Recently NHL stakeholders have been trying to digest what the MOU between Jerry Reinsdorf and the City of Glendale mean in cold hard terms beyond the political intrigue of a future Goldwater Institute or Arizona State potential showdown.

One would be very OFFside for believing that this MOU and new lease agreement between the team and Glendale offers any real hope of franchise salvation within Arizona.

Let's assume that given developer voluntary approval to the CFD also implies that their tenants are also legally bound to these new terms. Remember these tenants also have leases with the developer and after they expire there may be no way to force a tenant into similar terms. Unilateral lease term changes are unlikely to stand a challenge in court. And if such a challenge fails how many tenants would simply walk away or go bankrupt trying to make a go of things?

As it stands, $25 million is needed each year up to $100 million to offset team losses. Additionally, the first three years also requires an additional $21.5 million to help buy the team from NHL BOG hands. Therefore these roughly 50 businesses need to raise about $46.5 million in years one, two and three and $25 million basically every year thereafter until $100 million is collected and the team essentially bolts to another market.

(Aside: Good luck City of Glendale in getting anyone to shell out $103 million to buy the team then after 5 more years of losses without porting them outside of Arizona!)

Ok now on to $164 million question: How much, on average, would each tenant need to collect in ADDITIONAL taxes/revenues/CFDs?

Let's say that 41 hockey games are included and we add another 10 home playoff games every season for a total of 51 home dates (preseason may or may not draw more than flies).

Since all non-hockey events can still take place with or without NHL hockey as a main tenant, these events will still occur. Therefore they can't be included in any CFD "revenue" development for these 50 Westgate tenants, although they may have too once you see the final numbers at the end of this blog.

Therefore this $25 to $46.5 million annual CFD revenue must be generated by the businesses essentially off of the NET economic activity on JUST those 51 NHL home dates.

So each of the 50 tenant businesses need to rake in a whole lot of cash to pay for this CFD.

Each tenant collects additional CFD NHL fan tax/revenue, annually
= $46.5 million /(50 tenants)
= $930,000 per hockey season
= $18,235 per hockey game, based on 51 home NHL dates per year

Keep in mind this is additional revenues above and beyond any taxes and such on the NHL fan currently outlays.

So can the NHL fanbase of Phoenix swallow this extra cost to support their team? Let's run the numbers two different ways to see this answer more clearly.

So if this CFD fee is collected on nothing but parking and 2 people per car drive to each game with 13,000 fans per game used as an average, then in order to match the $46.5 million demand, each car would be charged slightly over $140 USD to park per game.

Or looking at this from the fan perspective, each NHL fan would have additional charges to attend each and every NHL game in Glendale. Using 13,000 fans as an average attendance and 41 home dates (playoffs should never be assumed in order to safeguard team viability), then each fan must cough up on average $87.24 USD on all potential revenues streams, where parking has been free in Glendale and where ticket prices are routinely $25 not including any discounts and 2-for-1 that have been this market history. (See the graphic header as but one of many historical examples.)

So clearly the NHL fanbase can't sustain this additional cash call, even with decent attendance which clearly has not been the norm but is a reasonable number to work from. This concludes the sustainibility test for the Coyotes under this proposed lease agreement.

So in order to continue NHL hockey in Glendale, it is now clearly a tax of all people who visit the Westgate area for almost any reason: concerts, rodeos, wrestling and the like. NFL Cardinal football fans would have been included but the team essentially told Glendale "over our cold dead hands" so the neighbouring stadium will not be coerced into contributing to NHL hockey. Thus the CFD burden will be that much more onerous on the remaining and relatively smaller businesses in the area. Potential future expansion of development space may offset this but an ever widening catchment to prop up an NHL team is clearly a shaky proposal at best. Of course, the required development expansion in the heart of a badly recession-stricken area must occur quickly in order to bring new tenants online before the 5 years of losses triggers the team to potentially jump ship. Developments have went on hold or bankrupt over the last few years in Arizona so this would certainly buck the trend and economic conditions.

At the end of the deal brokering, it appears that the Reinsdorf-Glendale plan offers nothing more than 5 more years of NHL hockey before departing while the entire area is asked to make cash calls to prop up the main tenant which helps drive business through their doors.

This proposal only makes sense if each CFD dollar collected to a total of $164 million would have went back to Glendale to cover the $180 million build cost that Glendale coughed up initially to build the rink. Because in 5 years, those dollars will have been collected and spent on Reinsdorf team losses, the team will depart and the rink mortgage will be only roughly $20 million lighter due to five years of Coyote rental fees. Either way, the numbers do not bridge that gap.

Glendale's Westgate tenants clearly comes to mind whenever the Rolling Stones' "Between a Rock and a Hard Place" is heard. There are some times when the Devil you know is clearly worse than the Devil you don't: but it might be a lesson postponed by five more long years in Arizona.

If you have a differing opinion, share it at our forum!

Chris
President, www.myNHLincludesWinnipeg.com

~ The Reality May Surprise You! Excite You! ~