Inside the NHL
Eight years ago this summer, I was in Glendale, Arizona, watching city-council members there debate the future of the region’s NHL team and whether they should risk the Coyotes getting moved to Seattle.
At the time, New York investment banker Ray Bartoszek claimed he was poised to move the Coyotes overnight, with the NHL’s supposed blessing, unless the council approved a new lease for the team at what’s now called Gila River Arena. Well, the council back then, as politicians often do when pressured by sports teams and leagues, voted 4-3 to keep the Coyotes rather than call Bartoszek’s bluff to have them play temporarily at KeyArena while Seattle figured out how to build a better venue later.
Still, given what has taken place the past week, we can say Seattle emerged as the long-term winner from NHL events of that bizarre, tumultuous summer.
Glendale initially lost millions on what became regarded as arguably the worst arena lease deal in North American sports. Meanwhile, our city has not only since gained its own NHL team in the Kraken, but an all-private $1 billion-plus overhaul of KeyArena into what’s now Climate Pledge Arena.
So, unlike in 2013, there’s no need for additional arenas here. Not so in Arizona, where Glendale informed the Coyotes last week it will terminate what has become a modified year-to-year lease and wants them gone from its publicly financed, city-owned arena by June 30, 2022.
The team has long sought public funding for a new arena in greater Phoenix, where existing venues aren’t really suited to NHL play. There is, mind you, a relatively new, NHL-suitable arena that also emerged as a Coyotes alternative back in 2013, only that one is 2,700 miles away.
The Centre Videotron in Quebec City was being built back then — also with ample public funding — and finally opened in 2015 and, unfortunately, has waited in vain for an NHL return ever since.
Anyway, that’s not our problem. While Glendale and Quebec City both took financial hits in the name of NHL love, our city got the equivalent of a billion-dollar arena paid for privately by the Oak View Group (OVG) developer and its partners. The city also obtained revenue guarantees to avoid the yearly financial losses that plagued Glendale.
Still, in a funny twist — depending on your sense of humor — a Seattle native helped ignite Glendale’s push to finally end its Coyotes relationship. Kevin Phelps, a former Seattle businessman and former Pierce County deputy executive, was hired away in November 2015 to assume the key position as Glendale’s city manager.
His hiring came not long after the Seahawks played and lost a Super Bowl in Glendale to the New England Patriots in February 2015. Glendale, by then fatigued by the Coyotes saga, had started playing hardball with sports leagues and as a result almost all Super Bowl events that year were moved by the NFL to neighboring Phoenix.
By mid-2015, Glendale, citing a conflict of interest by a former city attorney hired by the Coyotes after the 2013 vote, terminated the massively unfavorable lease and reverted to the current yearly renewal that offers no guarantee the team will stay.
Faced with a primary tenant actively looking to leave and knowing even more public money will soon be needed for major arena infrastructure upgrades, Phelps commissioned an analysis by Phoenix-based consulting firm Applied Economics to determine exactly what the Coyotes generate in city tax revenue.
“My responsibility is, if they do leave, what do I do with a fairly size-able (arena) asset?” Phelps told me this week. “And so we’ve been looking at this saying ‘How can we survive without hockey?’ “
The study examined four years of spending patterns by patrons at the arena and the adjacent Westgate Entertainment District complex of shops, bars and restaurants during Coyotes home games vs. an average of 17 annual concerts held there.
And the findings released last week garnered plenty of attention.
Sarah Murley, a principal at Applied Economics, concluded that spending by concertgoers was “significantly greater than for Coyotes events” — $58 per person compared with $27. Murley attributed this to concerts being a “special event” for which attendees linger longer and are more likely to stay overnight at nearby hotels.
The Coyotes’ longstanding problem has been that much of the ticket-buying fan base lives in wealthy Scottsdale and other communities. Far-flung Glendale has no mass public transit, meaning hockey fans were often driving 45 minutes or more in rush-hour traffic to midweek games, grabbing a quick bite at the arena and then heading home immediately after.
The study found that even by jettisoning all 43 seasonal Coyotes home dates, the city could still generate as much tax revenue by adding 20 more concerts of at least 10,000 fans apiece.
”It’s certainly become apparent that not only could we survive,” Phelps said, “but that we’d actually be financially better off than being tethered to the 43 dates a year that we tie up in the arena.”
Just reserving those dates, he added, required blocking off 200 nights annually until the NHL released its exact schedule. Now, with those dates free, the city can more easily book concerts well in advance.
“The speculation in the media was that I was trying to increase our leverage to get them to sign a long-term lease deal,” Phelps said of cutting ties. “And that’s not the case. We have made the decision that what’s in our best interest is to be able to go more aggressively after more impactful types of events.”
And that’s the lesson Glendale and countless other municipalities learned the hard way about fronting public money for professional sports teams and infrastructure. There almost always are things with greater “impact” for local governments to invest in.
It’s a vastly different story here, where the Kraken — not the city — will be the entity left holding the proverbial bag if the NHL product isn’t a resounding success. The Kraken’s owners and OVG development partners have already spent $1.7 billion on the arena, the team and its training center.
In other words, quite unlike in Glendale, our local politicians designed this arena deal so our NHL team has every motivation to stick around long term to recoup its vast investment. And the city, with its guaranteed cut soon to start flowing in, has zero incentive to let the Kraken leave.