Phoenix Coyotes Update: Team Staying in the Desert

In a follow up to an earlier entry about the Phoenix Coyotes hockey team, it was announced late last night that the City of Glendale voted to accept the arena management deal with the new Coyotes ownership group. This all but seals the future of the team in the Valley of the Sun, for at least the next five years.

 

The NHL will sell the Coyotes franchise to Renaissance Sports & Entertainment (RSE) shortly now that the lease agreement has been ratified, according to ESPN and other sports sources.

 

The RSE group will purchase the Coyotes, a moribund franchise which the NHL had to take control of during the bankruptcy of former owner Jerry Moyes in 2009.

 

The vote was very close though in the Glendale City Council meeting last night 4-3 in favor of ratification of the arena lease deal (www.espn.com) with the dissenting members of the council having misgivings about the length of the deal and the money the City is putting toward an arena and a hockey team. One city council member quoted by ESPN said that she would have rather had this money go toward education improvements.

 

Sticky Situation

 

The City of Glendale though was in a sticky situation because they chose to build the arena with the intent of the Coyotes being the anchor tenant. According to ESPN and other sources, the arena cost $220 million to build in 2003 of which the city put in $180 million from tax revenue. The arena would have almost certainly failed without the anchor tenant, the Coyotes, taking 41 dates per year for hockey games.

 

The arena management deal is for 15 years and Glendale will pay RSE $225 million to manage the operations of the arena. That was seen by the City Council as a huge expenditure of funds without any insulation for losses if the team leaves.

 

The other big issue is that the team can still leave, there is an out clause in the deal that allows RSE to relocate the team after 5 years or if the group takes $50 million in losses on the team. Either scenario is possible given, as I detailed in my earlier coverage of this situation, the fact that the Coyotes are dead last in attendance in the NHL.

 

The City of Glendale essentially built their own out clause in the deal which has RSE paying the city for any losses in revenue above $6 million if the team should relocate at any point in the course of the deal (www.espn.com).

 

The Key for RSE

 

Many reporters and others who have followed this story closely believe that the announcement by RSE that they had agreed to a partnership deal with Global Spectrum, the huge arena and stadium management company, was the key for them winning the vote last night.

 

Global Spectrum is a respected company with a reputation in the industry for successful management of sports and entertainment facilities.

 

It was widely reported yesterday that Global Spectrum is familiar with the market there in Phoenix because they manage the events at the University of Phoenix Stadium across the street from the arena in Glendale (www.espn.com).

 

The help of Global Spectrum gave RSE the confidence to project $8.5 to $11 million in revenue for the City of Glendale as part of the better management of the arena, this is also according to ESPN.

 

Westgate and the Future

 

The reports I read detailed a scene where several people watched on closed circuit TV in overflow areas around the Glendale City Hall building last night for the vote on the future of the team.

 

According to those same reports, some people cheered and others booed as the news came in of the vote to ratify the arena management deal with RSE. It is clearly a divisive issue for the people in the Phoenix area.

 

I also read reports that the city council was being pressured to ratify by the small business owners in Westgate, which is the area of Glendale developed right around the football stadium and the arena. The city had sunk money into developing Westgate, and many small business owners were certain that without the Coyotes the arena would probably close.

 

The ripple effect being that the arena closure would dramatically impact their businesses in Westgate, and mean potential lost jobs and further lost tax revenue.

 

The future of the Coyotes gained some certainty with last night’s vote but it remains to be seen whether RSE can make a very difficult situation work: hockey in the desert. Other owners have tried and failed. I detailed the issues with the location of the arena and the traffic to get to weekday games in rush hour.

 

I also do not think many people care about the team there, I never thought it was a good fit for Phoenix or the NHL. The other big factor there that is not present in many other NHL cities is that the weather in Phoenix is actually really nice during January, February, and March. In many other places the weather is lousy so people go to indoor events like an NHL hockey game.

 

Meanwhile, the saga of the Coyotes is over for now at least, and the media and fans there can move on to the non-business related aspects like talking about the players and the team as they prepare to play a truly “new” season in the history of that franchise.

 

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