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 appeared to be 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 watchdog organization said the agreement violates two prohibitions of the the state’s 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 declined comment on the specifics of the case until the lawsuit is filed. However, it did say it “remains confident in its position that the agreement meets all the requirements of the Arizona gift clause. We continue to welcome the opportunity to meet with Goldwater to discuss the agreement. Our previous meeting requests have been denied.”
Vouching for the legality of the bonds are the law firms of Fennemore Craig and Greenberg Traurig, according to city spokeswoman Jennifer Stein.
In a press conference last week, Glendale Mayor Elaine Scruggs said that “due to the threat of legal action from the Goldwater Institute, we are now at a point where time has run out.” What she meant by time running out was not immediately clear.
With the city claiming that loss of the team could cost it 750 jobs and $20 million in wages, Scruggs said: “The institute is potentially costing taxpayers almost half a billion dollars in potential losses to the region.”
Glendale is essentially financing the sale of the National Hockey League team to keep it from leaving the city-owned Jobing.com Arena, which was built in 2003 with $180 million of revenue bonds.
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.
“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 Supreme Court’s decision in Turken v. Gordon, the institute said the Coyote’s deal is similar in that Hulsizer is not providing roughly proportionate value for the payments he will receive from Glendale.
The Coyotes franchise is posting losses of between $25 million and $40 million each year and has already plunged once into bankruptcy.