{coyotes} Revised Coyotes deal goes before Glendale council

Tuesday 20 November 2012

{coyotes} Revised Coyotes deal goes before Glendale council

GLENDALE, Ariz. - A slightly reworked Phoenix Coyotes deal will go before the Glendale City Council Tuesday, but changing numbers from the city make it tough to judge the financial impact of keeping or losing the NHL team.

A council majority so far has supported a deal to keep the hockey team as being in the long-term interest of the city, which went into debt 10 years ago to open Jobing.com Arena. A city-commissioned study released last spring backed that idea up, saying nearby businesses would suffer if the team left Glendale, it was unlikely other events could fill the void and the city would lose less money if the franchise stayed.

The study assumed if the team left, it would cost Glendale an average of $15 million a year to operate the arena. However, the interim city manager, who now leads the city's negotiating team, recently estimated the cost at less than half that, $6 million — at least in the near term.

In the end, no one knows because the city has never put arena management out for a competitive bid, despite the mayor urging the city to do so.

What is known: Tuesday the council will discuss whether to pay potential Coyotes buyer Greg Jamison an average of $15 million a year for 20 years for arena management. The matter is only up for discussion but could go to a vote on Nov. 27.

A sports economist who studies arena feasibility said the Jamison deal appeared excessive, with what appears to be a subsidy built in beyond what it would likely cost to run the arena.

"As I see it, what they are doing is disguising a subsidy as a facility-management charge," said Joel Maxcy of Temple University in Philadelphia.

Maxcy said $6 million could be a low estimate, but that $15 million seemed high.

"Why not put it out to bid and see what the real picture is?" he asked.

Interim city manager Horatio Skeete called the proposal a "package deal," in response to it being questioned as a subsidy.

A 2010 study by the International Association of Venue Managers, a Texas-based group that tracks venues, found that among 21 arenas with a seating capacity of more than 12,000, the average annual operating expense is nearly $6 million.

That's similar to Skeete's estimate, which was based on net operating costs at arenas around the country and operating figures five years ago from the Glendale arena. Skeete noted that his estimate was a five-year snapshot, unlike the city study, which he called a more traditional analysis over the life of the deal.

At University of Phoenix Stadium, which sits across the street from the hockey arena, the Arizona Sports and Tourism Authority, which owns the football venue, has a differently structured deal that is less expensive.

The NFL stadium, more than three times the capacity of Jobing.com,outpaces the arena by about 20 percent when it comes to annual number of events, and it brings in more visitors.

The sports authority pays a venue manager as much as $330,000 a year. It also pays the operating expenses at the stadium and recoups the revenue. Its net operating costs have averaged $560,000 the past two fiscal years.

Glendale has annually averaged about $2.5 million in arena revenue that would offset the proposed $15 million fee.

The city does see indirect revenue from Westgate City Center, a restaurant and entertainment complex built as a result of its hockey investment. The city annually collects about $3.5 million in sales tax from Westgate and the arena.

Skeete said the arena alone was never expected to cover its costs, which include repaying the $180 million construction debt, but that spinoff development would contribute.

Mayor Elaine Scruggs described the football stadium deal as "a true management fee."

By contrast, the mayor, who has supported deals with other Coyotes suitors, said the management fee for Jamison is a subsidy to help defray the hockey team's losses.

Skeete maintains the city's ability to pay the arena debt can only be achieved with an anchor tenant, not as just a concert venue.

What has changed in the arena deal

The penalty Jamison would pay the city for not bringing in at least 30 non-hockey events annually drops from $30,000 to $25,000 per event that's short. The average required attendance at the non-hockey events would drop from 7,500 to 7,000.

Jamison would get $500,000 instead of $600,000 for every 20 extra non-hockey events over the 30-event minimum.

The city would get 15% of revenue from any advertising in arena parking lots.