Inside sports business
Last week’s vote by the Glendale city council to terminate the Arizona Coyotes’ lease at their city-owned arena provided two lessons we in Seattle should heed.
One, opportunities to land a relocating NHL or NBA franchise will occasionally take us by surprise. Until we approve an arena, though, we risk wasting such opportunities.
Two, as badly as some want the NBA and NHL, the Glendale fiasco shows the importance of getting the finer details right on any arena so taxpayer risk is minimized.
First, let’s be clear: the Coyotes very likely aren’t moving anyplace next season. So, we’re off the hook in being caught with our arena pants down. The team has obtained a temporary restraining order blocking their eviction and is threatening a $200 million lawsuit, prompting the city to schedule a private meeting Tuesday to revisit its decision.
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Legal experts suggest Glendale’s grounds for breaking the 15-year lease after barely two years are dubious: an obscure Arizona conflict-of-interest statute enabling termination of contracts if somebody who negotiated them for the city goes to work for the other party.
In this case, a former city attorney was still a Glendale consultant in July 2013 when the arena deal was struck. He became the Coyotes’ legal counsel six weeks later, though doubts have already been raised about whether he contributed anything significant during arena negotiations.
Understanding why Glendale risked this shaky legal showdown requires grasping how terrible the 2013 deal was for that city. Glendale then was already struggling to pay for police, firefighters and basic services.
But Connecticut investment banker Ray Bartoszek — the same guy now planning a Tukwila arena — was prepared to buy the Coyotes and move them here. So, Glendale chose sports passion over common sense, agreeing to pay the Coyotes $15 million annually over 15 seasons to stay and “manage” the arena.
The city didn’t really have the money, but was assured arena revenues would offset much of the funding. But Glendale says shortfalls cost it $8.1 million last fiscal year and might exceed that this year.
Adding to the city’s frustration, it gave the Coyotes an “out” clause to leave Glendale three years from now if accumulated financial losses surpass $50 million, which will likely happen.
Glendale now wants to renegotiate, but the Coyotes insist the time for haggling was before the deal was done. So, realizing it never should have signed off, Glendale has now invoked this nuclear option to force the Coyotes to the bargaining table.
It’s worth noting Glendale Mayor Jerry Weiers, who’d opposed the deal in 2013, is expected to seek re-election next year and seems to be staking his claim as a guy who stands up to big sports.
Weiers infuriated the NFL before the recent Super Bowl by not pushing Glendale hotels to reduce rates. The NFL promptly relocated many Super Bowl events to neighboring communities, leaving Weiers complaining about Glendale’s huge game expenses and minimal gains.
But Weiers, his town verging on bankruptcy, can now tell voters he stood up to two major sports leagues.
His mayoral opponent will likely be city councilor Gary Sherwood, who spearheaded approving the Coyotes lease two years ago. When I met with Sherwood last August, he didn’t deny interest in running.
Sherwood is one of two councilors – the other being Samuel Chavira – who opposed last week’s 5-2 motion terminating the Coyotes lease.
Chavira two years ago reversed his lease opposition and swung a 4-3 council vote that kept the Coyotes from moving to Seattle. Then, last July, Sherwood flip-flopped on a casino project spearheaded by Chavira and cast the decisive vote in a 4-3 motion approving it.
Read into that whatever you wish.
But what’s really interesting is the casino site sits less than two miles from the arena. In a twist Sherwood and Chavira likely never anticipated, the planned casino may have emboldened Glendale’s mayor into attempting this powerplay with the Coyotes.
An argument for keeping the Coyotes has been that the sprawling Westgate entertainment complex adjacent the arena can’t survive without them. But the coming casino’s employees and patrons will conceivably spill over to Westgate for food, drinks and shopping.
So, the casino supported by political opponents may have played into the mayor’s hands. To where he’d risk sabotaging 41 annual Coyotes home games, knowing casino traffic could soon flow 365 days per year.
Again, worth remembering for Seattle: it’s rarely about love of the game with arena discussions. Money, power and personal agendas lurk, which is why minimizing taxpayer exposure is critical.
Our region isn’t ready to take on the Coyotes.
Not when Quebec City and Las Vegas are already building arenas. We are still discussing where to build and whether it makes financial sense for just an NHL team.
Such discussions clearly can’t continue forever if we want to seize opportunities. But, as evidenced by the Glendale nightmare, resolving the finer details needs to happen before — not after — any digging starts.