With the Stanley Cup final between the New Jersey Devils and the Los Angeles Kings coming to an end this week, everyone thought the Phoenix Coyotes saga would be over by now and that the NHL-owned team would have a new owner ready to turn things around in Glendale, a suburb of Phoenix. Greg Jamison, former CEO of the San Jose Sharks, who has been interested in buying the Coyotes for several months now, has yet to officially purchase the team from the NHL stating he has problems finding the right investors.
Earlier last week, the city of Glendale published some documents regarding the sale of the hockey team to Greg Jamison on their Website (http://www.glendaleaz.com/); however, according to the Goldwater Institute (GWI), a conservative watchdog group, the city may be working without all the facts. On Friday, the city of Glendale voted 4-2 (council member Norma Alvarez didn’t vote as she is currently hospitalized after a fall) in favor of an arena management fee (AMF) agreement that will most likely keep the Phoenix Coyotes in the desert for the next 20 years.
“They just voted on a contract they don’t have the financial justification to explain,” said Starlee Rhoades, Executive Vice President at the Goldwater Institute. According to Rhoades, Glendale approved a deal that is missing two critical parts, known as exhibits, in the written contract. One missing exhibit is a written budget for Jobing.com Arena, while the other missing exhibit is the performance standards the arena management company has to meet, including how many events the company will bring in, the plan for repairs and maintenance, as well as other requirements regarding the arena.
The GWI had sought a temporary restraining in order to block or postpone the vote, arguing that the city had not yet released documents important to understanding the financial deal proposed, while the City of Gendale said that the major documents had been provided to Glendale citizens and the GWI throughout the week and that the court had no authority to prevent a vote on the AMF. While Goldwater was not able to halt Glendale from voting on the AMF (Superior Court Judge Katherine Cooper agreed with Glendale ‘s argument that the court does not have the authority to prevent a vote), Judge Cooper told Glendale to postpone the vote to give enough time to the citizens and the council members to review in great detail all the necessary documents pertaining to the financial deal.
Despite the Judge Cooper’s warning: “What the city is preparing to do, not complying with the court’s order, may jeopardize the ability to carry forward with that agreement because it would be subject to attack legally”, the city decided to go ahead with the vote on Friday. NHL Commissioner Gary Bettman, as well as Bill Daly and Greg Jamison where in attendance to make sure the deal was approved.
After the hearing, GWI’s attorney, Carrie Ann Sitren, said they had received some documents as late as Thursday afternoon, less than 24 hours before the meeting.
Sitren also said the judge’s remarks made it clear that if the council voted Friday on the Coyotes deal, it would violate a 2009 court order requiring that Glendale provide all related documents to Goldwater in a timely manner regarding Phoenix Coyotes negotiations with proposed buyers.
Sitren added that if Glendale approved the deal on Friday June 8th, 2012, Goldwater would be back in court to ask that the deal be declared invalid claiming the city has brokered a backroom deal: “We absolutely will challenge this vote.”
Goldwater President Darcy Olsen also released a statement after the court proceedings:
“This morning, Judge Cooper denied the Goldwater Institute’s motion for temporary restraining on the grounds that felt the court lacked the authority to block the vote. Simultaneously, she issued a strong warning to the City of Glendale about the implications of moving forward today, affirming the Goldwater Institute’s contention that the city has committed ‘clear violations’ both of court orders and open meeting laws.
“She emphasized the court would be receptive to considering holding the city in contempt if the council moves forward with the vote, stating that sanctions would be in order. We hope the council will heed the judge’s warning, comply with the law, and give the public sufficient time to review the council’s proposed action.”
The missing documents and the violation of open meeting laws are not the only roadblocks regarding the sale of the Phoenix Coyotes as Goldwater expressed concerns that the agreement between Glendale and Jamison amounts to a subsidy, which would violate the Arizona state’s gift clause. GWI even sent a letter to the Mayor Elaine Scruggs and the council members, warning them not to rush a vote because the deal would add an important financial burden to a city that is already overwhelmed with debt.
Moreover, it has been reported by different sources that potential owner Greg Jamison still hasn’t raised enough equity to purchase the Coyotes and meet the NHL’s rumored asking price of $170MM, even though the Coyotes are valued at only $134MM. Even with the $15 million/year taxpayer subsidy given by the City of Glendale to “manage” the arena over the course of the 20-year lease, investors are having cold feet, because despite the AMF, it will be hard to turn a profit with the Coyotes.
The team has been dead last in attendance this season with a disappointing 12,400 fans per game, about 5,000 less than the league average, that, despite having a very competitive team that made the playoffs and reached the Western Conference finals, which they lost 4 games to 1 against the Los Angeles Kings.
Investors are hesitant because they are skeptical that Jamison can boost ticket sales and revenue from non-NHL events enough to make the Coyotes profitable over the long term, which is why he will need much more money than the sale price of $170MM to survive the adventure of owning a team in the desert.
On Friday, during the city meeting, when Mayor Scruggs asked him who his financial investors were, Jamison simply answered that he couldn’t name them and that he needed a little more time to raise the required money. During the meeting, Gary Bettman added that the clock is ticking and that the NHL extended the delay to broker a deal with Jamison, which was originally 5 days after the Coyotes played their last game on May 22nd, by 30 more days, which would bring us to the NHL Entry Draft on June 22nd.
With the collective bargaining agreement coming to an end in September 2012, the NHL certainly wants to settle the ownership situation in Glendale in order to avoid distractions as a new CBA will have major impacts on revenue sharing as well as the salary cap. The NHL also has to make a decision quickly should the agreement with Jamison falters and should it needs to move the team to another viable city, such as Quebec City, in time for next season as the NHL schedule is usually released around the NHL draft.
It has been reported that the NHL has drawn more than one schedule in case it has to relocate the Coyotes before next season since the NHL stated several times it didn’t want to own the struggling franchise for another season.
Finally, this week will be crucial regarding the ownership situation of the Phoenix Coyotes and fans are hoping they finally find a suitable owner willing to spend tons of money in Glendale to market the team actively in the Valley and turn the franchise into a successful story, both at the gates and on the ice.
*UPDATE*: According to Columnist Yvon Pedneault of Tva Sports, Greg Jamison has only collected about $50MM for the purchase of the Phoenix Coyotes, far less than the required amount of $170MM.
**UPDATE**: According to Maricopa County Superior Court records, Goldwater and Glendale will return to court over the vote of the Coyotes’ lease.
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