DALLAS — Glendale, Ariz.’s plan to sell $100 million of revenue bonds to finance the sale of the Phoenix Coyotes hockey team to Chicago investor Matthew Hulsizer looks like it will remain on hold after the Goldwater Institute confirmed plans to challenge the deal in court.
After studying more than 1,000 pages of city documents, the conservative Arizona watchdog organization said the agreement violates two prohibitions of the state constitution, which requires that no Arizona government “shall ever give or loan its credit in aid of, or make any donation or grant, by subsidy or otherwise, to any individual, association, or corporation.”
The Goldwater Institute prevailed in a similar case against corporate subsidies last year in the Arizona Supreme Court.
The city Wednesday morning had not commented on how it plans to respond to the lawsuit or how it will affect the planned bond sale.
Glendale is essentially financing the sale of the National Hockey League team to keep it playing in the city-owned Jobing.com arena, built in 2003 with $180 million of revenue bonds and additional general obligation bonds for related infrastructure.
The city would give Hulsizer $197 million, from which he would use $170 million to buy the team from the NHL. In return, Hulsizer would allow the city to charge for parking at the arena, which he would manage and keep the Coyotes playing there until 2041 when the bonds would be paid off.
“The deal poses enormous risks to Glendale taxpayers, who will have to repay the bonds if the team fails again or if parking revenues are insufficient to repay the bonds,” the institute said in a statement. “The institute has urged the city to restructure the deal so that Mr. Hulsizer or another private buyer, rather than taxpayers, bear those risks.”
Citing the state high court’s decision in Turken v. Gordon, the institute said the Coyotes deal is similar in that Hulsizer is not providing roughly proportionate value for the payments he will receive from the city.
Noting the sale of the Buffalo Sabres hockey franchise earlier this year to a private buyer using his own money, Goldwater Institute president Darcy Olsen said: “Deals of this size and scope happen all the time in the private marketplace without putting taxpayers on the line. Mr. Hulsizer certainly appears better equipped to buy this team with his own funds than the taxpayers of Glendale.”
The Coyotes franchise is a perennial money-loser, posting losses between $25 million and $40 million each year and having already plunged once into bankruptcy.
