The Glendale (AZ) City Council agenda item five for the December 17, 2013 workshop is:

COUNCIL ITEM OF SPECIAL INTEREST: MONTHLY ARENA REPORTS
PRESENTED BY: Tom Duensing, Executive Director, Financial Services

The first quarterly report (click here) of Glendale expenditures versus revenues related to the city owned Jobing.com arena for the period between August 5 and November 30 will be presented to the City Council.

Cutting to the chase, line item “Excess (deficiency) of revenues over expenditures” is 1,583,174. Round it to a $1.6M net expense for Glendale on a total expenditure of $2.8M. That includes the necessary portion of the $15M arena management fee.

Lest we forget, the $15M management fee was essentially “set” by the people negotiating and voting to approve the “Jamison deal”. The Ice Arizona group and the city used that deal as a template, revising it with additional revenue streams directed to the city coffers to reduce the fiscal pain to Glendale.

One or more Glendale councilmembers are/is likely to offer a “told you so” commentary tomorrow during the workshop that begins at 1:30 PM.

Headline Numbers

While the file has been available online (click here) for a few days, the usual media suspects have yet to comment on the Glendale report. Perhaps they’re distracted by the more buzzworthy AZ Attorney General investigation into city finances. Look for mention of the fact the city actually requested the investigation in August, it should be reported in each story. If it isn’t, the implication of wrongdoing is erroneously magnified.

It’s less likely they’ve realized the Glendale financial problem story is NOT the Coyotes (or even the Camelback Ranch) story and that the arena deal in place will be a win for the city.

This week, I suspect we are likely to see a headline like:

“Coyotes Cost Glendale $1.6M In First Reported Quarter”

If we’re lucky, details explaining the real story will follow. If not, hopefully I can help with what is included and excluded from those reported revenues.

Front Loaded Annual Expenses

Glendale, according to their negotiated agreement, is responsible for $500k of capital improvements per year. Nearly all the $500k, $450,685, has been spent during this first reporting period. Split evenly through the year, that expense would be $125k. So, the city spent $325,685 MORE than the “budgeted” amount and skewed the revenue towards the red.

The “Safety & Security Fee ($174,122/year) was adjusted to $156,948 for a shorter than normal reporting year. It certainly could have been chopped into quarterly chunks and reported as $39,237 instead of booking it all immediately and tilting the revenue to the negative side. Subsequent reports will gradually normalize the YTD (year to date) impact of the expenditure.

That’s the main issue with using an initial quarterly report without a previous history to use for projections or for an accurate story. It makes it easier to skew essentially incomplete numbers to make a point using an “official city report”. The real story is more nuanced more difficult to tell and to understand, and a slanted story supported by “facts” garners more eyeballs and social media traction.

There’s little incentive to provide an accurate picture.

Missing Numbers

A larger issue is numbers that are missing, big numbers. No amount has been reported for the following line items:

• Supplemental Surcharge ($1.50/qualified ticket)
• Parking Revenue-Hockey ($10/car)
• Parking Revenue-Non-Hockey ($15/car)
• Naming Rights (20%)
• Naming Rights-Indoor Stage (100%)

Neither of the naming rights revenue streams have come to fruition yet. Perhaps the other missing numbers are not included on the report because the payments aren’t due until after quarter close.

Ticket Surcharge

189,937 hockey tickets have been sold as of the last home game (click here). That’s $284,905.50 due Glendale.

The two events listed on the report correspond to a Pearl Jam show and Winter Jam 2013 on November 10. The AZCentral review (click here) of the Pearl Jam show states the arena was “packed to the rafters”. The review continues:

He (Eddie Vedder) reminisced some about the Valley’s long defunct Mason Jar venue, taking in the at-capacity crowd at Jobing.com Arena (one that even mostly filled the sections situated behind the stage) and declaring, “These are pretty nice digs.”

If Pearl Jam was sold out there’s another $28,500 into the Glendale kitty.

I don’t imagine the Winter Jam 2013 show packed them in.

Glendale’s reported numbers seem off, to me. Line item “Ticket Surcharge-Non-Hockey ($5/qualified ticket)” reports $69,004. For starters, that isn’t divisible by 5.

Secondly, that number divided by the $5 surcharge nets 13,800 non-hockey tickets. I’m not sure how many tickets Winter Jam 2013 gave away, but I have confidence Pearl Jam didn’t comp many tickets.

Let’s assume the numbers are right, and guess that concert ticket surcharges brought in another $21k so far. Let’s round up guesstimates for hockey and non-hockey to subtract another $310k from Glendale’s revenue deficit.

Parking Fees

The elephant in the revenue reporting room is arena parking, and there’s no information provided in Glendale’s report. I’ve asked a few people casually about parking numbers and came up empty.

So, I have NO idea how close to projections parking revenue is. My guess? It’s probably a little short.

University of Phoenix Stadium, across the street from Jobing.com arena, opens their parking lot to the general public for Coyotes games. I don’t know if they also do for concerts and other events. They significantly undercut the parking fees charged by the Coyotes for their “day of event” parking. None of that revenue reaches Glendale.

The additional revenue from parking is smart business decision for Bidwill in the short term. Alienating your neighbors often comes back to bite you when the time comes for contract renewals. The old contract with Glendale Fire for UOP stadium coverage will eventually be coming up for renegotiation and police coverage could also be increased. Would the increases Glendale might insist upon be enough to cover the lost revenue from parking? Maybe.

If I’m not mistaken, the AZ Sports and Tourism Authority, the same people that are stiffing Glendale on Camelback Ranch funding, made the parking decision. Good neighbors. The current mayor had a “make AZSTA pay” plank in his campaign platform, so perhaps there are changes on the horizon if he gets to work on that.

I was mistaken. According to a “source familiar with the situation”, the decision to open the parking lot to compete with the Coyotes was made by Cardinals owner Bill Bidwill. Glendale PD is paid for parking coverage, although I’m not sure how the split is allocated with the Coyotes.

Westgate parking remains free. People are parking in the Westgate (and Cabelas) lots when they arrive for a Coyotes game or other event. That may change if Westgate decides to implement a proposed fee for parking during events.

So, parking is a work in progress with upcoming changes likely. For now, we can assume the parking fees have brought in some revenue to the city, we just don’t know how much.

Annual Target Looks Good

December has two Trans-Siberian Orchestra shows not included in the report. These shows are traditionally well attended in Glendale, and of course “non-hockey” events pay more to Glendale than hockey games for parking and ticket surcharges. The addition of Global Spectrum to the mix ensures “non-hockey” events will become more frequent and lucrative to Glendale.

December is a slow month for hockey with the Coyotes on the road. But, the Sharks game on the 27th is nearly sold out already, a surprise to many (including Coyotes ownership) this early in the new regime. It’s significant because the Sharks are not one of the traditional big draw teams like the Red Wings or Blackhawks. It’s also significant because the “high season” for hockey ticket sales doesn’t start until February or so.

The Coyotes will hopefully play in the NHL playoffs this year, providing additional revenue. Big shows, Justin Timberlake for one, are on the schedule at the arena. Hockey attendance is already up double digits.

The game against the Blackhawks was sold to OVER 100% capacity and it broke the all time revenue franchise record for a regular season game. Encouraging, to say the least.

A huge Canadian TV contract has brightened the financial picture for the Coyotes considerably. While the contract isn’t directly shared with Glendale, it DOES significantly lessen the chance for the infamous “five year out clause” to be triggered. It also increases the power of the player signing pen for the Coyotes, solidifying the team’s chances at remaining a top contender in the NHL.

Success for the team as a business means success for Glendale’s investment in their arena.

Let’s see what headlines appear this week. There ARE budgetary problems in Glendale, but their arena issues are well on their way to being completely resolved.