A June 15 article from Mike Sunnucks in the Phoenix Business Journal entitled “Glendale gets credit rating love after canceling $225M Arizona Coyotes contract” is actually false. If the Phoenix Business Journal, somehow, became interested in factual headlines, they would change it to:
“Glendale gets ratings love BEFORE canceling $225M Arizona Coyotes contract”
But, they won’t.
Moody’s Backs Up The Fertilizer Truck
Moody’s provided some text to Sunnucks that included an “officials estimate” attribution from the City:
Cost savings will be offset somewhat by payments to a new facility manager for Gila River Arena, which officials estimate will cost approximately $6.5 million annually based on contracts for comparable facilities. The city also faces unknown, onetime legal costs from the Coyotes’ legal actions. Moody’s believes any negative effect to arena-related revenues should be outweighed by cancellation-related savings.
What officials? What comparable facilities?
Debt Is NOT Related To Coyotes
Moody’s also offers the following nugget:
For Glendale, remaining costs related to the Coyotes include debt service on approximately $133 million of long-term debt outstanding until 2033.
What’s wrong with the above statement is that the $133M of long-term debt is NOT “related to the Coyotes” it is related to paying for the arena the City of Glendale voted to build. That debt remains and must be paid regardless of the existence of the Coyotes.
History Disagrees With Moody’s
A request for the RFPs submitted before IceArizona was aboard with the Coyotes and as arena managers was denied, so there’s no way of knowing what company bid what. It’s important to remember that an extension had to be granted for reviewing RFPs because not enough companies were interested in taking on a non-hockey venue.
It’s also important to remember that the NET cost to the city is rapidly approaching the $6.5 million number that the “officials estimate” a new contractor would cost. Also, there is NO WAY that new contractor could deliver the minimum 600,000 visitors to Glendale that the Coyotes do.
But, Moody’s took all that into account, and they did so BEFORE the contract was killed.
The Great Zoltan
There are only three ways that the cancellation of the Coyotes deal could have been a factor in the new Moody’s rating:
- “The Great Zoltan” predicted it
- Moody’s has a hot tub time machine
- Somebody at City Hall with direct knowledge that the contract would be cancelled the next day regardless of anything that happened in the City Council meeting was in direct contact with somebody at Moody’s.
Unless there was specific information provided TO Moody’s prior to the actual cancellation of the Coyotes contract, the assertion that the rescinding of the contract was responsible for the improved rating must be completely false.
How can we be so sure?
Dates Are Important
The vote to nullify the arena management agreement with IceArizona was during a June 10, 2015 Special City Council Meeting.
Moody’s upgraded their rating of Glendale to “A3/positive outlook” the day before, on June 9, 2015. Click here to read the Moody’s press release.
Tom Duensing, Interim Assistant City Manager said the following on June 9, again (47:55 on video, the day BEFORE the Coyotes contract was cancelled:
I’m actually pleased to report to you tonight that Moody’s released a report today, June 9, 2015 that basically upgrades our rating outlook from stable to positive on all the city’s debt. In addition, a total of 197.1 million in subordinate lien debt has been upgraded from BAA1 to A3.
He mentions discussions with Moody’s prior to their upgrade and some of the factors that went into the upgrade decisions.
Duensing makes no mention of the arena management agreement.
Water and Sewer
An interesting sidebar to this upgrade process relates to the inter-fund loan balance that was dismissed in the version of the budget being approved.
The water and sewer enterprise fund is also mentioned on the Moody’s page. In the report (click here) regarding the rating for that fund, there is no mention of the $15 million loan FROM the enterprise fund TO the general fund that was made to disappear miraculously.
What IS mentioned is:
Management expects the city to adopt rate increases starting within the next two years to support a healthy operating position.
Rate increases are a fact of life, but it begs the question… What if the $15M loan was paid BACK to the water and sewer enterprise fund within that timeframe? Would there be enough cash on hand to obviate the need for rate increases leveed on Glendale citizens?
Spin It Up
As is expected now, the fable that is the Sunnucks Phoenix Business Journal piece made the rounds immediately, picked up by anybody with an agenda that is against IceArizona, the Coyotes, etc. Parroted “facts” are already creeping into conversations justifying the cancellation of the contract.
Unless Sunnucks was completely fabricating the piece, it’s clear that somebody at Moody’s fed him dialogue that forwarded the agenda supported by the five people that voted to kill the Coyotes deal.
What Moody’s motivation could be in that regard is not clear, one would assume there may be a relationship or two between “somebody” at Moody’s and “somebody” at Glendale City Hall.
The fact remains that, unless Moody’s had a time machine, ending the agreement had NOTHING to do with the upgrade.
It all comes down to what the headline writer means by “ratings love”, since Sunnucks dances around actually stating quid pro quo in his piece.
Let’s all agree that was the very strong implication, though, alright?