DALLAS — Glendale, Ariz., would pay nearly $325 million in management fees to the proposed buyer of the Phoenix Coyotes hockey team under a plan to protect the city’s $180 million bond funded investment in the Jobing.com arena.
The management fee for the arena would come in the form of annual payments ranging from $14 million to $17 million over the 20-year term of the agreement. The city is negotiating a sale of the Coyotes to Greg Jamison, the former owner of the National Hockey League’s San Jose Sharks, and with the NHL, which bought the Coyotes out of bankruptcy to keep the team playing in Glendale.
Terms of the deal had been scheduled to air before the City Council on Tuesday, but that has been pushed to Thursday, officials said.
Without the Coyotes or another team playing in the arena, Glendale would stand to lose up to $500 million in sales tax revenue over a 30-year period, according to a 2009 study. The city collects sales tax from the Westgate City Center, a retail development adjoining the Jobing.com arena.
With or without a team, Glendale must pay $12.6 million in annual debt payments for the arena over the next 20 years. The $180 million of revenue bonds used to build the arena are backed by city sales tax revenue.
Completed in 2003 at a construction cost of $220 million, the arena seats 17,125 for hockey and 18,300 for basketball and about 19,000 for concert events. The arena has 3,075 club seats and 88 luxury suites.
Even if the Coyotes somehow went to the Stanley Cup Finals for the next 20 seasons and the arena booked 30 sold-out concerts each year for the next 20 years, Glendale could still expect to lose about $9 million annually, according to an analysis by the Arizona Republic.
The arena, designed as an economic development project, has proven to be a costly drain on the city’s finances.
Coyotes owner Jerry Moyes put the team into bankruptcy in 2009, with the intention of selling it to a buyer who would move the team to Canada. The NHL, which bought the team out of bankruptcy with the assurance of city subsidies, has been looking for a permanent buyer since then. Two deals have fallen through, and the city has paid the NHL $50 million to cover its losses in keeping the team in Arizona.
On Jan. 20, Moody’s Investors Service downgraded Glendale’s general obligation bond rating to Aa3 from Aa2 and shifted the outlook to negative from stable. Three days later, Standard & Poor’s downgraded the city to A-plus from AA and also provided a negative outlook.
Moody’s analysts attributed the downgrade to the city’s “strained financial position” related to the Coyotes.
Mayor Elaine Scruggs voiced concern that Glendale will provide $24 million for capital improvements at the arena when the city’s own capital improvement fund is low. The City Council could be forced to adopt a 61-cent secondary property tax hike that will be phased in over two years and end in 2017. Even with the tax hike, Glendale does not expect to fund any other capital projects for at least five years.
