Coyotes – NHL And Renaissance In Glendale

UPDATE April 7, 2013: Meetings postponed, no further explanation provided.

It went public recently via a post from Fox Sports Arizona’s Craig Morgan (click here) that NHL brass and the Renaissance Sports and Entertainment (RSE) group will be meeting with the City of Glendale to begin the process of developing a mutually beneficial arena management agreement for the city owned Jobing.com Arena. Even the HNIC guys finally discovered the story!

If one is actually interested in weeding out fact from fantasy in stories about the Phoenix Coyotes, there are only a few sources to trust. Craig is one of them

The RSE group is made up of Avik Dey, George Gosbee, Daryl Jones and Anthony LeBlanc. Two of the men, LeBlanc and Jones, were formerly part of the Ice Edge group and have been pursuing the purchase of the Phoenix Coyotes for four years. Yes, the fourth anniversary of Jerry Moyes’ march to bankruptcy court is May 5. Give those two guys points for persistence if not yet success in this pursuit. They may yet get this thing done.

Glendale Meetings

People watching FlightTracker (they DO exist, no kidding) for the movements of NHL Commissioner Gary Bettman and/or NHL Deputy Commissioner Bill Daly will note both men winging their way to Glendale for a bunch of meetings scheduled for Tuesday, May 7. Joining them in the air will be Anthony LeBlanc and George Gosbee and maybe the other two partners. They’re all coming en masse to chat with the leadership of the City of Glendale about a proposed arena management agreement.

Bettman has stated the NHL would be relieving the City of Glendale from the responsibility of vetting a buyer for the Coyotes and that the league would approach the City once they had found a buyer for the team. Honestly I’m not convinced, at this point, that this is entirely the case YET. For example, Darin Pastor texted Craig Morgan:

“Aggressively fighting to win,” was all Pastor texted while taking in the Kentucky Derby on Saturday. “No joke!”

Regardless of my uncertainty, that is serious negotiation horsepower being put to the ground in Glendale. Top Fuel level horsepower.

Ignore The RFP

Glendale hired Beacon Sports Capital to manage their arena management plan for 400 bucks an hour, providing them a retainer to begin their work. Beacon finally published a Request For Proposals (RFP) document some time ago. In that document were the criteria for prospective arena managers and some rules for submitting legitimate bids.

Both the NHL and Glendale are completely ignoring the RFP and bidding process. A statement in the RFP is:

INQUIRIES OR OTHER CONTACT WITH ANY OFFICER, AGENT, OR EMPLOYEE OF THE CITY OF GLENDALE REGARDING THE ARENA AND/OR THIS REQUEST FOR PROPOSAL, INCLUDING CONTACT BY PROPOSER’S CONTRACTORS, AGENTS, REPRESENTATIVES AND CONSULTANTS, COULD RESULT IN A PROPOSAL BEING DISQUALIFIED.

So the NHL and RSE could be disqualified? Um, okay.

Meeting Schedule

Meetings will begin in the morning and continue throughout the day. The schedule, as best as I have been able to determine, is mayor Weiers and Acting City Manager Dick Bowers kicking it off, most likely in the trophy animal festooned mayoral chambers. Pro tip? Watch the elk antlers (it IS a gigantic elk), they’ll put your eye out, man.

The council members will also meet with the group, three at a time so as not to run afoul of open meeting regulations. After those two meetings, I believe there’s an additional “staff” meeting.

The City Council has a workshop scheduled at 1:30 pm, so we should expect the bulk of the work to be done prior to then. The Council also has an executive session scheduled for after the workshop, and the arena management is (as usual) and agenda item for the closed door meeting. Anything discussed in executive session is privileged and is NOT for public consumption, continuing the non-transparent nature of the current council.

That means anything discussed in the private meetings all morning AND in the executive session may not become public depending on the attitude of the people involved.

What’s On The Agenda?

Up for discussion will be everything related to the city owned arena and what mutually beneficial arrangements can be made with the new owner of the Coyotes. Glendale has stated a July 1 deadline for everything to be complete. That deadline coincides with the new fiscal year and a LOT of important things for the Coyotes. In other words, there remain less than 60 days to complete the resolution of the Coyotes four year bankruptcy fiasco.

Capital Expenditures

Upcoming capital costs, including a new $2M high tech membrane roof, will be borne by the city for their building. Inspections and discussions are, to the best of my knowledge, complete and published and provided to prospective managers. The city has identified $5.6M worth of improvements they will be eating in order to keep Jobing.com the premiere facility that it currently is. Perhaps their killer sound system (best in the Phoenix area) is why they need $350k worth of “Power factor correction capacitor bank installation”?

Show Me The Money

It seems clear that the agreement painstakingly negotiated and re-negotiated between Glendale and the Jamison group will be the starting point for discussions. In order for an agreement to be considered mutually beneficial to the two parties, it’s clear that revenue directed toward the arena manager should come from the arena area as much as possible or it won’t be palatable to Glendale.

I have not seen the business plan the Renaissance crew have worked up, but I can make a few educated guesses what they will have included as revenue streams to be shared with or borne by the City of Glendale.

• Ticket surcharges – Current per ticket fees for both hockey and non-hockey events are likely to be raised to share revenue with the City.
• Parking fees – Free parking will be dead, fans won’t care and additional revenue. Because Westgate parking can’t be effectively separated from arena parking, some compromise from Westgate merchants will be necessary.
• Stadium/Entertainment district – There are likely to be some modifications to special district fees and taxation to be shared between the manager and the City.
• Bed tax/Lodging fees – The Renaissance Hotel adjacent to the arena (purportedly the source of the RSE name) could be the source of additional fees to be shared between the city and arena manager.
• Naming rights – Renegotiated naming rights for the arena will be shared with the City.

The Elephant In The Room

The elephant in the room is the annual arena management fee.

Hockey Partners (the Jamison group) had an agreement with Glendale to manage the city owned arena for an average $15M per year for 20 years. That ship has sailed, although I wouldn’t be surprised if that is the starting figure for negotiations.

The Glendale budget has had a $6M figure for arena costs in their budget discussions for a long time now. Very few people actually believe this is a realistic number, considering the utility costs alone run over $1.2M. Regardless, this is politics and reason isn’t necessarily a driving force in any decision when seven people with seven agendas need to agree.

The $6M number isn’t going to work for a legitimate professional arena manager, regardless of Coyotes ownership.Expect a compromise somewhere between six and fifteen. At the last home game this season, the mayor told ex Council Member Clark that a $10M figure could work. A $12M number (for a 12 year agreement) has been mentioned multiple times and is, I think, acceptable to at least two of the remaining groups interested in the Coyotes.

I really do NOT know where some of the Council stands on an agreeable amount, partly because of the current scramble from public safety to increase their budgets for the next fiscal year.

The 600 Pound Gorilla

The 600 pound gorilla is the term of the agreement and the dreaded “out clause”.

The City of Glendale will want a minimum ten year agreement, despite specifying a renewable five year agreement in their own RFP.

Depending on the arena management fee, the ownership groups may also want a long term agreement, perhaps as long as 20 years being requested again. The caveat is the “out clause”.

Since this fiasco began four years and one day ago, groups have come and gone with various escape clause requests. My objections to the former Ice Edge group’s initial proposal was the apparent intent to move the club north at the first opportunity. The reasoning behind my uncertainty, which to some extent remains with the new iteration, was the proposed plan to play some Coyotes “home” games in Saskatoon and an ill-advised statement from Ice Edge principal Keith McCullough about people in Phoenix not wanting to come to hockey games.

I would expect an agreement to have a seven year relocation clause per the NHL requirements.

Will It Work?

Without question a cooperative effort between the City of Glendale and a real owner for the Coyotes running Jobing.com arena could be profitable for both. While there is some buzz in City Hall that the mayor is holding out hope for his harebrained four-way arena management scheme, that’s clearly not going to work for this process.

The Coyotes have not had a legitimate owner for years, even the doubters would have to admit that if they chose to view the facts. The success of the Coyotes in this shortened season with poor on-ice performance has been remarkable. Season ticket sales are at their highest for years, attendance increased significantly despite severely reduced promotional tickets, and viewership for Coyotes games MORE THAN DOUBLED.

For example, Look at this list of non-hockey events at Jobing.com arena for FY 2012. It’s an absolute embarrassment and not likely to be tolerated by an aggressive marketing group once ownership is transferred from the absentee NHL. Other than the over 600k people (with attendance that obviously needs improvement), a little fewer than 148k people attended events at Jobing.com arena.

The facility is superb for concerts. Live Nation has US Airways Center locked up, but there are other large scale promoters (including AEG) out there that are, for some reason, not booking shows at the arena. Expect that to change with a vengeance.

Never count the Coyotes out.