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

[lockstock]

Weird, weird, and more weird. I never realized that the biggest percentage of the value of a pro sports franchise is the parking spaces at the arena as opposed to the actual team. Shows what I know about this mysterious thing they call business. Maybe McDonald's makes most of their money off those plastic lids they put on the drinks rather than the hamburgers?

Close. They make a lot of the profit on the soft drinks that those plastic lids are put on. Another big chunk is from the french fries. Potatoes and water mixed with syrup cost almost nothing, but can be sold as individual servings for several dollars. That's why they push larger sizes and meal deals. The hamburger, like the actual sports event, just gets you in the door so they can overcharge you on everything else.

 

[TheLegend]

How much does a parking garage cost to build these days?

Hehehe, I thought I knew. Let's just ask Mayor Scuggs.

LOL!!!!!

We'll make sure to ask if it's union concrete or not...

 

[TheLegend]

Likewise, I have no intention of being a smartarse or instigating anything - that's why I put the smiley icon thing in there to show it was a tongue-in-cheek comment. Anyway, as for the public money, it breaks down like this:


ARENA LEASE AND MANAGEMENT AGREEMENT @ 9.9 City Commitment

9.9.1 In consideration for the conveyance to the City of the Arena Parking Rights and the other rights and the assumption by the Arena Manager of the obligations set forth in this Agreement, the City shall pay to the Arena Manager, by wire transfer of immediately available funds to an account specified in writing by the Arena Manager on or before the Agreement Effective Date, One Hundred Million and No/100 Dollars ($100,000,000).

That is the straight up transfer of $100MM in public money from the city to the team. Attempting to sell Parking Revenue Bonds to generate the $100MM doesn't make the funds any less public.

Thanks. I was thinking along the lines that public funds would only come into it if actual taxpayer money has to go into paying them off instead of the the planned revenue streams (ie. parking fees, etc.)

 

[TheLegend]

The NHL may want to consider increasing the price of the Coyotes to $240M or so to reflect the valuable parking rights. I am surprised that the value of this significant revenue source was not mentioned during the bankruptcy trials.

Silly statement and sarcasm noted.

NHL wants only wants what they have in it. If they had wanted to make money they could have let Jim Balsillie take the team to Hamilton, reap a couple hundred million in relocation fees and saved everyone the fuss, right?

I'm not going to argue that paying $100M for parking rights is a sound business decision either (because it isn't). But this was the mechanism they came up with to get the deal done, given all the perplexities and characters involved.

 

[CGG]

The most likely repercussion is the judge denying the motion and Goldwater paying Glendale's legal bill.

There is a significant gap between filing for injunctive relief and being awarded injunctive relief. Whomever filed such a claim would still need to demonstrate a legal right to stop the action. Standing up and saying "buying 5500 parking spaces for $100MM is really, really dumb" is not going to get it done. Glendale can rather easily demonstrate that over 23 years the 5500 spots have a revenue potential that amounts to an equitable return for their investment.

No, they really can't. At least not by rooting any of it in common sense or actual facts, including the fact that the majority of those spaces have generated $0 in revenue from Coyotes games each and every year since the arena opened.

I appreciate your efforts to explain all this, but paying gross sums of money for a revenue stream worth only a fraction of that price still has to pass some sort of sniff test. If there were only 500 spaces instead of 5,500 could the COG still pay $100 million for it and not face any repercussions? What if it was only 5 spaces? How about if the COG purchased the right to sell advertising on urinal cakes in the northeast men's room from the team for $100 million? Is that still bulletproof?

The main reason why this is extremely fishy and IMO unlikely to work is that this was a last minute Hail Mary. Why mess around with Reinsdorf and his proposed tax districts? Why try to set up the CFD? Why didn't they just cough up $100 million 18 months ago for "parking rights" if it was so brilliant a strategy? Why explore absolutely every other option first if it was so bloody easy to make a gigantic cash payment to the new owner of the team?

This reeks of a "screw it, we got nothing else, we know this is freakin' insane and has abslutely no merit, we're not even going to try to hide it inside a CFD, we're just giving some guy $100 million whether you like it or not, please don't sue us".

 

[Whileee]

No, they really can't. At least not by rooting any of it in common sense or actual facts, including the fact that the majority of those spaces have generated $0 in revenue from Coyotes games each and every year since the arena opened.

I appreciate your efforts to explain all this, but paying gross sums of money for a revenue stream worth only a fraction of that price still has to pass some sort of sniff test. If there were only 500 spaces instead of 5,500 could the COG still pay $100 million for it and not face any repercussions? What if it was only 5 spaces? How about if the COG purchased the right to sell advertising on urinal cakes in the northeast men's room from the team for $100 million? Is that still bulletproof?

The main reason why this is extremely fishy and IMO unlikely to work is that this was a last minute Hail Mary. Why mess around with Reinsdorf and his proposed tax districts? Why try to set up the CFD? Why didn't they just cough up $100 million 18 months ago for "parking rights" if it was so brilliant a strategy? Why explore absolutely every other option first if it was so bloody easy to make a gigantic cash payment to the new owner of the team?

This reeks of a "screw it, we got nothing else, we know this is freakin' insane and has abslutely no merit, we're not even going to try to hide it inside a CFD, we're just giving some guy $100 million whether you like it or not, please don't sue us".

I think you have hit on an important issue. Clearly plans A, B and C included a CFD mechanism that would essentially take the City of Glendale out of the subsidization picture. I and others have been very skeptical that the CFD would make sound business sense to potential participants (in Westgate), and I think it is a fair assumption that Glendale discovered that they could not set up a CFD that would generate the level of revenue to satisfy Hulsizer's conditions for subsidization. The proposed lease is so very clearly driven by the demands of Hulsizer, not the financial calculations of the city. Once again, I am fine with a municipality deciding to subsidize a hockey team or a symphony orchestra or a ballet company. But the way in which it has been done in Glendale leaves a very bad impression, complete with what I think are blatant misrepresentations of the financial justification. I think that approach actually breeds cynicism and weakens democratic institutions. Still, if Glendale citizens understand what is happening and are fine with it, then I can't really blame them for spending to keep their team. I am sure that many Jets fans would have been delighted if politicians had forked over whatever it took to keep the team, but I personally would not have supported saving the Jets at any financial cost.

 

[OthmarAmmann]

No, they really can't. At least not by rooting any of it in common sense or actual facts, including the fact that the majority of those spaces have generated $0 in revenue from Coyotes games each and every year since the arena opened.

I appreciate your efforts to explain all this, but paying gross sums of money for a revenue stream worth only a fraction of that price still has to pass some sort of sniff test. If there were only 500 spaces instead of 5,500 could the COG still pay $100 million for it and not face any repercussions? What if it was only 5 spaces? How about if the COG purchased the right to sell advertising on urinal cakes in the northeast men's room from the team for $100 million? Is that still bulletproof?

It only has to be shown legally, so we can dispense with common sense.

It's quite possible that CoG has a valuation that shows it is worth at least $100 mm. You just have to play around with the assumptions an include a significant factor for inflation.

 

[King Woodballs]

Mod: deleted.
but....
at least they get to keep their team.....

is there a stream that we can watch to see the proceedings unfold?

 

[dandeneau44]

but....
at least they get to keep their team.....

is there a stream that we can watch to see the proceedings unfold?

Yep, Winnipeg Free Press has a stream of the meeting on Tuesday night.

http://www.winnipegfreepress.com/sp...ouncil-votes-on-Coyotes-future-111535464.html

 

[Faltorvo]

It only has to be shown legally, so we can dispense with common sense.

It's quite possible that CoG has a valuation that shows it is worth at least $100 mm. You just have to play around with the assumptions an include a significant factor for inflation.

Be mindful of inflation, there is going to come a point when stagnant wages will no longer be able to compensate.

Othmar, it would have to show that it is worth far far more then $100m , the debt servicing alone is going to cost 5/9 million a year .

How can they tweak assumptions when there is no etched in stone lot fee lay out or the biggest elephant in the room and that is, what is the debt servicing on the $100 million dollar bond.

The only reason i care is that i am truly tired of watching politicians screw the public over with their money.

Will the COG be bound by law after the fact , in regards to what they charge on X amount of the lots. Will the COG be forced to charge X for XX amount of lots so the potential revenue could possibly match their obligations?

It's these vagaries that make me wonder if this can pass. It's not a matter of if the GWI can point to a set of #s and claim gift clause.

It's a matter that the GWI can point to the #s and claim that there are not enough of them to declare that it is NOT a gift.

1% bond or 9% bond?

$5,500 spots at $5 or

5,500 spots at $20.

Given these vagaries and the fact that nary a cent has ever been made in parking fees.

You really need to give a bit more credit to your judges down there.

 

[Fidel Astro]

As an evil "relocationist," the only good I can see coming out of this deal is that we can now find out, once and for all, if Phoenix is a good hockey market or not.

Remember, "bad ownership" has been blamed on the team's woes for years now. Hulsizer, according to Coyotes fans, is the team's glorious saviour that will lead them out of the darkness and blah blah blah...

Personally -- and I've said this before -- I don't believe that a change in ownership is going to result in a significant increase in attendance. A winning streak couldn't even do that, and it seems unlikely that the identity of some new suit in the office is going to attract a whole pile of previously uninterested people. The ownership announcement is only going to affect the die-hards and (maybe) any fans who had stopped going to games a few years back and figure they should give the team another chance.

To the average Phoenix resident who doesn't care about hockey, though... it's not going to make a difference. Look, I think football is one of the most boring sports around. We have a CFL team here in Winnipeg, the Blue Bombers. Because the team is fairly popular and because I read the newspaper, I'm aware of what happens with the team -- whether they win or lose, whether they get new coaches, new players, new management, etc. I'm not going to buy tickets to a Bombers game ever because I'm not interested in football. They've had coaching/management shakeups in recent memory and have had success (getting to the Grey Cup final) and failure (worst record in the league) in recent years too. None of this information has made me want to attend one of their games, because I don't like football.

Why would people in Phoenix be any different? I think it's pretty clear that hockey is not high on the sports food chain down there, so I really can't see how "new ownership," even if it turns out to be "good new ownership" is going to convince anyone with no interest in the sport to spend their money on tickets.

I think it will be interesting, assuming this Hulsizer deal goes as planned, to see whether the team keeps up with the rock-bottom attendance.

All that aside, I've almost sick of hearing about the Phoenix Coyotes at this point. It looks like the NHL has probably managed to keep the team there, as part of their Pejorative Slured southern expansion fantasy, but I still think it's only a matter of time before another hideous failure down there.

If there's anything this whole ordeal has taught us, even if you just look at the media coverage, it's that there's an incredibly strong desire for NHL hockey in Canadian cities like Winnipeg and QC, and a strong lack of interest in southern cities like Phoenix and Atlanta. The fact that, after years of trying, Phoenix could only find an owner (with a deal heavily weighted in his own favour) a couple of weeks before the Dec. 31 deadline (assuming Hulsizer succeeds) illustrates that.

...so, as usual, we'll have to wait, but at least we'll get to see Phoenix finally prove itself as a legitimate hockey market with a strong fan base....or not. My vote is on "not".

 

[Ciao]

It's their money. Let them spend it as they like, for all I care.

I would be interested to see how they use the naming rights to a $100-million parking lot.

It must be one truly impressive parking lot.

Funny how Moyes, who is reputed to have squeezed every last nickel out of the Coyotes operation, never realized the gold mine that was sitting next to the arena!

 

[Ciao]

The other thing that strikes me is whether there is now a Plan "B" in case the new corporate ownership also goes belly-up several years from now.

I always thought it was foolish of Glendale to build the arena without adequate security. It could have insisted on the pledging of assets equal to the amount of its arena debt to be used in the event the tenant vacated the arena, or a personal guarantee from a principal (like Moyes or Ellman) with the net worth to make good on the arena loans in the event the team failed. Any commercial lender would insist on nothing less.

I haven't read the lease agreements, but perhaps someone who has could advise whether there is any security to back up the lease agreement with these limited-liability companies?

If there isn't any security, then Glendale has just tossed more chips on the table and is getting ready to roll the dice again. This time it will be double-or-nothing, and as far as I can tell there would still be no Plan "B".

For a city of 250,000 to take on a total of $370-million in debt to support a pro-sports franchise, with all the risks that are attached to that, is more than a little desperate and very pathetic. Glad they aren't managing my money, that's all.

 

[AllByDesign]

LOL!!!!!

We'll make sure to ask if it's union concrete or not...

I believe the concrete will be made out of ground up relocationists...

 

[RR]

Be mindful of inflation, there is going to come a point when stagnant wages will no longer be able to compensate.

Othmar, it would have to show that it is worth far far more then $100m , the debt servicing alone is going to cost 5/9 million a year .

How can they tweak assumptions when there is no etched in stone lot fee lay out or the biggest elephant in the room and that is, what is the debt servicing on the $100 million dollar bond.

The only reason i care is that i am truly tired of watching politicians screw the public over with their money.

Will the COG be bound by law after the fact , in regards to what they charge on X amount of the lots. Will the COG be forced to charge X for XX amount of lots so the potential revenue could possibly match their obligations?

It's these vagaries that make me wonder if this can pass. It's not a matter of if the GWI can point to a set of #s and claim gift clause.

It's a matter that the GWI can point to the #s and claim that there are not enough of them to declare that it is NOT a gift.

1% bond or 9% bond?

$5,500 spots at $5 or

5,500 spots at $20.

Given these vagaries and the fact that nary a cent has ever been made in parking fees.

You really need to give a bit more credit to your judges down there.

I find that last line interesting. You're responding to a poster who wrote, "It only has to be shown legally, so we can dispense with common sense.

It's quite possible that CoG has a valuation that shows it is worth at least $100 mm. You just have to play around with the assumptions an include a significant factor for inflation."

As far as I know OthmarAmmann isn't in Phoenix, he's in NYC. And he has been anything but a protagonist for the Phoenix cause, neither has he been an antagonist. Yet you assume he's from Phoenix. Why is that? What in his post would make you think that?

 

[Fugu]

I find that last line interesting. You're responding to a poster who wrote, "It only has to be shown legally, so we can dispense with common sense.

It's quite possible that CoG has a valuation that shows it is worth at least $100 mm. You just have to play around with the assumptions an include a significant factor for inflation."

As far as I know OthmarAmmann isn't in Phoenix, he's in NYC. And he has been anything but a protagonist for the Phoenix cause, neither has he been an antagonist. Yet you assume he's from Phoenix. Why is that? What in his post would make you think that?

You'd have to be out in the desert to be able to back this deal-- from either a business or ethics of governance perspective.

I'll admit I checked out of following this story closely some months ago. Did I miss any information that shows Glendale is worse off without the Coyotes than they would be in this scenario where they divert ~$200m to a private entity? Are they going to make a single red cent from this venture? I'm just interested in the $$ of it.

 

[CBJ goalie]

Pertaining to CasualFan's numbers, that is based on best-case scenario - that all 5500 spots will be filled for every event for the next 23 years - and that is NOT plausible at all. Impossible, actually.

 

[Faltorvo]

I find that last line interesting. You're responding to a poster who wrote, "It only has to be shown legally, so we can dispense with common sense.

It's quite possible that CoG has a valuation that shows it is worth at least $100 mm. You just have to play around with the assumptions an include a significant factor for inflation."

As far as I know OthmarAmmann isn't in Phoenix, he's in NYC. And he has been anything but a protagonist for the Phoenix cause, neither has he been an antagonist. Yet you assume he's from Phoenix. Why is that? What in his post would make you think that?

Sorry, i meant the "your" as in American judge.

If you look at my post, there is nothing there insinuating nor attacking.

I live just outside of TO, so i have no vested interest in this either, like i have stated ,i find the the politics and legal beagle aspects fascinating .

 

[elvisisdead]

There sure is a lot of petty sniping going on here!

With all of the details of this deal out in the public, I see the future of the Coyotes based solely on whether Goldwater decides to file suit.

Whatever side you might come down on (or if you are just an interested observer like me), I think any reasonable person will agree that both sides will be able to produce their experts that say that the consideration paid for the parking and management is or isn't fair consideration (depending on their position).

In any event, a court challenge would not be swift and the resulting delay and appeals would likely kill any chance to keep the team in the desert.

I'd be interested to hear opinions on why people think Goldwater would not file suit, considering their previous actions (especially the previous litigation with the COG over release of information on the sale of the Coyotes), and the amount of money involved and the way the deal is structured.

I'm not from Arizona, and looking at this from the outside (and looking at their track record), it looks like this would be exactly the type of situation that Goldwater would love. However, maybe I'm missing something (that often happens ).

 

[OthmarAmmann]

You really need to give a bit more credit to your judges down there.

Why? I doubt a judge is going to sit there and say "Well this assumption is clearly bullsh!t"

The other thing that strikes me is whether there is now a Plan "B" in case the new corporate ownership also goes belly-up several years from now.

I always thought it was foolish of Glendale to build the arena without adequate security. It could have insisted on the pledging of assets equal to the amount of its arena debt to be used in the event the tenant vacated the arena, or a personal guarantee from a principal (like Moyes or Ellman) with the net worth to make good on the arena loans in the event the team failed. Any commercial lender would insist on nothing less.

I haven't read the lease agreements, but perhaps someone who has could advise whether there is any security to back up the lease agreement with these limited-liability companies?

If there isn't any security, then Glendale has just tossed more chips on the table and is getting ready to roll the dice again. This time it will be double-or-nothing, and as far as I can tell there would still be no Plan "B".

For a city of 250,000 to take on a total of $370-million in debt to support a pro-sports franchise, with all the risks that are attached to that, is more than a little desperate and very pathetic. Glad they aren't managing my money, that's all.

This is where I believe that the cost is actually a lot more than $197. Since they've doubled down and seem to take sunk costs into account, it could be rather easy to extract more from them five years from now. Of course that depends on their financial situation at that time, and I wouldn't be very surprised if they were downgraded within the next few years.

I find that last line interesting. You're responding to a poster who wrote, "It only has to be shown legally, so we can dispense with common sense.

It's quite possible that CoG has a valuation that shows it is worth at least $100 mm. You just have to play around with the assumptions an include a significant factor for inflation."

As far as I know OthmarAmmann isn't in Phoenix, he's in NYC. And he has been anything but a protagonist for the Phoenix cause, neither has he been an antagonist. Yet you assume he's from Phoenix. Why is that? What in his post would make you think that?

This is correct, I am in NYC and am ambivalent to the whole situation. I like to watch financial fiascos unfold (was lucky to live a few blocks from the NY Fed the weekend Lehman bit it). I wouldn't typically be that interested the finances in a small community on the other side of the country, but I am from Winnipeg originally and was a Jets fan. I am on the record stating that I do not expect the NHL to return to Winnipeg in any form anytime soon, and that isn't meant as a shot at Winnipeg.

 

[Faltorvo]

Why? I doubt a judge is going to sit there and say "Well this assumption is clearly bullsh!t"



This is where I believe that the cost is actually a lot more than $197. Since they've doubled down and seem to take sunk costs into account, it could be rather easy to extract more from them five years from now. Of course that depends on their financial situation at that time, and I wouldn't be very surprised if they were downgraded within the next few years.



This is correct, I am in NYC and am ambivalent to the whole situation. I like to watch financial fiascos unfold (was lucky to live a few blocks from the NY Fed the weekend Lehman bit it). I wouldn't typically be that interested the finances in a small community on the other side of the country, but I am from Winnipeg originally and was a Jets fan. I am on the record stating that I do not expect the NHL to return to Winnipeg in any form anytime soon, and that isn't meant as a shot at Winnipeg.

It's not the argument that the assumptions are BS.

It's that there is not enough information to show that they can be valid assumptions.

I ask again how can the calculations or assumptions be judged when , no one knows what % is attached to the bond or it's term length.

Or how much revenue could be expected to be collected from the parking when there is no break down on how many spots are going to be charged at X amount.

How much is expected per ADV spot.

Is the gift clause not set in place to prevent officials from making financial claims that fall into the grey zone?

Before this passes the GWI sniff test surely some of these vagaries have to be cleared up.

How much is the debt servicing on the bond per annum?

How many parking spots at X value?

What is the amount being charged for type X advertising?

 

[Shawa666]

Let me get this right.

1. COG owns the arena, and presumably the land it sits on and the adjacent parking lot, right?

2. COG signs contract with Hulzier to manage said arena and ammenities. MH will get paid 72M$ to run the arena for the next 5 years (including this year)

3. COG buys revenue rights for parking and naming of arena from Hulzier for 100M$ With annual interest rates at say 5% over 20 years = 158M$

Expected expenses for this deal so far: 230M$

4. Remaining revenue from Current arena naming rights: 18M$

5. Revenue from parking: Unknown, there never was any direct fee for parking in the arena's lots.

Expected revenues 18M$

Bottom line for COG AFAIK: 18M$-230M$= -212M$


Then there's this law that cites that COG can't give money to a private company.

 

[CGG]

Why? I doubt a judge is going to sit there and say "Well this assumption is clearly bullsh!t"

That's exactly what a judge should be doing. Otherwise you can blame "bad assumptions" and "piss poor revenue forecasting" on all sorts of subsidies to private companies. It completely defeats the whole reason for having a gift clause in the state constitution if municipalities are allowed to veer right around it so easily by justifying the expense based on bullsh!t revenue assumptions.

Go back to the original case that sparked the gift clause clarification. Municipality pays $100 million to Company ABC so they can build a parking garage. Gift clause violated, no can do. But wait. Re-word it so that Municipality gives Company ABC $1.99 to help build the parking garage, then acquires the awesome revenue stream from parking lot naming rights and parking curb advertising for $99,999,998.01. Gift clause averted! Everyone celbrates! It's not a subsidy, it was a purchase of a revenue stream based on "flawed" math!

If the above doesn't fly, then why should the COG deal?

How much is the debt servicing on the bond per annum?

How many parking spots at X value?

What is the amount being charged for type X advertising?

I'll give them a pass on the debt servicing. Technically they're only paying $100 million to acquire this load-of-crap revenue stream from the parking lot. That they are going to issue bonds to cover that expenditure doesn't really factor in to the whole gift clause thing.

(However it does make Glendale's actions even more moronic since the parking revenue and the awesome parking lot naming rights will come nowhere close to even paying the annual interest cost, let alone repaying the principal).

 

[aj8000]

Everyone knows that this is a subsidy. Goldwater knows this is a subsidy, any judge who "may" listen to any future case knows this is a subsidy, the COG knows this is a subsidy, H knows this is a subsidy, the NHL knows this is subsidy, I know it is a subsidy. I think my friends cat even knows this is a subsidy. Do I think it is insane, yes I do. Do I care, No I do not, since it is not my tax dollars at stake.

Now if the City of Winnipeg decides to fund the complete bomber stadium then I will have a problem with that.

Frankly, I do not think Goldwater really cares if it is a subsidy or not. Good luck to the COG and H they may need it. And congrats to the Yotes fans. You have had to put up with enough BS, you deserve a break.

 

[Faltorvo]

That's exactly what a judge should be doing. Otherwise you can blame "bad assumptions" and "piss poor revenue forecasting" on all sorts of subsidies to private companies. It completely defeats the whole reason for having a gift clause in the state constitution if municipalities are allowed to veer right around it so easily by justifying the expense based on bullsh!t revenue assumptions.

Go back to the original case that sparked the gift clause clarification. Municipality pays $100 million to Company ABC so they can build a parking garage. Gift clause violated, no can do. But wait. Re-word it so that Municipality gives Company ABC $1.99 to help build the parking garage, then acquires the awesome revenue stream from parking lot naming rights and parking curb advertising for $99,999,998.01. Gift clause averted! Everyone celbrates! It's not a subsidy, it was a purchase of a revenue stream based on "flawed" math!

If the above doesn't fly, then why should the COG deal?



I'll give them a pass on the debt servicing. Technically they're only paying $100 million to acquire this load-of-crap revenue stream from the parking lot. That they are going to issue bonds to cover that expenditure doesn't really factor in to the whole gift clause thing.

(However it does make Glendale's actions even more moronic since the parking revenue and the awesome parking lot naming rights will come nowhere close to even paying the annual interest cost, let alone repaying the principal).

I beg to differ , any short falls in revenues generated by the parking or ADv rights that are supposed to cover the debt servicing , will then get diverted from a source that normally goes into general revenue.

Frankly this is where the rubber meets the road.

The bond and the debt servicing short falls are backed by tax payer money.

Anyone who cares to look at this honestly and objectively knows there is going to be a collection short fall when it comes to this bond and that short fall will have to be covered by tax payer money.

That is where the gift is truly hidden.