Source

Glendale, Phoenix Coyotes' prospective buyer strike deal; city council vote pending

by Rebekah L. Sanders - Dec. 10, 2010 11:29 PM

The Arizona Republic

Glendale has struck a deal that would pay the Phoenix Coyotes' prospective buyer $197 million over the next five years, more than the city spent to build an arena for the team seven years ago.

Chicago businessman Matthew Hulsizer would get $100 million, which Glendale will raise from a bond issue, as soon as the deal is signed.

The city would then pay the Coyotes organization $97 million over five years to operate the arena during concerts and other non-hockey events, a cost that had previously been borne by the team.

The city says it will charge parking fees at arena lots to help cover the cost of the $100 million in bonds, although it isn't clear that such fees alone will cover the debt.

The details were laid out Friday night in a proposed lease agreement for Glendale-owned Jobing.com Arena. The Glendale City Council will vote Tuesday on whether to approve the deal. The multimillion-dollar commitment is the latest in a series of moves the city has considered to keep hockey in Glendale as an 18-month drama over the team's ownership played out. Citing financial losses and unable to negotiate a better lease deal, former owner Jerry Moyes put the team into bankruptcy in May 2009. A string of other bidders negotiated with the National Hockey League and the city to take over the team. For a time, it seemed possible the Coyotes would be moved to Canada. In the end, the league itself bought the team and kept it in Glendale. Now, Hulsizer plans to pay $170 million to buy the team from the NHL as soon as next week and is expected to use the city's $100 million to offset the cost. In exchange for the up-front payment, Glendale will take over rights to 5,500 parking spaces in lots surrounding the arena. Use of those lots had previously been controlled by the arena's tenant, the Coyotes. The city plans to repay the debt by implementing arena-parking fees of $5 to $20 during hockey games, concerts and other events, as well as selling advertising and naming rights on the lots. Mayor Elaine Scruggs has said the city would suffer if the team left. "What shall we do, lock it up, turn off the lights and then pay the debt on the arena?" she asked this week at a community meeting. But Councilman Phil Lieberman blasted the deal as "ridiculous" Friday night. He said Glendale cannot afford the terms of the agreement. A statement issued by Hulsizer's group said he is "making a strong financial commitment to build a great organization and will work tirelessly to earn the hearts and minds of our fans." Hulsizer is the co-founder with his wife of PEAK6 Investments in Chicago. He was captain of his hockey team at Amherst College. The deal aims to ensure Glendale has an anchor tenant for the taxpayer-funded arena until at least 2033. The city spent $180 million to build the facility in 2003 and depends on team and concert revenue to pay off the debt. After the arena, Glendale built a spring-training stadium. Counting the money now pledged to Hulsizer, Glendale's debt on sports-related venues with interest tops $1 billion. The price tag for the new lease deal would be steep: - The city has done preliminary work to find investors to purchase $125 million in bonds to cover the up-front payment to Hulsizer. The bonds would likely be paid over 30 years, although the terms, including annual debt payment are not yet known. Another way of helping to pay that debt could be to form a special taxing district near the arena, although that is not outlined in the agreement. - Glendale would pay Hulsizer $97 million over the next 5 1/2 years to manage the arena, schedule concerts and other non-hockey events. That cost previously has been picked up by the team. Glendale's annual payments would range from $10 million to $20 million. - After 5 1/2 years, Glendale could sell the arena to Hulsizer for no more than $130 million. If he isn't interested, the city could sell the arena to another buyer or renegotiate payments to Hulsizer to continue to operate the arena. The Coyotes would remain at the arena, even if the arena were sold. - At the end of the lease, Hulsizer could purchase the arena, as well as the rights to charge for arena parking, for $40 million. - A point not addressed in the lease is $25 million the city put up earlier this year to cover team losses and arena expenses. Glendale officials believe the NHL may allow the city to keep the $25 million, which has so far gone untapped. In return, Hulsizer agrees to: - Keep the team in Glendale for the next 23 years, the remaining time the city has on its lease with the team. That's also the length of time the city still owes on its borrowing to build the arena. - Pay the same amount of arena rent and fees to Glendale as previous owners, as much as $6 million a year. - Work to rename the team the Arizona Coyotes. Glendale officials in a statement said securing "a long-term commitment to the community" from the Coyotes "is critical to the economic viability of the entire region." Glendale estimated losing the Coyotes could have a "devastating" economic impact to the area, which is also home to Westgate City Center and University of Phoenix Stadium. The city cited a 2008 economic study that said the Coyotes and the arena generated 750 jobs in Maricopa County, $20 million in annual wages and $4.5 million a year in indirect business taxes for Glendale, the county and state. In addition, Glendale is in the running to host the NHL All Star Game in 2013 with an estimated $10 million to $30 million economic impact.