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Recently the media has latched onto a state "no gift" law that ensures no Arizona public money is flushed out to the private sector when deals are cut.

As one supporter pointed out the Goldwater Institute has its' ears perked ( http://www.goldwaterinstitute.org/case/3200 ) while watching Coyote lease negotiations between the NHL, Ice Edge Holdings and the City of Glendale (COG).

Saving Face When Saving The Team Isn't Possible

One would be OFFside to believe that the watchdog, Goldwater, will not be a potential scapegoat and allow all parties including the local politicians to save face by pinning the blame squarely on them.

And Goldwater would happily wear that title like a badge of honour protecting the public purse at all cost. Everyone except the local fans walks away fairly unscathed. Sound eerily familiar Winnipeg Jet fans?

Where's The Gift Hiding?

Up to this point it's not clear how much of an annual subsidy from the COG to the Coyotes would cross over the line from business deal to out and out gifting the team money to help stay above water.

And let's also see how fast the team under the old/current lease would pay off the $180 million rink City rink cost($220 million - $40 million put up by the Coyotes).

From the lease as it stands, the only arena revenue that is turned over to the COG are the annual arena rental and a parking surcharge that is collect off each ticket used. The number of distributed tickets are not the driver of this calculation. This means potentially several thousand less ticket fees collected each game by the COG.

Some Quick Math

(1) Parking Maximum Annual Contribution = $1,538,000 = 41 games x $2.50/ticket x 15,000 (average fans per game, based on past history this is improbable but shown for the sake of showing maximum revenue)

(2) Annual Arena Rental = $4 million

(3) Max Annual Total COG Revenue = $5,380,000 (1) + (2)

COG Simple Payback = 33 years = $180 million / $5.38 million

I believe that Jobing.com opened in 2003. So the end of 2004 would be the first full year of contributions. So that's 6 years and change so far.

So that leaves roughly $147.7 million remaining to be paid off at these maximum annual values. This is $180 million subtract (6 x $5.38 million).

Actually with the local Westgate spinoff businesses paying tax back to the City, the six year remaining amount might be somewhat less but were not even talking another $5 million total since generally City goverments don't have access to the same tax revenues as the other levels of government. (Note: This is extra or found money for COG since the hockey fans weren't spending the money in COG before, all of this commerce was done in the GPA instead.)

Revenue Neutral Point

If the COG were to sweeten the lease pot by say $5.38 million that would be roughly the revenue neutral point from the current state as shown above. (Attendance hasn't come close to 15,000 so this would effectively offset any extra tax revenues found on spinoff revenues.)

Therefore, any subsidy above this magic number of $5.38 million would essentially be a gift and illegal. You can expect the Goldwater Watchdog to bite the Desert Dogs at that point.

And if you have been following this sad story for the last 14 years or even the last 15 months, it is not news to learn that $5 million is not anywhere near to close the gap between Coyotes' annual financial losses. These losses have been pegged anywhere between $20 and $35 million annually depending more on how much team debt is held by the owners rather than anything to do with the Phoenix/Glendale marketplace. This means Ice Edge or any owner can't keep this Dog in the Sun without getting a severe sunburn or bitten by the Watchdog.

Sundown Summary

With the Coyotes dropping $40 million for the construction and another $37.7 million moved to COG over their years of use, the team has contributed a total of $77.7 million to Glengale over just 7 years of arena use. By leaving after this season, the team will have essentially left a relatively new and state-of-the-art arena (35% paid by the team) as their legacy in Glendale. The city can then revert to booking the arena as they see fit, gain all the event revenues that the Coyotes previous took for themselves, all to cover not only the operating costs but the remaining arena mortgage. This is no consolation prize since these revenues may in fact be larger than the $5.38 million the COG receives currently from the team. Many NHL arenas make well over $5 million per season from their non-hockey events. Tampa Bay has been reported to pull in over $15 million per year which helps the Lightning partially offset hockey operating losses. So in a rather ironic twist, the loss of the team, could be the best thing to happen to Glengale and the Coyotes.

If you have any burning sentiments, head down to our own Dawg Pound and have your say! www.mbmbforum.com

Chris
President, www.myNHLincludesWinnipeg.com

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