Phoenix XXIV: How many twists does the scriptwriter have left?

[OthmarAmmann]

I have been meaning to get some insights into the CFD arrangement that was previously included in the MOUs for IEH and Reinsdorf.

In IEH's MOU the CFD was proposed to provide $7.5 million to IEH annually to cover their debt financing of the team purchase. Interestingly, the $7.5 million was to come from parking revenues around the Jobing.com. The reason that IEH's first MOU was rejected was that the bank loaning IEH the money insisted that the COG guarantee that they would cover any shortfalls in the CFD funds. The COG insisted that they would not be able to pledge their tax revenues to back the CFD. It all seems a bit quaint now, doesn't it?

The creation of the CFD (June 22, 2010) was to incorporate city-owned land around the Jobing.com arena. What is unclear to me is how would the CFD generate parking revenue if it had not acquired the rights? So how would the CFD acquire those rights, and from whom? Would IEH (the new owner and lessee) have given the parking rights to the CFD? Or would the NHL transfer those rights to the CFD? Or, would those have come from the COG itself, since it was creating the CFD based on its own land, including the parking lots?

I was wondering the same thing.

 

[Killion]

I have been meaning to get some insights into the CFD arrangement that was previously included in the MOUs for IEH and Reinsdorf.

I cant remember the exact details Whileee. What I do find interesting is how the CFD's supposed to kick-in under the "Hulsizer Proxy". If Im not mistaken, moving forward, the CFD, in addition to the Parking Revenues is supposed to cover the COG's debt servicing on the Bonds and the Arena Management fee's. I would assume revenues from both would be funneled into the 3rd party CFD account & then disbursed. Based on the CBRE/Hocking et al projections, which dont fully address the advertising/naming rights fee's, it might be rather critical to get a look at some numbers & do an analysis on the CFD projections visa-vie Ellman & the merchants/service providers in & around Westgate. At roughly $17M X 5yrs, thats not insignificant & could land the taxpayers in hot water, never mind the COG if they have to start dipping into General Revenues.

 

[Whileee]

I cant remember the exact details Whileee. What I do find interesting is how the CFD's supposed to kick-in under the "Hulsizer Proxy". If Im not mistaken, moving forward, the CFD, in addition to the Parking Revenues is supposed to cover the COG's debt servicing on the Bonds and the Arena Management fee's. I would assume revenues from both would be funneled into the 3rd party CFD account & then disbursed. Based on the CBRE/Hocking et al projections, which dont fully address the advertising/naming rights fee's, it might be rather critical to get a look at some numbers & do an analysis on the CFD projections visa-vie Ellman & the merchants/service providers in & around Westgate. At roughly $17M X 5yrs, thats not insignificant & could land the taxpayers in hot water, never mind the COG if they have to start dipping into General Revenues.

If this deal goes through, I cannot see any realistic scenario under which the COG will not have to dig rather deeply into general revenues. Remember that the TOTAL sales tax revenues from the sports entertainment district was said to be around $13.4 million per year. There just isn't enough economic activity in that area that can be skimmed from various fees and naming rights to generate the $20-30 million that the lease agreement will need to pay the arena management fee and bond debt. I think we need to remember that the Westgate mall, if measured by the number and profile of the retail outlets and restaurants.

 

[GSC2k2*]

Just to get the thread back on track after the previous bit of ridiculousness ...

Honestly, I think thats all people really want to see... Hulsizer using his own money to buy the team. If someone wants to spend thier own money to buy the Coyotes, then hats off to them. That also shows they are fully committed to the team. When someone spends other peoples money on something, you always have to question thier resolve.

All I could say to the Coyotes fans is that if Hulsizer does get the team, every game from this point on had better be a sellout or close to it, or you will be right back in this situation in a few years IMO.

Do you REALLY think so? All of the pro-WPG posters are clamouring here because they are disappointed over the level of equity that Hulsizer is contributing as opposed to the amount that he is contributing by monetizing a key cash flow component to his later detriment? Is THAT what they are complaining about?

Forgive me for disagreeing, but I simply do not accept that as a viable position.

I thought we had gotten past this idea when one of the posters confessed at the end of the last thread that he really didn't care about Glendale and really only cared whether WPG got a team. THAT post reeked of honesty.

So, would it still be as "lucrative" and inviting to MH if he had to pull the moths out of his wallet in order to get some more wampum to put on the table?

Guess we'll see just how "passionate" about hockey he really is...

What difference does it make how "passionate" he is?

Stupid question from the back! *waves hand*


If MH had to "top up" any shortfall as far as monies, would that not require some sort of re-write/amendment to the lease agreement?

Also, if he's just going to cut a check for a few million or 10 or more to make up for it-why didn't he just do this in the first place?

A revision of the $100M purchase price for parking rights, or the timing for payment, would require a revision to the draft lease for sure. I would also expect that it would require a new vote, as it would be a material change to the approved document.

"Why didn't he just do this in the first place"? Is that how you negotiate?

 

[AllByDesign]

I thought we had gotten past this idea when one of the posters confessed at the end of the last thread that he really didn't care about Glendale and really only cared whether WPG got a team. THAT post reeked of honesty.

Allow me to retort.

I empathize with the tax payers of Glendale, and I care not for Winnipeg getting an NHL team. I do care that the transaction doesn't make any business sense from the City's perspective. You and I agree that the monetized value of the parking rights are worth $100 million or more over the next 30 years. Our disconect is the sense of the financing charges over that period are to the peril of the City and cannot justify the upfront payment.

You question others method of negotiating, but it appears the City's technique would be to grab their ankles and clinch tight. Their standpoint on the upfront payment for parking rights has nothing to do with "negotiation". It is simply a means to make the transaction with MH "happen" in such a format that will pass the gift clause. It is starting from and end and working backwards, which is not how negotiation works.

 

[Killion]

If this deal goes through, I cannot see any realistic scenario under which the COG will not have to dig rather deeply into general revenues.

Quite true. Their simply has got to be a big spike & consistency in attendance at the job for the Coyotes AND an increase in non-hockey events booked into the arena, both of which are going to take time & patience. If you tack on a couple of percentage points (or more) onto the initially scheduled interest rates on the Bonds, well, the mind reels. As we are now in full blown Mexican Standoff Territory, the League itself will simply have to make a decision for Glendale, and I suspect its not one they'll like, but what else is there to do?....

 

[Whileee]

A revision of the $100M purchase price for parking rights, or the timing for payment, would require a revision to the draft lease for sure. I would also expect that it would require a new vote, as it would be a material change to the approved document.

"Why didn't he just do this in the first place"? Is that how you negotiate?

So, you really think that Hulsizer might just have pushed Glendale into issuing a $100 million bond, under threat of litigation and revision of their bond rating as just a negotiating position? Is that how you negotiate?

If he is open to renegotiation, do you think he might be willing to exclude Coyotes Team expenses from Eligible Operating Expenses for determining the "arena management fee"?

 

[kdb209]

*insert Clint Eastwood "Nameless Stranger theme*

woo-woo-woo....wah wah wah...

 

[GSC2k2*]

If this deal goes through, I cannot see any realistic scenario under which the COG will not have to dig rather deeply into general revenues. Remember that the TOTAL sales tax revenues from the sports entertainment district was said to be around $13.4 million per year. There just isn't enough economic activity in that area that can be skimmed from various fees and naming rights to generate the $20-30 million that the lease agreement will need to pay the arena management fee and bond debt. I think we need to remember that the Westgate mall, if measured by the number and profile of the retail outlets and restaurants.

This was another bit of talking points that came up during my "hiatus". It is based on what I believe to be an incomplete understanding of the sales tax issue and what is generated by Jobing. When I looked into this matter last year while this point was going on unchecked around here, it turns out that it is not just Westgate that experiences augmented sales tax revenues for the CoG. There are other nearby facilities immediately to the west of Jobing (a Walmart?) in addition to Westgate. Also, there are developments immediately north of Westgate which are also impacted.

Do your numbers also include increased property tax assessments? It does not seem that they do. Certainly it does not appear to assume any parking rent whatsoever. How about sales taxes on Jobing.com purchases itself? How about hotel taxes?

 

[OthmarAmmann]

This was another bit of talking points that came up during my "hiatus". It is based on what I believe to be an incomplete understanding of the sales tax issue and what is generated by Jobing. When I looked into this matter last year while this point was going on unchecked around here, it turns out that it is not just Westgate that experiences augmented sales tax revenues for the CoG. There are other nearby facilities immediately to the west of Jobing (a Walmart?) in addition to Westgate. Also, there are developments immediately north of Westgate which are also impacted.

Do your numbers also include increased property tax assessments? It does not seem that they do. Certainly it does not appear to assume any parking rent whatsoever. How about sales taxes on Jobing.com purchases itself? How about hotel taxes?

God knows what's in that number. I remember seeing it reported in the Republic. Glendale's base sales tax rate is 2.5% and is 3.5% for restaurants and bars. For $13.4 million to be Glendale's sales tax revenue, total annual sales would have to be between $382 million and $536 million. Don't want to say that's impossible, but wow.

Would you mind contrasting the parking rights deal in this deal versus how the IEH or JR MOUs were contemplating them?

 

[Whileee]

This was another bit of talking points that came up during my "hiatus". It is based on what I believe to be an incomplete understanding of the sales tax issue and what is generated by Jobing. When I looked into this matter last year while this point was going on unchecked around here, it turns out that it is not just Westgate that experiences augmented sales tax revenues for the CoG. There are other nearby facilities immediately to the west of Jobing (a Walmart?) in addition to Westgate. Also, there are developments immediately north of Westgate which are also impacted.

Do your numbers also include increased property tax assessments? It does not seem that they do. Certainly it does not appear to assume any parking rent whatsoever. How about sales taxes on Jobing.com purchases itself? How about hotel taxes?

According to media reports, the $13 million are the total sales taxes "pumped into" the City of Glendale's coffers from the visitors to the sports district. Only a relatively small proportion of that would come from Coyotes fans, per se, as we have discussed before. I suppose that there are other sources of revenue that might offset some of the expenses, but might point was that in the next several years the City of Glendale will certainly need to dig into their tax revenues to pay for the Hulsizer deal.

By the way, do you think that tax revenues from Walmart should go into supporting the Coyotes deal? I think that is really stretching the economic argument a bit far, in my opinion.

 

[Dado]

I'd appreciate it if someone could shoot me a PM if something, anything happens. Just don't have the time to keep weeding through the recent explosion in word count.

Cheers.

 

[Whileee]

I'd appreciate it if someone could shoot me a PM if something, anything happens. Just don't have the time to keep weeding through the recent explosion in word count.

Cheers.

You'll need to define "anything".

 

[Jesus Christ Horburn]

My guess that we won't find out anything until Monday.

If COG is planning something (which I'm sure they are, whether it's altering the lease to make it more "legal", convincing MH to put up more money, or something new altogether), they'll take the weekend to think about it before announcing it on Monday.

There's also the possibility they could amend the COG council agenda for March 8th on Monday.

 

[GSC2k2*]

Allow me to retort.

I empathize with the tax payers of Glendale, and I care not for Winnipeg getting an NHL team.

Acknowledged and accepted. You are the anomaly.

I do care that the transaction doesn't make any business sense from the City's perspective. You and I agree that the monetized value of the parking rights are worth $100 million or more over the next 30 years. Our disconect is the sense of the financing charges over that period are to the peril of the City and cannot justify the upfront payment.

I accept your concern. That is the sole source of my interest too.

On our disconnect - Not quite. From my perspective, what matters is that they cover the financing charges. At the end of the 30 years, provided the team stays (and if it stays for 30 years, odds are it will stay longer), the CoG still has a valuable asset in the parking rights. If they paid off the purchase price PLUS the interest costs, they would have made $100M in equity. The interest costs are what has to be covered.

Your previous point about getting overly focused on the legalities is at least partly true, as it has caused everyone to ignore all of the benefits that accrue to the CoG and focus on only the legally relevant direct benefits, All of the increased property tax base, and additional excise taxes, matter to the CoG's business case. The fact that GWI won a case out of the blue in classic "dog catches bus" fashion does nt change that from a business perspective.

You question others method of negotiating, but it appears the City's technique would be to grab their ankles and clinch tight.

I know that it is trendy to have one's own particular favourite simile for this transaction, usually involving some version of your colourful (but curiously uncreative) description. The strange thing is that no one ever does so with an actual thoughtful consideration of the negotiation interests of the parties and whether or not they are acheiving them. That is how I look at negotiations. Most people with whom I am acquainted who negotiate for a living (and that is no small amount of people) look at it exactly the same way. It is a pretty well established principle.

Their standpoint on the upfront payment for parking rights has nothing to do with "negotiation". It is simply a means to make the transaction with MH "happen" in such a format that will pass the gift clause. It is starting from and end and working backwards, which is not how negotiation works.

As far as I am concerned, that is a theory created on this very Board during a period when there was a great amount of groupthink (IMO) and there was nobody around to provide a strong counterpoint. I believe that theory was held initially based on pure speculation, and then took hold when a poster cited a couple of out-of-context comments by a Glendale councillor (councillor Martinez, IIRC) as evidence, and (since that seemed to be the pre-existing thought), that was that.

Suffice to say this: just because a few posters who dominated the discussion a few months ago decided that "that was that" and the above theory became part of what "everybody knows ...", I do not have to follow that precedent. I dispute it. Strenuously.

As for working from an end and working backwards not being how negotiation works, I must confess to being a little gobsmacked. Are you actually suggesting that people do not go into a negotiation by first determining what they want to achieve at the end and working from that to determine the best way to achieve it?

Interest-based negotiation (which is what that is) is the prime way that "partnerships" of the kind contemplated by the CoG/MH deal are negotiated (and I do not say "partnerships" in the legal sense, but the business sense). Not every negotiation is like a product price negotiation (I say $10, you say $8, we agree at $9). Interest-based negotiations that you conduct to create an ongoing (say, 30 year) business relationship proceed quite differently. You cannot skin the other party alive; you must address what the other party needs. Both parties appear to have done so here.

Unfortunately, that does not lend itself to colourful metaphors.

As always, that's just me. Accept, reject or discuss at your pleasure.

 

[Confucius]

My guess that we won't find out anything until Monday.

If COG is planning something (which I'm sure they are, whether it's altering the lease to make it more "legal", convincing MH to put up more money, or something new altogether), they'll take the weekend to think about it before announcing it on Monday.

There's also the possibility they could amend the COG council agenda for March 8th on Monday.

It's done like dinner. If anyone is going to move on anything now, they must have nerves of steel. I believe the last deadline went by. Remember the mayor said, time has runout.

 

[AllByDesign]

On our disconnect - Not quite. From my perspective, what matters is that they cover the financing charges. At the end of the 30 years, provided the team stays (and if it stays for 30 years, odds are it will stay longer), the CoG still has a valuable asset in the parking rights. If they paid off the purchase price PLUS the interest costs, they would have made $100M in equity. The interest costs are what has to be covered.

The first bolded portion... It's not enough that they cover the financing charges, but how they cover those charges. Creating a new taxing district or reaching into general revenues show a shortfall in the valuation in comparison to the debt ratio. I.E. it is a bad business move. If I was borrowing to buy a Pizza joint for $500,000 and the projections show I could not possibly bring in enough income to cover the payments, I cannot buy the pizza joint. Nor would I want to.

For the second bolded point you are incorrect. They are not buying parking land, they are being rights over a finite period of time.

The fact that GWI won a case out of the blue in classic "dog catches bus" fashion does nt change that from a business perspective.

Absolutely

I know that it is trendy to have one's own particular favourite simile for this transaction, usually involving some version of your colourful (but curiously uncreative) description.

I am sorry that my simile was uncreative. You are correct that I didn't back it with substance. I will get to that shortly.

As far as I am concerned, that is a theory created on this very Board during a period when there was a great amount of groupthink (IMO) and there was nobody around to provide a strong counterpoint. I believe that theory was held initially based on pure speculation, and then took hold when a poster cited a couple of out-of-context comments by a Glendale councillor (councillor Martinez, IIRC) as evidence, and (since that seemed to be the pre-existing thought), that was that.

What would that counterpoint be? The Phoenix Coyote's are worth a purchase price value of $170 million? What is the basis for that statement? That valuation bares no merit. That by paying a transactional cost of 300-400 million for parking rights over 30 years is financially prudent for the COG? Walker says otherwise.

As for working from an end and working backwards not being how negotiation works, I must confess to being a little gobsmacked. Are you actually suggesting that people do not go into a negotiation by first determining what they want to achieve at the end and working from that to determine the best way to achieve it?

You have over-simplified my statement. There is a fundamental difference bewteen the selling price of the team and the value of the team. It has been defined as $100 million, but I would say $70 million is a stretch for a valuation of the team.

It is a negotiation if you have a give and take partnership to reach portions of ones goals while making it worthwhile to both parties. My statement of working backwards is in the $100 million gap. The NHL won't budge on selling price regardles of valuation. MH will not budge on his purchase price. The COG is charged with funding the $100 million gap and needs to arrive at a legal piece of paper to accompany those funds. There isn't a negotiation if the $100 million was pre-determined from the outset. It is one party having to work to find a way to make it legal.

Interest-based negotiation (which is what that is) is the prime way that "partnerships" of the kind contemplated by the CoG/MH deal are negotiated (and I do not say "partnerships" in the legal sense, but the business sense). Not every negotiation is like a product price negotiation (I say $10, you say $8, we agree at $9). Interest-based negotiations that you conduct to create an ongoing (say, 30 year) business relationship proceed quite differently. You cannot skin the other party alive; you must address what the other party needs. Both parties appear to have done so here.

Is that what you really thought I meant?

Yes both parties have needs, and the lengths to achieve those needs have broken the bounds of how far the City should be willing to go. The $500 million in detriment to the city was never part of any published study. It comes from the same roots as which you detest. It was "put out there" and nobody ever challenged it. I am sure there is a study somewhere from Hocking on it though..

 

[cbcwpg]

http://www.bizjournals.com/phoenix/news/2011/03/05/glendale-coyotes-working-on-deal-with.html

The city of Glendale could rework its $100 million Coyotes bond, could work out an unlikely compromise with the Goldwater Institute over its opposition to the deal and potential lawsuit, or the whole deal could be scrapped because the city can’t sell the bonds.

Glendale, Hulsizer and the National Hockey League are reworking the $100 million bond deal. Sources familiar with the Coyotes deal said perhaps the bond amount could be reduced so Hulsizer gets $70 million instead of $100 million.

“What would you call a landlord who gives a tenant a 30-year lease, pays him up-front six times the amount of his total 30-year rent, then borrows the entire amount to do so? I call that crazy. Glendale calls it keeping the Coyotes,” Bolick said.

Not sure if reducing the bonds from $100M to $70M will make the GWI back off.

 

[Jesus Christ Horburn]

From the Phoenix Business Journal:

Goldwater officials didn’t respond to request for comment this weekend but Goldwater Institute CEO Darcy Olsen and attorney Clint Bolick have posted on Facebook their continued opposition to the deal.

“What would you call a landlord who gives a tenant a 30-year lease, pays him up-front six times the amount of his total 30-year rent, then borrows the entire amount to do so? I call that crazy. Glendale calls it keeping the Coyotes,” Bolick said.

http://www.bizjournals.com/phoenix/news/2011/03/05/glendale-coyotes-working-on-deal-with.html

Looks like Mike Sunnucks is stalking members of the Goldwater Institute on Facebook

 

[danishh]

if you want some actual stuff to talk about, Brahm Resnik did an interview on the TEAM 1200 in ottawa a few hours ago. He doesnt do sports journalism, but covers arizona business and politics. He is however from cote-st-luc, so he may have a deeper rooted canadian bias.

http://www.facebook.com/video/video.php?v=159504097437412&oid=254660295467&comments

nothing groundbreaking, but a nice summary of the whole situation from an Arizona reporter's point of view.

 

[OthmarAmmann]

On our disconnect - Not quite. From my perspective, what matters is that they cover the financing charges. At the end of the 30 years, provided the team stays (and if it stays for 30 years, odds are it will stay longer), the CoG still has a valuable asset in the parking rights. If they paid off the purchase price PLUS the interest costs, they would have made $100M in equity. The interest costs are what has to be covered.

Okay, so does that mean that the previous MOUs with JR or IEH were flawed? What was the difference with those that the rights needn't be purchased? I'm still trying to make sense of it.

 

[pucka lucka]

Okay, so does that mean that the previous MOUs with JR or IEH were flawed? What was the difference with those that the rights needn't be purchased? I'm still trying to make sense of it.

Let history tell the story. Some claimed that the JR & IEH deals were sound as well. I believe it's been recorded on these boards.

 

[RAgIn]

Sources familiar with the deal say Goldwater is not only driving up the interest rate on Glendale’s bonds against parking revenue that will be charged at Jobing.com Arena but it’s also scaring off bond investors all together.

“No one wants to buy the bonds because of the risk that the Goldwater Institute will
sue. The threat of the lawsuit is driving the bond pricing high,” said a source who has worked directly on the Coyotes ownership situation.

It looks like Glendale will have to fix the bond deal asap, because it looks like they won't even be able to sell. That might take some time. How much time will the NHL give them? By next week, apparently.

 

[RAgIn]

Sources: Glendale to file lawsuit Monday

http://sports.espn.go.com/nhl/news/story?id=6185492&campaign=rss&source=NHLHeadlines

The City of Glendale, faced with what they estimate will be more than a half-billion dollars in lost revenue, taxes and jobs if the Phoenix Coyotes relocate, is expected to file suit Monday against the Goldwater Institute and specific members of the public watchdog's board, multiples sources told ESPN.com Saturday.

The lawsuit is expected to allege the Goldwater Institute was guilty of a legal form of interference when the institute reached out to potential buyers of municipal bonds, the sale of which are crucial to the City of Glendale's new lease agreement with Chicago businessman Matthew Hulsizer, and warned them off purchasing the bonds.

WOW! What will this do to the deal? Any takes!?

 

[RAgIn]

More:

The NHL has hired former Jerry Reinsdorf associate John Kaites to try and work with the Goldwater Institute to see if there is some way to work out the disagreement over the legality of the lease agreement in time to see the bonds sold and save this deal.

It's believed the NHL's patience with the situation in Glendale has reached the breaking point and that if the municipal bonds are not sold within a matter of days, or unless there is a new strategy revealed for getting the lease agreement done, that the league will move to relocate the team to Winnipeg.

Perhaps suing the GWI is the new strategy? I'm speechless.