pollstar, who would have shown that, even at best, the place was selling 220K non sports tickets a year. That would make about a 33% increase in the number I showed earlier, or a 25% decrease in how much everyone has to spend for every visit. That really doesn't make a dent in how high a fee it is, really.

If you want to try to include EVERYTHING that has come to Westgate since the center was built, then that is a seriously complicated argument, since it is clearly incorrect to credit the team for the existence of all shopping and entertainment in the area.

As for the state, I see your point, but I don't think I would go with: The state give the city more money because the sports team's players pay more income tax.....

I don't have the information to gather everything you are asking for here, and I don't mean to take the thread down a deep dark hole, but I really don't think there any non NFL arena which has paid for itself. Exceptions would be MSG or Staples, or perhaps Philly. Maybe in Chicago. Big cities with huge event loads. Phoenix and/or Houston don't seem to fit this bill.

And, actually, this is the big question to me about the situation in Seattle. The OVG is completely in with their own money is great. That the place cost nearly 1B is astonishing to me (that doesn't count the price of the team). And, that they can pay that off in 30 years means 33M a year in profit from the arena. I just can't take that in.

And, I should also add that this doesn't mean that such arenas shouldn't be built. There is definitely a cultural, enjoyment, emotional side to cities. For example, every city has city parks that have to be maintained. Libraries are another example. The buildings need to be there. It's just that the honest case for them is NOT economical.

 

[sawchuk1971]

any updates on the tempe proposal?

 

[Mightygoose]

any updates on the tempe proposal?

No updates at all until the consultant report is ready in a couple months or so.

With final Tempe council meetings tomorrow and Friday, the final ones in 2021, there is no chance that the contract will be awarded this year.

 

[OG6ix]

No updates at all until the consultant report is ready in a couple months or so.

With final Tempe council meetings tomorrow and Friday, the final ones in 2021, there is no chance that the contract will be awarded this year.

I'm sure the Consultants will take their sweet time to stretch their pockets. If the Coyotes don't have an alternate plan of where to play next year by say March I am going to think that the Forbes reports are true.

 

[TheLegend]

I'm sure the Consultants will take their sweet time to stretch their pockets. If the Coyotes don't have an alternate plan of where to play next year by say March I am going to think that the Forbes reports are true.

It's a fixed contract set at $78,000 (plus travel, lodging, meal expenses). So they have pre-determine how long they need.

If you want some light reading.... this page contains the RFQ (Request For Quote) showing the terms.

https://bids.tempe.gov/bids/BidDocuments.aspx?RequestID=c71e9dda-6dcf-464d-b013-2e326e209baf

 

[sh724]

Well, if you take into the entire building costs, then you have to figure out how it is financed, and what the financing costs. It was originally a 30 year lease, so maybe it's 30 year bonds. I think I read somewhere the city has about 12M/yr in bonds (this is totally back of napkin), but that doubles the building costs.

Then, if you want to include sales tax on every event in the building, then I would refer you to Pollstar, who would have shown that, even at best, the place was selling 220K non sports tickets a year. That would make about a 33% increase in the number I showed earlier, or a 25% decrease in how much everyone has to spend for every visit. That really doesn't make a dent in how high a fee it is, really.

If you want to try to include EVERYTHING that has come to Westgate since the center was built, then that is a seriously complicated argument, since it is clearly incorrect to credit the team for the existence of all shopping and entertainment in the area.

As for the state, I see your point, but I don't think I would go with: The state give the city more money because the sports team's players pay more income tax.....

I don't have the information to gather everything you are asking for here, and I don't mean to take the thread down a deep dark hole, but I really don't think there any non NFL arena which has paid for itself. Exceptions would be MSG or Staples, or perhaps Philly. Maybe in Chicago. Big cities with huge event loads. Phoenix and/or Houston don't seem to fit this bill.

And, actually, this is the big question to me about the situation in Seattle. The OVG is completely in with their own money is great. That the place cost nearly 1B is astonishing to me (that doesn't count the price of the team). And, that they can pay that off in 30 years means 33M a year in profit from the arena. I just can't take that in.

And, I should also add that this doesn't mean that such arenas shouldn't be built. There is definitely a cultural, enjoyment, emotional side to cities. For example, every city has city parks that have to be maintained. Libraries are another example. The buildings need to be there. It's just that the honest case for them is NOT economical.

Calculating the true economic impact of an arena is virtually impossible bc you could go further and further into the weeds with indirect expenses/revenues. Then there is the various tax implications including depreciation. For Seattle being able to write off a $1B building, even using straight line depreciation for 30 years, will result in huge tax savings.

I dont disagree that many (most) arenas are not directly profitable, was more pointing out its not really a black and white calculation. As you noted there are intangible aspects to having a sports team.

One of the first things covered in an ECON class is the difference between economic value and accounting value. Something may make economic sense but not accounting sense, the opposite is also plausible. Only those trying to make money primarily focus on the latter. Governments tend to look at the economic impact over the accounting impact. Its easier to borrow money and let someone else worry about the profitability later when you arent accountable.

 

[gstommylee]

I'm sure the Consultants will take their sweet time to stretch their pockets. If the Coyotes don't have an alternate plan of where to play next year by say March I am going to think that the Forbes reports are true.

So you believe everything forbes puts out...

 

[takimaki]

In Arizona, what's the actual temp options (besides paying Glendale a ridiculous amount of money)

Play at old AVMC (which im sure costs XX million to renovate, and would need to be started yesterday) I don't even think there's enough time to get this up to a decent standard.

This is the most sensible "plan-b" stopgap measure, but work should have already started by now. Maybe it can still work if the Coyotes start on the road for a couple of months. If there is no movement on the AVMC option by this time next month, I think one of three things will likely happen before the end of the season:

- Meruelo caves to Glendale and overpays
- Glendale caves
- Coyotes prepare to move

I don't see Chase Field as a real, legit option for playing a whole season in.

 

[LPHabsFan]

So.....ummmm.....There's this....

 

[Warden of the North]

It's time for this team to move on.

Enough.

 

[takimaki]

So.....ummmm.....There's this....

Suddenly the Coyotes leaving Arizona looks even more likely.

 

[tarheelhockey]

So.....ummmm.....There's this....

Good news for anyone holding stock in the popcorn industry.

 

[Fatass]

Suddenly the Coyotes leaving Arizona looks even more likely.

Has a team ever moved city’s mid season?

 

[MNNumbers]

I feel really bad for Coyote fans.

 

[gstommylee]

Has a team ever moved city’s mid season?

No. The city is gonna get their buts sued for breach of the lease by locking them out. The league doesn't allow the cities do basically give them the boot in the middle of the season.

 

[Swervin81]

I have tickets to the Leafs/Coyotes game in AZ on Jan 12th. Of all the possible reasons for plans to get f***ed in this day and age (flight delays/cancellations, getting snowed out in Denver, COVID, etc), I did not have "home team being evicted and having the locks changed because they skipped rent" on my bingo card.

For real though... if this is true, this has graduated from a tire fire to a California brush fire. This is just a black eye on the league and the Coyotes fanbase deserves better than this.

 

[JimAnchower]

I wonder what Tempe is thinking right now. The $78,000 feasibility study isn't the worst cost to absorb.

 

[gstommylee]

I have tickets to the Leafs/Coyotes game in AZ on Jan 12th. Of all the possible reasons for plans to get f***ed in this day and age (flight delays/cancellations, getting snowed out in Denver, COVID, etc), I did not have "home team being evicted and having the locks changed because they skipped rent" on my bingo card.

For real though... if this is true, this has graduated from a tire fire to a California brush fire. This is just a black eye on the league and the Coyotes fanbase deserves better than this.

There's a such thing as breach of lease agreement... They can't just close the doors on them in the middle of the season.

 

[OG6ix]

So.....ummmm.....There's this....

What the hell - I thought Muerelo was a billionaire. Something is off.