AZ Republic Contradicts Itself

Hey it's not me

Hey I have NOTHING to do with this mess!

I have work to do and really should be doing it. There’s so much buzz today resulting from what I perceive as a carefully timed Arizona Republic hit piece fired across the bows of the NHL and the Coyotes that we should examine the metamorphosis of the Republic.

If you’re reading this, you probably remember Lisa Halverstadt as the former Glendale beat writer for the AZ Republic. At the time, and it hasn’t changed much, being the beat writer for Glendale might as well have meant you were the beat writer for the Coyotes ownership fiasco.

Read Joyce Clark’s “Numbers Don’t Lie” based on AUDITED ACTUAL EXPENDITURES, it’s a quick and easy summary that concludes the number to manage the arena is about $12M per year. Once you’re done with that, read Craig Morgan’s piece as well that also supports the same conclusion.

On August 8, 2012 Lisa wrote a piece “Glendale has few options on  Jobing.com Arena” subtitled “With or without Coyotes, taxpayers will pay millions”. She goes on to explain the numbers in her article. Read it and make your own decisions about it’s veracity, but I’m summarizing here with my own agenda front and center as usual.

All extracted text is from that article or tweets from the author of the more recent piece and is noted with italics.

Numbers Based On “Jamison Deal”

All of the discussion revolves around the deal that had been struck with Greg Jamison. That deal was later revised to be more beneficial to the City, but the “big picture” numbers remained essentially unchanged. With everything boiled down, Glendale would be paying an average of $15M per year for twenty years to an arena manager. Despite chatter to the contrary, that annual number is probably what most of the groups vying for the Coyotes are factoring into their equations.

If the team stays, the city estimates it will cost about $12.2 million a  year, or $54 per resident, when costs and revenue are factored. That’s in  addition to the roughly $13 million a year to retire the debt on the arena in  about 20 years.

But the city says it would face even steeper financial challenges without the  Coyotes.

If the team leaves, Glendale will still be on the hook for the arena debt.  But the city also projects it will then need to come up with millions of dollars  a year to pay an arena manager and other expenses if there is no anchor tenant  for the arena. The city estimates that would cost $15.8 million, or $70 per  resident.

With that in mind, Glendale projects it would save about $3.5 million  annually by keeping the team.

The savings could be greater if sales-tax revenue generated at the arena is  factored in, as well as the sizable sales-tax hauls from fans who flock to the  neighboring Westgate City Center on game nights.

In August, 2012 the paper is maintaining the cost for running the arena is roughly $12.2M per year and in May, 2013 the number is reduced to $5.1-5.5M per year. The intent of publishing a number under $6M was then further bolstered, on Twitter by the author of the recent piece, with quotes from Council Member Manny Martinez:

#Glendale Councilman Manny Martinez on the budgeted $6 million a year arena management fee: “There’s always room to wiggle it down.”
#Glendale‘s Martinez on the #Jobing.com Arena fee: “But to wiggle it up, I just don’t see where we can get any more money. I just don’t.”
#Glendale City Manger Dick Bowers on the source of the $6 million figure used for arena managment fees in the proposed city budget…
#Glendale‘s Bowers: “Our estimate, based on audited statements and reviews, we believe that’s in the neighborhood of what it would take.”
#Glendale‘s Bowers on the budgeted $6 million a year arena management fee: “We could be wrong, up or down.”

That seems pretty clear where this is pointed, doesn’t it? The same “audited statements” that Mr. Bowers referenced have also resulted in an approximate $12M figure for managing the arena as explained by Joyce Clark in her piece.

Perhaps that’s what Bowers means with his disclaimer “We could be wrong, up or down.”? By the way, Bowers is the “Acting” City Manager, not the City Manager.

Glendale Paid For Studies

To answer the question of what is a reasonable fee for managing their arena, Glendale hired an outside firm. This, by the way, is after Glendale ALREADY hired another firm (TL Hocking & Associates) to provide a “number” for parking revenues for their arena based on the 660k MINIMUM people visiting the arena for hockey. Lisa mentions the second firm’s results:

Scottsdale-based economic consulting firm Elliott D. Pollack and Co. analyzed  those costs for the city, using numbers provided by Glendale.

The analysis showed the city would save about $3.5 million annually by  keeping the Coyotes

There’s a May 31, 2012 memo summary of the Pollack report (click here) on the GlendaleFirst! web site. Extracting the conclusion of that memo:

The cost to operate the arena without a team is estimated to total between $12 and $19 million per year for the next 20 years with an average of $15.3 million each year.

Pretty simple, right? There is a professional opinions on what it costs to run a world class arena WITH and WITHOUT hockey. Hockey wins every time.

Sports Economist Opinion

Lisa contacted Dan Rascher, a sports economist at the University of San Francisco and quoted him in her piece:

“There are lots of fixed costs that will be there with or  without a team,” he said.

But Rascher questioned whether the deal with Jamison is reasonable for a city  of Glendale’s size. The city might consider a special tax at Westgate or the  arena area to lessen the burden on its roughly 227,000 residents, Rascher  said.

This year, the deal will cost the city about 5 percent of its $347.7 million  operating budget.

But, ultimately, the economist said, Glendale has an arena and is left with  few choices. “You’re stuck with two not-great plans, and you have to pick the  best one, and that’s having the team,” he said.

There is yet another opinion, published in the AZ Republic, from a professional that speaks to the viability of a $15M per year check being written by the city to an arena manager WITH HOCKEY.

Glendale even hired the same firm (in 2011) they’re using now to come up with this report on what is a realistic number for running arenas all over the country.

Tanger Outlets Factor

Lisa goes on to speak with yet another professor about the economic effect of the Coyotes leaving:

Longtime developer Mark Stapp, a professor at Arizona State University’s W.P.  Carey School of Business, was more skeptical of Tanger’s ability to replace  customers if the Coyotes leave. The shopping center will likely draw crowds, but  it’s a block away from Westgate and there’s no guarantee people will go  there.

Stapp believes the right manager for Jobing.com Arena may have a stronger impact.

“If you get somebody who can stabilize that team and the experience and you  can raise that attendance, it’s going to have a tremendous positive effect,” he  said.

That also seems clear.

Lisa closes with a statement from Joyce Clark that sums it up, as you’d expect from Joyce, in a sentence:

“If the Coyotes are gone, the city has sent a strong signal that they no  longer believe in the vision they created,” Clark said.

She’s right.

What’s Next?

Peter Sullivan, second from left

Peter Sullivan, second from left

So what are the signals being telegraphed with a hit piece carefully timed to precede a scheduled meeting between the City of Glendale, the NHL and the Renaissance group to speak about the Coyotes?

The answer is we don’t know yet, but we will soon enough once Beacon starts releasing or leaking other proposals to run the arena. The people who have those answers aren’t talking.

However, based on social media traffic and statements, it seems clear at least a few of the prospective owners aren’t daunted by the latest $6M buzz. It could be as simple as having their “plan B” firmly in hand, we’ll know soon enough.

Oh, mayor Weires? Taking the doors off your office is a nice gesture, but implying any sort of “open door” policy is obviously a clever joke on your part.

Isn’t it?

Comments

  1. Rhys Halloran says:

    “In August, 2012 the paper is maintaining the cost for running the arena is roughly $12.2M per year and in May, 2012”

    George, shouldn’t that read May, 2013?

  2. James Showalter says:

    I believe Darin Pastor has submitted his bid and his “plan B” seems evident. He has a 5 year out-clause and does not seem committed to the AZ market at all. Does he expect Glendale to pay him millions while he waits out the losses and moves or sells the team? Why would the city, league or fans accept that approach? I don’t like it!

    • The five year out clause, or perhaps seven, is likely to be a component of any of the new deals, I think.

      I would put more weight, commitment–wise, on the proposition to purchase the arena. The history of the Pastor family in professional and youth hockey is impressive and available on the Internet for your Googling pleasure.

      • James Showalter says:

        I would not give much credence to Pastor saying he might buy the arena. That’s just some sugar to sway Glendale into thinking they might get rid of that debt. Similar to when Jamison offered to buy it, I see no reason for anybody to buy Jobing when they are being paid a huge sum to manage it. Buying the arena would end the $10-15M paycheck from the city, wouldn’t it? Is there an article or study on the benefits of doing so?

        In any case, I would say that allowing only 5 years to turn Phoenix around when many others feel 10 years is necessary seems to indicate a desire to mitigate losses from these buyers. Can you picture a new owner investing millions to spend to the cap when they already have an eye on the door?

        • There’s no question the Coyotes are damaged goods. Yet, despite that, attendance is up. Season ticket sales are up. TV viewership more than DOUBLED. Freebie tickets are way down.

          Stewardship of the Coyotes hockey club AS AN ASSET by the current crew is more than remarkable, it’s borderline miraculous. I’ll be dealing with the five year “out clause” thing later, whether it’s a good thing or a bad thing depends on the owner.

          My impression of the proposed arena purchase, by the way, is that it’s different than the prior offer in that it’s more specific and includes actual terms. It’s just an educated guess, at this point.

  3. Geoff Kerr says:

    Forgive me if I am wrong…but 12 million to run it in 2012 shows no word on that amount lessened by revenue. The 5.5. million in 2013 does take into account revenue of what, 6.5 million meaning total cost of 12 million. So assuming revenue for 2012 is about the same the figures seem about the same for each example. Thoughts?

    • Quite frankly, my thoughts are I am tired of this discussion and really don’t expect to sway any person with their minds already made up one way or the other.

      The point of my piece, Geoff, was the differing viewpoint of two reporters using the same exact numbers. If you’re not even remotely suspicious of the timing of the Giblin piece and the number being promoted in the article AND on Twitter, I submit you’re naïve or purposely being dense.

      Either way, I’m moving on to other topics.

  4. Geoff Kerr says:

    I am quite aware of the timing and realize it isn’t an accident. To me, it is even more of a “chosen timing”. Because if the numbers are generally the same as I think they are in both pieces, then they are taking old news and repackaging it in a much more sinister, however accurate approach.