“Double Bubble” or The Real Reason Why Glendale Will Not Accept $50 Million

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By: Patrick Romanoski

 
 

 

 Glendale City Council decided not to vote on the issue as it might create anger among the fans…..but what will the taxpayers say when the City loses a chance at years of bond payments?

City Council of Glendale: The final move in 'going for broke'

City Council of Glendale: The final move in 'going for broke'

 

 

Phil Lieberman: The only council member with 'common sense'?

Phil Lieberman: The only council member with 'common sense'?

Glendale city Councilman Phil Lieberman had it right when he said:

“I would like to keep the team in Glendale. I am not sure that is what the NHL will do in the long run. . . . I believe the time is now to take the $50 million and put up with the fact that we will have to continue the debt service on (the arena). . .

He understands. He has seen the writing on the wall and knows that the NHL promises ring hollow. He knows that at least the $50 million offer is a safe ‘bird in the hand’ that will save his taxpayers tens of millions of dollars. No need to speculate on the alternative, it could leave the city in a massive hole.

This all started when Mayor Elaine Scruggs says she and other members of the city council and staff met “Mystery Man,” Steve Ellman March 12, 2001. At that meeting, the topic of discussion was how to tear down and rebuild a blighted shopping centre at 59th and Northern avenues.

Thirty days later (quite a salesman), Scruggs said, the council met and approved five memorandums of agreement to do business with Ellman and redevelop Manistee Town Center. Nov. 27, 2001, council approved five final development agreements that included the Glendale Arena construction and massive mixed-use around the arena.

What kind of marketing studies did the city do to prove an expenditure of this size was warranted? Did they do any studies to prove hockey had a large enough fan base to support a team in Glendale? Likely not, they were blinded by the flashy salesman who was turned down elsewhere. Hurry up and decide, going once, going twice … maybe he pointed out there were other boots in line for this deal? If any of this sounds like ‘city envy’ to you, you are not alone. A memorandum of agreement within 30 days?

To build the arena in 2003, Glendale issued revenue bonds backed by sales taxes as well as general obligation bonds for roads, sidewalks and other infrastructure around the Westgate area. The city issued $155 million of Series 2003 A and B sales tax bonds in July 2003 for the bulk of the financing under the name Glendale Municipal Property Corp. (the municipality put up $180 million of the $220 million price tag).

This is financing on a bubble, it assumes that the tax revenues will be forthcoming, a huge assumption over a 30 year period with an area that has no infrastructure. Consider also, that this was conceived & built during the much discussed real estate boom which recently burst causing massive financial upheaval. A bubble, built within a bubble. A sure recipe for disaster.

Not being in Glendale, online research can be limiting so I was not able to find out the amount or interest rates Glendale taxpayers are paying for the Series “B”bonds.

Some basic calculations using the known rate of Glendale Municipal Property Series A of 5.00% is fair. At least $670 million will be paid mainly out of taxpayer pockets. for over 30 years, one heck of a financial commitment. Do the taxpayers benefit? Sure they get an arena and a shopping district, places to spend their money, but was it worth it and who truly benefits? I think the answer is obvious – the usual suspects. The developers who have the work and the politicians who proclaim what a great deed they have accomplished. The two groups that never seem to be without each other, developers are well known to be among the largest contributors to election campaigns.

Could financing have been obtained that was less costly? And, it brings us back to the question of who holds the arena bonds? 

The city is banking on the sales-tax receipts generated from the arena and Westgate helping to pay the bonds from the arena but those taxes are decreasing. The arena lease is killing the franchise that they have counted on to draw people to the tax zone, a lease locked into paying for the bonds.

Added to that, the Coyotes, unlike most teams in the NHL, receive nothing from parking fees at the arena. Instead, they actually pay a surcharge of $2.70 per vehicle. That means instead of generating upwards of $10 million in revenue, they pay more than $2 million. In short, said one source, they are paying people to park at their building.

Steve Ellman: The promise of 'growth and prosperity'

Steve Ellman: The promise of 'growth and prosperity'

This is what Steve Ellman realized as he found himself searching for funds to complete his plans for Westgate, it was dragging him down. Fortunately for him, he was able to unload his problem on Jerry Moyes. Moyes is a man more likely to do a deal on a handshake than on a stack of contracts to sign. To say that he understood what he was getting into would be a gross mischaracterization of events.

The promise of only one more year for the Coyotes franchise by the NHL means that the city should not be hanging its hopes on any revenues from the Coyotes at this point. They should be actively searching for a solution such as suggested by Jerry Moyes, more concert dates. Since the hockey franchise does not attract enough people, city inaction will only lead to failure and a deeper than necessary debt will result.

According to information from Jerry Moyes and Phil Lieberman (council member), Glendale’s lost revenue from team relocation is estimated at $2.12 million per year and this combined revenue is a major part of Glendale’s $12+ million in annual debt payments on money they borrowed to build Jobing.com arena. Lieberman, in an interview on the Fan 590 radio pointed out that Balsillie’s offer would cover off 4 1/2 years of debt payments.

Further, concert revenues could easily replace lost hockey operation revenues while attracting a more diverse cross-section of an audience. That audience would also be more likely to spend on a dinner and drinks before and after concerts, generating greater tax revenue & jobs.

The $50 million offered by PSE to buy out the lease obligation would go a long way to cushioning the blow to inevitably come. Not only would it allow the city to pay down some debt, it would buy the time needed to create the conditions to attract 40 more concert dates per year.

Concertgoers come from a much wider spectrum than hockey fans and would likely be willing to travel further to see a favourite artist. The likelihood is that they would generate more tax revenue than the hockey fans ever could. The present course of inaction by the city is likely to sink it deeper in debt.

Instead of facing up to their mistakes Glendale City Council hides from the truth by playing ostrich and burying their collective heads in the desert sands. They are all (save for one Phil Lieberman) in panic mode. Moving the team will expose them and could cause the municipal government to be on the hook for the taxes without a tenant, a 26 year anchor around their necks.

Rather than face facts they listen to the platitudes of the NHL that has plans for escape. A league whose leader is motivated not by keeping the team in Glendale, but by where he is not allowed to move it. A leader that has shown he will stop at nothing to achieve his goals.

Is he above misleading the gullible members on the city council and payroll? Or is there more to this than meets the eye? In the end only two scenarios can be conjured up here that make rational sense.

Rather than take the $50 million, superficially, it looks like they have been swayed to turn down the superior offer for a hope, a prayer, a snowballs chance in the desert. “Will the next snake oil salesman please stand up, have we got a customer for you. They won’t have a whole lot of money for a while, but they are accommodating.”

or….

Exactly, whose fingers are in this development pie? Are the NHL itself and unnamed others tied up in this land investment & development? Does that give certain councillors more confidence in the NHL bid? Perhaps, otherwise why would the city council not approve of both bids? What do they have to lose?

 

Or maybe both. You decide!

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7 responses to ““Double Bubble” or The Real Reason Why Glendale Will Not Accept $50 Million

  1. That dingle-berry Ellman and Glendale are to be blamed for this whole fiasco! Those greedy asses took the team from downtown where it was viable and dropped them in a field 30 miles out on the west side of town… further away from the key customer bases of Scottsdale and way, way, way out east in Chandler. Now anyone not in Glendale gets to enjoy 30-50 miles of rush hour traffic to catch a game on a weekday evening. At least the drive home will be less traffic, just don’t plan on getting home before 11:00 pm or so.
    As for the parking, who would pay to park 1/2 a mile away from the stadium in a dirt lot? The stadium is now closed in on all sides by a movie theater(???), a hotel or two, bunches of trendy sports bars/eateries(read: over-priced, box chains) and the NFL stadium(sorry…can’t park in their lots).

    I live in Phoenix and I go to ~10+ games a year(and used to enjoy listening to them on the nhl radio, thanx for taking that away NHL). I will miss the ‘Yotes when they are gone, but thanks to greed and negligence they are currently positioned to fail here.

    Oh yeah, did you know the Superbowl contender Cardinals’ stadium right next door barely sold out their season opener at home last Sunday? The NFL had to give them an extra day to sell tix so they wouldn’t have to black out the game on local TV. Great sports market there in Glendale, Bravo politicos.

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  4. Good job sussing out what you could on the Bonds. Too bad your not employed by a traditional media outlet, most being bereft of investigative reporting anymore due to downsizing. Are the Reinsdorfs or companies close to them, including NHL governors or related companies Bond Holders?. Could be eh?. Wonder what backroom guarantees’ the leagues given to the City?. Could it be we see Reinsdorf re-appear when the klieg lights are extinguished, quietly acquiring the Coyotes by Christmas time?. Might be. City Manager Lynch spoke with far too much confidence to be taken lightly. This just reeks of the City, the NHL & Reinsdorf having this thing all tied up in a neat little package.

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