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May 10, 2012

Glendale's Public Hockey Project

The Cash-Strapped Arizona City Loses $12.9 Million a Year Supporting the NHL's Coyotes

The Wall Street Journal
by Brad Parks

And if neither the drunks nor the thugs get you, the never-ending debt payments just might.

On Monday, the Phoenix Coyotes advanced to the NHL's Western Conference finals for the first time since moving to the desert in 1996.

But here in Glendale, the Phoenix suburb where the Coyotes play, not everyone is cheering. "If you need a poster boy for how to pour your whole budget down the drain of professional sports, Glendale is the place," says Glendale resident Ken Jones, a retired construction superintendent, who calls the team a financial albatross.
...

The city is obligated to make debt payments on the arena that average $12.6 million a year. To keep the team afloat, moreover, the city has been paying a so-called "arena management fee" of nearly $25 million a year to the NHL, which three years ago bought the Coyotes out of bankruptcy.

The NHL has announced a tentative sale to a group headed by former San Jose Sharks executive Greg Jamison, under terms that would essentially institutionalize Glendale's commitments. Under the proposal that the NHL has laid out for city council members, the city would continue paying an arena-management fee that would average about $14.5 million a year.

On top of the city's average $12.6 million in debt service, that amounts to annual expenses of about $27.1 million—to be offset by anticipated Coyotes-related revenue of $14.2 million, according to projections by Glendale's city management department. That adds up to a projected annual loss for Glendale of $12.9 million.

By the time the new ownership deal ran its course in 2033, Glendale would have paid $271 million—nearly $1,200 for each of its 226,721 citizens—to keep the team.

These expenses outweigh Glendale's Coyotes-related revenue by such a degree that Moody's has downgraded the city's bond rating twice in the last 18 months, citing the city's ongoing hockey payments. In part due to the Coyotes, the city's reserve fund has fallen to $11.7 million from $72.5 million six years ago. Facing a projected $35 million budget gap—in a city whose general revenue funds in the most recent fiscal year amounted to $142.6 million—Glendale is proposing to raise its property and sales tax rates, while slashing library hours and hiking fees for city services.

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NoLandGrab: "Jobs, Housing & Hoops?" More like Drunks, Thugs and Debt.

Posted by eric at May 10, 2012 12:57 PM