Part XV: Phoenix - the battle of evermore (UPD #443ff 14-Dec agenda/lease links)

[crazycanuck900]

Thomson is a non-issue. He's not the public face of TNSE, Chipman is. As far as 'disrespecting' and 'lying' to him, that's once again laughable. He'd be a silent partner, a money man, and if he or TNSE were promised anything, Bettman is even dumber than he sounds. You guys were pawns, the team was always staying in Phoenix, and Bettman would sooner eat his suit - shoes included - than leave a market like Atlanta.

I also don't think TNSE were pawns, i think TNSE knew that the coyotes would probably be staying, but if not, the coyotes would be a nice fit in Winnipeg. I think there eye has been the Thrashers along.

 

[CGG]

I don't even think this thing needs Goldwater to stop it. There must be a lawyer / taxpayer in Glendale sitting around with some time on his hands that wants to make a name for himself, who will attempt to throw up some kind of injunction. If nothing else, I'd like to hear the city explain how buying parking rights on land that it already owns outside an arena it already owns for $100,000,000 doesn't constitute a subsidy.

 

[AllByDesign]

Then what does that make Gretzky and his $8 million/yr salary as head coach? What do you think of Basillie? Who is your model owner by the way?

Model owner. Michael Vick.

Basillie.. I just love his phones don't you? He is a business owner that creates. Hulsizer operates more like a tape-worm. I'm not saying he would be a bad owner. The points I am making about him isn't to persuade anyone into thinking he isn't a smart business man. I think his present ownership situation is very beneficial to him and shows he knows what he is doing. I find that the portrait he is trying to paint of himself is false. Does that count for anything? I dunno. It likely doesn't even matter in the grand scheme of things. I can tell you this for certain. Some owners of businesses will put themselves in personal jeopardy for the sake of the Business. They treat it as if it were their own child. Other owners only look at their business as a simple asset and a means to income. When the going gets really tough which one stands and fights and which one ducks and covers?

I digress though... we are getting far too ahead of ourselves. The lease must first pass council... which I have no reason to believe it won't. The second portion is to see if the GWI stays mum or ties this deal in litigation rendering all efforts impotent.

 

[AllByDesign]

Yeah, it's almost too cute. I had a nice renard arctique look going, but with the Santa hat and lights, the fox looks like a stuffed animal.

Doesn't that Avatar undermine your authority?

 

[peter sullivan]

goldwater are a bunch of amateurish sabre rattlers....this will slide right by them and the slumbering population of glendale without incident.

 

[Fugu]

Doesn't that Avatar undermine your authority?

The thought had crossed my mind.

 

[AllByDesign]

The thought had crossed my mind.

Perhaps some photoshopped fangs?

 

[AllByDesign]

goldwater are a bunch of amateurish sabre rattlers....this will slide right by them and the slumbering population of glendale without incident.

Don't you think their actions speak to the contrary?

 

[Dado]

Don't you think their actions speak to the contrary?

We're about to find out. If they can't stop this, they can't stop anything.

Unless, of course, they've already been co-opted on this issue...

 

[Dado]

i havent believed it was the coyotes since the summer.

I remember that.

It does seem a little unlikely that the Moose are going to have a press box renovation worth more than the entire franchise.

 

[dkehler]

I remember that.

It does seem a little unlikely that the Moose are going to have a press box renovation worth more than the entire franchise.

Not really. It's been needed for some time (and that's from the complaints from the media, not the Moose organization). And certainly won't hurt the NHL cause, but don't read too much into it.

 

[CasualFan]

I'd like to hear the city explain how buying parking rights on land that it already owns outside an arena it already owns for $100,000,000 doesn't constitute a subsidy.

I'm not the City but I would encourage you to keep in mind that the test for subsidy under the Arizona Constitution's Gift Clause is equitable return. Or put simply, did the City of Glendale receive a fair value for what they paid. Please note that it doesn't matter who owns the land or arena, it only matters that contractually the team controls the parking lots so the City must pay to acquire those rights.

- The city bought 5,500 spaces for 23 Years at a cost of $100,000,000. If we do the basic math, we find that $100MM divided by 23 Years equals approx $4,347,000 per year.

- If we then divide that $4.3MM by the 5,500 spots we arrive at $790 per spot, per year.

- Using a fair estimate of 50 events per year, we calculate a final figure of roughly $15 per spot, per event, per year. I don't believe you could find a judge that would rule that as inequitable return.

Remember, the court is not tasked with judging the wisdom of the purchase (nor is it likely a judge would question the veracity of the claim that each of the 5,500 spots can be sold 50 times each year). The test under the law is 'did you receive an equitable return for your payment'.

I don't see how this could be blocked for the parking payment. Further, I don't believe you are going to find any attorney who would dare litigate a claim against the $100MM. (I also don't believe you could argue the "public purpose" prong of the Gift Clause either.) If there were to be a challenge to this lease, in my opinion, it would need to be that the Annual Arena Management fee is well beyond market value. But, I would be shocked if anyone brought such a claim.

I am not offering any opinion about the City throwing another $197MM into this team. I'm merely posting on the legality of the deal they drafted.

goldwater are a bunch of amateurish sabre rattlers....

Ironically, the Goldwater Institutes litigation record would indicate the exact opposite.

 

[AllByDesign]

Casual Fan, Ghost had posted a ruling in a similar scenario that the gift clause was violated for a similar sum for parking rights in Phoenix. Would this presidence not give litigation some merit?

 

[peter sullivan]

casualfan, thanks for that outline...i agree with you for what its worth....they seem to have found a pretty good way around it....the no 'out clause' is the key to the whole thing...they are buying a legitimate revenue stream with guaranteed return....if you spread their investment over 23 years what they are paying can be justified quite easily.

i think matty is the crazy one....not glendale....he is giving up a key revenue stream and is locking in for a generation.

the management fee isnt as cut and dried but not so insane that it is a slam dunk...especially when it will be negotiated in 5 year chunks.

 

[CasualFan]

Casual Fan, Ghost had posted a ruling in a similar scenario that the gift clause was violated for a similar sum for parking rights in Phoenix. Would this presidence not give litigation some merit?

I did not see the post, however, it must have been related to Turken v. Gordon (aka CityNorth). The only similarity in these cases is the fact that it involved parking.

- In Turken, the funds were being spent to construct the lot. In Glendale, the funds are spent to control the revenue at a lot that's already built.

- In Turken, the city argued that the expense of building the lot was valid because it would create the indirect benefit of sales tax receipts at the mall the garage supported. In Glendale, the city receives the direct benefit of parking fees and advertisements (again, the court and I are not here to judge if you can really sell advertising, we're merely accounting the value of the right to sell ads)

Or put simply, if Glendale wanted to spend $100,000,000 to build parking lots that they city received no revenue from (aside from "taxes generated by the parkers") then you'd have a case against.

In this deal, Glendale pays $100,000,000 to receive direct revenud from 5,500 existing parking spots in a location that can reasonably expect to generate 50 events per year.

Apple, meet orange.

 

[AllByDesign]

I did not see the post, however, it must have been related to Turken v. Gordon (aka CityNorth). Apple, meet orange.

Yeah... I was thinking Turducken for some reason... yeah... with apple sauce...

What were we talking about again?

I also don't think TNSE were pawns

Mmmmm Prawns fried in garlic butter... I love prawns...

 

[OthmarAmmann]

i think matty is the crazy one....not glendale....he is giving up a key revenue stream and is locking in for a generation.

Even still, he can always put the club into bankruptcy again if necessary, no? I think we've all seen how well zero-down mortgages fair.

 

[bacon25]

As a curious follower of this long a drawn out saga. I have to ask this question: If the COG votes no on Tuesday or if the GI is able to stop the process, are the Coyotes done in Glendale? or does the NHL keep looking and working with the city in order to find a solution.

And I am well aware that after the Dec 31st deadline the NHL can talk to other potential owners, but would they really? When would the NHL finally give in and would that be the same day that Bettman resigns?

On another note, I have thought about moving to Phoenix, cheap hockey tickets, nice weather and I would only have to drive 45 minutes to see the games. Very tempting indeed.

 

[Whileee]

We're about to find out. If they can't stop this, they can't stop anything.

Unless, of course, they've already been co-opted on this issue...

Never mind Goldwater, if this passes then there seems little reason to have a "gift law".

Business: "We are considering setting up a factory in your city."

City: "Fine, we'll build the factory for you and you can pay us a modest lease cost."

Business: "Sorry, no can do. You'll have to do better than that."

City: "But we can't really offer much more because of the gift law."

Business: "Okay, we'll go elsewhere."

City: "Wait a minute, maybe we could pay you to 'manage' the factory. How does $20 million a year sound? I'm sure it is a really expensive factory to run (wink)."

Business: "That's a good start, but we need a lot of capital to get the ball rolling."

City: "Well, what if we made some parking lots around the factory and then bought the rights from you to use them. That should be worth $15-20 million. I'm sure we'll make money on this eventually."

Business: "That's a good start. We were thinking more like $100 million."

City: "Would you promise to stay in our city for a very long time."

Business: "Sure..."

City: "Deal!"

Citizens: "Huh???"

 

[Whileee]

I'm not the City but I would encourage you to keep in mind that the test for subsidy under the Arizona Constitution's Gift Clause is equitable return. Or put simply, did the City of Glendale receive a fair value for what they paid. Please note that it doesn't matter who owns the land or arena, it only matters that contractually the team controls the parking lots so the City must pay to acquire those rights.

- The city bought 5,500 spaces for 23 Years at a cost of $100,000,000. If we do the basic math, we find that $100MM divided by 23 Years equals approx $4,347,000 per year.

- If we then divide that $4.3MM by the 5,500 spots we arrive at $790 per spot, per year.

- Using a fair estimate of 50 events per year, we calculate a final figure of roughly $15 per spot, per event, per year. I don't believe you could find a judge that would rule that as inequitable return.

Remember, the court is not tasked with judging the wisdom of the purchase (nor is it likely a judge would question the veracity of the claim that each of the 5,500 spots can be sold 50 times each year). The test under the law is 'did you receive an equitable return for your payment'.

I don't see how this could be blocked for the parking payment. Further, I don't believe you are going to find any attorney who would dare litigate a claim against the $100MM. (I also don't believe you could argue the "public purpose" prong of the Gift Clause either.) If there were to be a challenge to this lease, in my opinion, it would need to be that the Annual Arena Management fee is well beyond market value. But, I would be shocked if anyone brought such a claim.

I am not offering any opinion about the City throwing another $197MM into this team. I'm merely posting on the legality of the deal they drafted.



Ironically, the Goldwater Institutes litigation record would indicate the exact opposite.

To help me understand, from whom will the city of Glendale be purchasing the parking lots? They paid for the construction of the arena and the parking lots, received nothing from Hulsizer towards the arena or the parking lots, but are now being sold the rights to them by Hulsizer. Interesting...

 

[leafs4cup]

Hate to say it, but I agree with those who say Winnipeg was used. They were, BUT only because they knew that it could happen and because the NHL saw the opportunity to use TNSE.

Remember this, the NHL NEVER approached TNSE, it was TNSE that approached the NHL. TNSE knew that by offering to buy the Coyotes and the NHL's supposed stance on not relocating teams, that the NHL was going to use them to put pressure on the CoG. So, the question is, do they get anything out of it?

But on the Phoenix front...

Its not often you get a second life in sports... Minnesota got their second chance and made the most of it... Atlanta got thier second chance and have proven to the hockey world that they have blow it big time and they shouldn't have been given that chance.... now its Phoenix's turn. We will see...

You have no idea who really approached who.

 

[jol]

- The city bought 5,500 spaces for 23 Years at a cost of $100,000,000. If we do the basic math, we find that $100MM divided by 23 Years equals approx $4,347,000 per year.

- If we then divide that $4.3MM by the 5,500 spots we arrive at $790 per spot, per year.

- Using a fair estimate of 50 events per year, we calculate a final figure of roughly $15 per spot, per event, per year. I don't believe you could find a judge that would rule that as inequitable return.

They also pay interest for that $100 million, not sure how much would that be, 4% will double the amount in 23 years (almost). Similar case, Marlins stadium in Miami, city of Miami is building a parking garage, 6000 spots, cost about $100 million. Not sure how much interest rate was (if they have sold those bonds already, at the begining they had difficulties, price was too high), they set a cap 7.5% for non-taxable bonds, 9.5% for taxable bonds. Also interestingly Marlins are buying all the spots, paying $10 per spot per event.
It could be that Miami's credit rating is worse than Glendale's.

JOL

 

[Faltorvo]

yeah, i was just playing along....obvioulsy ellman and moyes have not been philanthropicaly donating $20m of services to the city of glendale every year....

in my opinion, the no 'out clause' is a massive victory for glendale......easily worth worth the $225m investment to get it.

glendale will likely give matty $225m in the next 5 years to buy the team and cover his losses....essentially in return they are getting someone locked in for 23 years.

that's basically $10m a year to matty, offset by $3-4m in parking fees and another $1.5m for the ticket surcharge, plus the $6-8m a year for the rental payments....all money they would not see if the team left.....a pretty good long term investment for glendale.

matty seems like the one getting screwed.....with the average ticket price being $37, the $2.80 surcharge and a parking fee of $20 per car.....while trying to build a market, he stands to have more than 1/3 of the cost of attending a game for every spectator (assume 2 people per car) going straight to glendale....with no control over those charges whatsoever.

does that seem like a solid foundation to run the team for 18 years?.....stuck paying these fees until the arena is 30 years old.

my guess is that after 5 years he extends his management fees for another 5 at the same $17m per year rates....or maybe more by that time.

Sorry but, i take serious issue with your parking #s.

For starters it is listed in the agreement "anywhere from $5 to $20 per space.

So you grab the highest # and spread it to every spot and fill every spot for the full 41 games , now how realistic is that? Really?

Are we to honestly believe that throughout the Yotes history no one was smart enough to see the viability of charging for parking? Common. This reality has not changed just because the COG are desperate.

The big difference now is that no one is actually putting their own money at risk, all you have is a bunch of politicians risking tax payers money. It's like me going to the casino with your credit and ATM card, WTF do i care if i leave you broke.

How about we do the math with a consistent 75% lot usage at an average of $10 a spot $1,700,000 , far cry from 3/4 million per.

Thats if we are to believe fans are willing to pay for parking that is almost 33% of the cost of their game ticket.

A 100,000,000 at 33 years needs 3 million set aside per year to pay off the principle and if the bond is set at 5%, another 5 million per for debt servicing.

So 8 million a year for debt servicing and principle.

And I'm being generous here , what is it going to cost to to segregate these 5,500 spots or to control and collect those fees, how about lot repairs.

How many FREE parking spots are there going to be close enough to the arena that the COG won't be able to control or prevent them from being used to view events there?

Like i have stated, i have no ill will to wards Yotes fans , what i do have issue with are politicians that screw around with tax payers $.

 

[elvisisdead]

- Using a fair estimate of 50 events per year, we calculate a final figure of roughly $15 per spot, per event, per year. I don't believe you could find a judge that would rule that as inequitable return.

I think you have a good argument here. However, the judge doesn't even have to make a ruling for Goldwater to win. The moment a suit is filed, this thing is tied up for at least a year or two (including subsequent appeals). Goldwater wins, without even getting a judgment, as the NHL won't want to suck up the losses for another year while the uncertainty continues.

From Goldwater's perspective, challenging the payments make sense; they get publicity that they need to continue their fundraising, and they can claim credit for "saving" the taxpayers from government waste, all with minimal cost. I doubt if MH or the NHL is willing to sit around and watch another circus unfold over the next year or two - I would suspect they would be likely to fold their tents shortly after a suit is filed.

All Goldwater needs are grounds that makes their case arguable (not necessarily successful). The wheels of justice turn slowly, and they can use this to their advantage.

 

[OthmarAmmann]

- The city bought 5,500 spaces for 23 Years at a cost of $100,000,000. If we do the basic math, we find that $100MM divided by 23 Years equals approx $4,347,000 per year.

As somebody pointed out, this does not include debt service. At 6% (the 30 year Treasury is 4.3% right now, so it could easily be higher) that comes to $8,127,848. Of course, the amortization pattern will figure prominently in the true cost (I just did it like a mortgage)

edit: If you assume that this is long-term debt, this is probably $6 mm to $8 mm, depending on the rate they get in the market.

- Using a fair estimate of 50 events per year, we calculate a final figure of roughly $15 per spot, per event, per year. I don't believe you could find a judge that would rule that as inequitable return.

There's a lot of uncertainty about the revenue number obviously, and varying assumptions will result in very different results:

$15 per spot is very high. Spots may range between $5 and $20, so if we assume parking may be priced at $5 lots, $10 lots, $15 lots, and $20 lots, the distribution we need to get to $15 is

20	2200		40%
15	1500		27%
10	1500		27%
5	300		5%

Which may or may not be likely.

This also assumes that all 5500 spots are used for all 50 events. The Coyotes attendance the last two years would suggest that this is very optimistic, at least for the next two to three years. I'd suggest at least a 10% to 20% haircut.

Finally, this is of course just the revenue number and ignores costs to run the parking lots (employees, etc). Let's assume though that the lots are very profitable and have an 80% profit margin. At a more reasonable $10 per spot, that results in $8 profit.

Let's also bump the number of events up to 60, so that it's 1/3 non-NHL events (God, what was Glendale thinking?). This is where MH and company are going to add value in bringing in more shows.

($8 per spot) * (4400 spots per event) * (60 events) = $2,112,000

That means naming rights have to be about $6 mm per year to break even, and the parking lots don't exactly get national billing (i.e. the "Jobing.com arena with parking presented by Wells Fargo")