The Cow Says “AMULA”

Lawyer Up!

Lawyer Up!

I’ve been speculating for awhile the NHL could decide to hold Glendale to an Agreement of Management, Use and Lease (AMUL) that could be significantly LESS beneficial to the City than any agreement they’ve currently negotiated with prospective owners. Certainly less beneficial than the agreement worked out with Hockey Partners (the Jamison group). I didn’t honestly think it was an option, but I wouldn’t rule it out as a negotiating tool sharp enough for a savvy guy like Gary Bettman to use.

We requested all documents (not memos and emails and everything yet, though) related to the agreement between Glendale and the NHL. There’s a LOT of pages and I have NOT yet gone through them all line by line. But, let me take a stab at explaining what I have read so far.

One of the documents we received makes it look like the City has fixed their agreement so they at least have the option of turning down the NHL. They did not, however, change the agreement to modify the rules for determining the losses that would be covered by the $25M payment from the City.

The Original Agreement

The City of Glendale and the NHL (using combinations of “Coyotes Newco” and “Arena Newco”) reached an agreement on May 20, 2010 whereby the NHL would run the city owned Jobing.com arena while owning the Coyotes hockey club. This agreement supplanted the Amended and Restated Arena Management, Use and Lease Agreement (AMULA) with “Dewey Ranch Hockey” (Jerry Moyes and crew) in 2001.

$25M Legally Covers Hockey Losses

That agreement (click here if you MUST read it) is the root of the $25M per year potential payment to the NHL by Glendale. It is specifically spelled out in section 2 “Owners’ Compensation” how much will be paid, how it will be paid, and what the money is supposed to cover. Urban legend and some misdirection from ex Glendale City Manager Ed Beasley maintains NONE of the $25M is to be used for hockey related losses, it’s supposed to be used ONLY for arena expenses.

Actually that’s not what is stated in 2.3 “The term ‘Actual Cash Losses’ means:”. Specifically mentioned as acceptable loss adjustments include:

  • adjusting player salaries for contracts entered into after June 30, 2010 so that the amount included in Actual Cash Losses after such adjustment equals the average salary (including signing bonus and deferred compensation) over the term of such player’s contract;
  • payments made in the ordinary course of business consistent with the types of payments made by other NHL hockey clubs, arena managers or owners (e.g., payments for player assignments, expense reimbursements paid by all member clubs to the NHL blah blah blah

To this non-lawyer, that means at least some hockey related losses ARE specifically covered. Because of the weird position of the team being owned by the entity that would be receiving a payment, I suppose they decided to spell it out as “okay”. I actually don’t even understand what the “adjusting player salaries” means, although it sure sounds as if hockey player salaries are part of the mix in some fashion.

There are very specific exclusions for inclusion in losses (“excluding income taxes” and the like) and NONE of those exclusions is “expenses related to hockey” or “expenses NOT directly related to the Arena management”.

Kinda Blackmaily

If you’re reading this document and ever had any doubt the NHL was playing hardball with Glendale, read section G:

“… the Owners currently have a bona fide offer from a viable purchaser who would relocate the hockey team to another market for the 2010-11 NHL season and contemplates that the Owners would break even on their investment in the Team through the end of the 2009-10 NHL season, as well as the NHL potentially receiving a relocation fee.”

Sounds like a clear threat to this non-lawyer.

Glendale, while protesting “why should WE be responsible for finding a buyer?” specified that they, indeed, wanted an EXCLUSIVE clear shot at doing so (for what prospective buyer?) in sections H and I:

“Given the City Council’s approval of a Memorandum of Understanding with a prospective new owner and notwithstanding the existence of a bona fide offer that would result in the relocation of the Team, the owners are willing to agree to give the City and adequate opportunity to facilitate a Glendale Sale, on such terms and conditions as are acceptable to the Owners, and potentially allow the City to mitigate the losses it would suffer if the Team were to relocate.”

“… In furtherance of its mitigation efforts, the City desires to assure that it has an adequate opportunity to find a purchaser who would consummate a Glendale Sale on terms and conditions acceptable to the Owners during the period from the Effective Date until December 31, 2010″.

So, all the finger pointing and blame shifting is spurious on the part of both parties, with the citizens of Glendale and the hockey team being the monkeys in the middle.

Renew The Agreement

The above AMUL was modified by “AMENDMENT NO 1“, timestamped almost a year after the original agreement. It was intended to deal with the next season, so there’s a bunch of “change the relevant dates and years” lingo in there. Makes sense, just translate “let’s just do this thing for another year, buddy, whaddya say?” into lawyerese and sign on the dotted line.

Some more interesting language was also inserted, though.

Agreement Renewable Until 2021

At the discretion of the NHL, the agreement INCLUDING the $25M escrow payment, is renewable until 2021.

If you read the document, item 11 of the amendment deals with replacing “Section 5.3″ of the original agreement that dealt with the validity of the agreement depending on the whim of the bankruptcy proceedings with the following:

“5.3  In order to enable the Owners to fulfill their obligations under this Agreement, concurrently with the execution hereof, the City and the Owners will amend the AMUL to (a) extend the term of the AMUL through the End of the Coyotes’ Season, and (b) provide the Owners with the option, exercisable in the Owners’ sole discretion, to extend the term of the AMUL for a period of up to 10 years. blah blah blah”

 Wow. The City Of Glendale signed a document promising a payment of up to $25M per year to the NHL to cover arena management AND hockey losses (if they chose) that the NHL could renew for ten years at the discretion of the NHL.

Don’t ever accuse the NHL of being merciful.

I remember hearing the 10 years renewal “thing” at a City Council meeting and being amazed. I remain amazed the NHL was able to get that language in an agreement.

Don’t mess with NYC lawyers, man.

Rewrite The Agreement

Later, the agreement was rewritten. You’d think that a clause that is so one-sided would be removed or at least modified to include the City of Glendale in the renewal decision. After all, their famous RFP has language that’s more mutually beneficial.

Read “AMENDMENT NO. 4“, timestamped June 27, 2012. The NHL still has the right to extend, at their discretion, their agreement. This time, the City added a few words that should give them the right to refuse:

“3.4 Notwithstanding anything to the contrary herein, the Team and the Operator shall have the right, but not the obligation, upon written notice to and agreement of the City, to extend the Term of this Agreement for a period ending on or before June 30, 2021. blah blah blah”

To this non-lawyer, the “…and agreement of the City” means the City can finally tell the NHL to take a hike should they choose to.

Losses Are Losses

Unless we are missing documents (not very likely) or I haven’t found a clause in hundreds of pages of agreement documents (a bit more likely), the characterizations of Glendale paying money out to the NHL for unwarranted expenses is untrue. Right or wrong, the City of Glendale agreed to reimburse the NHL for losses resulting from managing the city owned arena AND the NHL owned hockey team.

Ed Beasley

Ed Beasley

There’s been a lot of buzz generated by an article in the local paper (AZ Republic, Sunday, May 5). That article in a paper that is recognizably, for whatever reason, happy to distribute both real and imagined BAD news about the Coyotes while ignoring nearly all of the good news, cause quite a stir. The numbers in that piece were later clarified by Craig Morgan in this piece. There’s a quote in the AZ Republic piece from Ed Beasley that’s MEANT to imply that hockey isn’t supposed to be paid for, yet says something different:

Former City Manager Ed Beasley told the council on May 11, 2010, that the then-proposed first $25 million payment was strictly to pay for arena operations.

“There’s some things … I think that have been misunderstood. This item is not to pay operating losses for the NHL. It’s a fee to the NHL to operate our arena and maintain the team,” he told the council during a public meeting.

Even based on the quote from Ed Beasley, the statement above is incorrect. Ed Beasley, clarifying what the $25M would be used for spells out that it’s for operating the arena AND maintaining the team.

Since the bookkeeping is the responsibility of the NHL, they make the ultimate decision how much to withdraw from the escrow account. It seems clear from the agreement that they have the option of legally offsetting at least some of their hockey related expenses.

Read the documents, read the articles, read this and decide for yourselves. I have been clear about MY agenda from the jump, keeping the Coyotes playing in Glendale is my target. That does not mean keep the team at all costs, either, it has to make sense for all the parties involved or it WON’T WORK.

Others are less clear about stating their agendas, you have to read between the lines.

Matt Cooke says:

George, you’re wrong when you say the COG was at risk of having to pay $25M/year until 2021 at the sole discretion of the NHL until the agreement was rewritten with Amendment #4. You need to distinguish between 2 agreements: the AMUL (Agreement of Management, Use and Lease — which enables the NHL to manage the arena and have the ‘Yotes play there) and the AMOA (Arena Management and Operations Agreement — which got the city on the hook for $25 million for the 2010-11 season).

That AMOA was extended ONCE, to the 2011-12 season (see Amendment #1 above), to get the league another $25M. As pointed out in section 5.3, the AMUL (but not the AMOA) was also amended to give the NHL the option to extend the AMUL (i.e. keep using the arena) from year-to-year until 2021. Had Amendment #4 not been agreed upon, the NHL could have used Jobing.com until 2021 by paying the (IIRC) nominal rent of ~40k/month that’s included in the AMUL. But that wouldn’t have triggered any $25M payment from the city because the NHL never had the unilateral option to extend the AMOA’s terms.

As I say all the time “I am not a lawyer” and can be, despite my best efforts, unable to decipher the gibberish designed to keep those retainer checks being depleted.

Fact is, it’s NOT in effect now, and I had been saying that it WAS, so I wanted to clarify.

However, it IS true that the loss calculations DO include hockey related expenses, correct?

Matt Cooke says:

They definitely do. There’s an AZ republic article somewhere saying the losses for 2010-11 amounted to $36 million (with the city on the hook for $25 of those), that has to include hockey expenses since the arena itself lost around $5 million (according to RFP documentation).

I know those things are tough to follow but I only wanted to point out that the following isn’t true: “The City Of Glendale signed a document promising a payment of up to $25M per year to the NHL to cover arena management AND hockey losses (if they chose) that the NHL could renew for ten years at the discretion of the NHL.”

..the city has made some dumb moves in the past but at least they split the agreements, and were never potentially on the hook for $25M/year.

Thanks, Matt.

Lawyers, huh?

Rick Johnson says:

Could it be that Ed Beasley stated the $25 million was to fund only “arena operations” as not to trigger the Arizona gift clause which prevents a city from directly subsidizing a professional sports team? Beasley may have changed what he called the fund but in reality it could have been exactly what the agreement stipulates, a fund to cover loses.

Unlikely, simply because the language was there for all to read. Goldwater certainly would have requested and read the documents, like I did, and found out for themselves what the money was for.

Beasley was speaking to the people that wouldn’t bother looking at the words, including people such as the mayor at THAT time, the mayor NOW and a reporter with only a casual interest in presenting facts that might shed a more difficult to understand light on the transaction.