The City of Seattle: The NHL’s New ‘Plan B’

A horse is dangerous at both ends and uncomfortable in the middle — Anonymous

For over two years, an investment group led by Seattle native turned hedge-fund manager Chris Hansen and Microsoft stalwart Steve Ballmer worked diligently to bring the NBA back to the nation’s 12th largest market. The stars and moons aligned to the point where what would normally be considered the most challenging part of the effort — the political process — worked itself out, with an arena deal signed by all parties and funding mechanisms firmly in place. Now, all it takes is a franchise to see greener pastures within the shimmering waters and fair summers of the Emerald City. Hansen and company even have money to burn, just in case they need a little “convincing”.

And yet, such an opportunity has thus far eluded Seattle. The Sacramento Kings came within an eyelash of being the arena’s first major tenant, but despite Seattle being a bigger market with more corporate dollars and undoubtedly far greater long-term opportunity for the NBA, the league spurned the Hansen/Ballmer group’s significantly higher offer in favor of retaining the team in the California capitol. Fresh off of that stinging defeat, it would appear the Phoenix Coyotes situation will likely mirror that of the Sacramento Kings, with an 11th hour push by the city of Glendale and the league all but certain to keep the team in the desert.

The troubled state of the Coyotes franchise

The NHL has owned the Coyotes franchise since 2009, following former owner Jerry Moyes’ bankruptcy. Although successful in recent years on the ice, that success has not translated itself into attendance, with the team perennially finishing at or near the bottom of the league. As a result, this Forbes report valued the franchise #30 overall in November, 2011 — dead last in the NHL.

Despite the grim revenue and value reports, a group called Renaissance Sports Entertainment has agreed to pay $170 million to purchase the franchise from the NHL, with a catch: the group wants $15 million per year from the city of Glendale in order to manage Jobing.com arena — approximately $9 million more than what the city has budgeted.

Both sides have reportedly been working to bridge the gap, with Renaissance possibly giving the city a percentage of gate receipts, parking revenues and even the naming rights to the arena. No agreement has been announced, but both sides appear confident one will be hammered out. Glendale spokesperson Julie Watters said in a prepared statement, “The city of Glendale is continuing negotiations with the Renaissance Group and is hopeful to have information early next week with the council’s direction for arena management. We are also hopeful, at that time, to discuss more specifics of the agreement, such as deal points. Our current anticipation is to have a negotiated deal brought forward for the council to vote on publicly on Tuesday, July 2nd.”

Although considered highly unlikely, were the vote to fail, a “Plan B” is already in the works.

Seattle: the NHL’s ‘Plan B’

If the Glendale city council ultimately cannot ratify a new lease agreement, the NHL has indicated that the team will likely be sold to another investment group. Rising to the forefront has been New York investors Ray Bartoszek and Anthony Lanza. Bartoszek is said to have ‘deep roots’ in the Puget Sound region, including extended family. Reportedly, the two have agreed to pay upwards of $220 million for the Coyotes. Further reports have former Coyote Jeremy Roenick a part of hockey operations if the team is sold to the Bartoszek/Lanza group.

Adding fuel to the suddenly smouldering fire, the Vancouver Canucks were recently informed that Seattle’s Key Arena was unavailable for lease to their AHL affiliate, despite having no major sports tenant at present.

The NHL has ramped up the pressure during the past few weeks. Gary Bettman has spoken with Seattle Mayor Mike McGinn about a possible move of the Coyotes to the Emerald City in time for the 2013-14 season, with Key Arena house the team until the new arena can be built. Poorly suited for hockey, Key Arena would therefore require some retrofitting and refurbishing. Investor Chris Hansen has pledged to put $6 million toward modernizing the facility.

At first glance, Seattle would seem to be an ideal market for the NHL. Situated a mere 120 miles from Vancouver, B.C., a new Seattle team would give the Canucks a natural geographical rival. Seattle is also just 440 miles from Calgary, and well within short flights to most western conference cities. Quebec City, with a new arena already in place, is also prime for a relocating NHL franchise, but with the Coyotes already in the west, Seattle would be the more logical destination.

Likely outcome

Despite the advantages Seattle has in terms of geography, market size, hockey history, corporate sponsorship and money, it seems increasingly likely that the city of Glendale will come to terms on a new lease with the Renaissance group. The loss of the Coyotes would be a serious economic blow to the region, one which would be extremely difficult to recover from when tax revenues, business livelihoods and other factors are taken into account. Unless negotiations collapse, expect to see the council vote to pass a new lease agreement when it comes up for vote on July 2nd.

Seattle was the NBA’s ‘stalking horse’ during the Sacramento Kings saga, and to some degree appears to be assuming the same role for the NHL. With area enthusiasm for both the NBA and NHL at a fever pitch, let’s hope that repeated disappointments don’t turn that horse into a nag.