Is the Coyotes Case about the Infrastructure of America, Greed, and the abuse of the Taxpayer?

For the bullet summary, please go here.

The Phoenix Coyotes hockey team was never truly just a hockey franchise.

And, in bankruptcy court, the bidders are playing ‘shorthanded’.

When the Coyotes were moved to Glendale, the expectations of huge tax revenue and area development went along with it.

The City of Glendale didn’t necessarily care if the team won, as long as the tax revenues and Westgate District and related commercial and residential growth was assured. If the team was .500, that probably would have been good enough.

In 2003, when the arena was set to open, there was much hope from mayor Elaine Scruggs, who said:

Jobing.com Soon to be 'White Elephant'?

Jobing.com (soon to be 'White Elephant'?)

“This is a huge victory for the city of Glendale, Glendale residents and for hockey fans throughout Arizona,” said Glendale Mayor Elaine M. Scruggs. “The arena and surrounding development will positively impact Glendale and will eventually become the heart of the West Valley.

“This project came down to a business decision that represented an incredible economic development engine for the western area of our city. What especially makes this a win-win situation for us is that Ellman will also redevelop the site currently occupied by the Manistee Town Center shopping mall at 59th and Northern avenues into a mixed-use commercial center.”

From a Canadian perspective, we don’t necessarily get wind of all the issues that affect the future of this hockey team. We might be inclined to look at the case as a simple question of the City of Glendale being able to grant subsidies to the new owner and keep the team in it’s Jobing.com home, or not. Well, it would seem to be a ‘whole lot more’ complicated than that.

Looking again at the ‘players’ in the game, we know that Jerry Reinsdorf has been approached by the City of Glendale and the NHL to be the new ‘White Knight’ to save the franchise. And, let’s not forget about the growing suspicion surrounding the ‘oh ya, we were going to tell you that part later’, Michael Reinsdorf factor, reiterated in this piece from:

Brahm Resnik 
2009-07-17 13:04:37

 

The younger Reinsdorf’s connection does raise questions about whether the Reinsdorf bid group has gained an unfair advantage during the auction process. Michael Reinsdorf’s company is also a registered client of John Kaites, the lobbyist heading the $148 million Reinsdorf bid. The bankruptcy trustee has already challenged the NHL’s obvious desire to steer the team to Reinsdorf.

Ah, it does support the Glendale City Hall Reporter, Rebekah Sanders piece that talked about the ‘Tangled Web’. She missed the part about where the real money lies though. Should we ask ourselves how she got a hold of the $5,000 figure and the $48,000 figure? Nah, after all, the Goldwater Group would be embarrased, because they have had to sue the City of Glendale to get any information. Whoever provided these facts to Rebekah had better stay off the radar for a while.

We also know that a major creditor in the case, Michael Dell (founder of Dell Computer Corp.) is in the mix, as the team owes his investment company, SOF Investments, over $80 million (see details of arrangement). We, from Canada might think it would be a no brainer. Why wouldn’t Michael Dell stand up and say, “heck, give me the deal where I get my money, and I’m outta here”? Well, again, it’s not that simple.

Remember the offer from Reinsdorf, that claims it will need to rework and renegotiate the secured debt? Well, that would mean Reinsdorf would have to convince Michael Dell to take his payments back over time from a franchise that is in doom and gloom mode. Again, why would he consider this? Crazy right? Has Jerry lost it? Or, did Jerry know that it would likely be ‘A O K’ with Dell?

The attraction to the Coyotes hockey team has always been an issue of land development opportunites and great deals with government, and the profits that would go along with them. Nobody in their right mind would take this team with the clear math currently in place. As soon as Moyes and Ellman broke up the land from the ice, that’s when the ‘Coyote’ should have chased the Roadrunner out of town.

Are we to believe, as mentioned by the Reinsdorf camp, and now even by the new Canadian/American mixed coalition represented by Daryl Jones (Research Edge LLC) that trying to share in a little bit of food and parking is going to cut the mustard? ‘Little things add up’ is the argument? Were we  born yesterday?  And, if I might add, if Daryl Jones and his group thinks they are going to break into this game with nickel and dime thinking, they had better think again. Like all politics, what would make sense from a genuine, honest angle usually doesn’t win the prize.

So, to the point. Again, us Canucks haven’t necessarily been fed all the true reasons here as to what the implications and tight weave may be, but here are some interesting facts.

There is a development called CityNorth, off Loop 101 in Phoenix that is in a huge legal battle with the city of Phoenix and a coalition of investors over subsidies. Now, when I say subsidies, this brings to mind the case in Glendale, right? Exactly. The bottom line is this:

CityNorth

CityNorth

The Arizona Supreme Court said June 2 it would hear the CityNorth case, which looks at the legality of a $97.4 million tax subsidy the city of Phoenix wants to offer Chicago developer Klutznick Co. to help get the mixed-use development built.

The Wall Street Journal adds:

Two years ago, the city signed a contract with developer Thomas J. Klutznick, who is building an outdoor mall. The city has to rebate to him $97.4 million in sales taxes over the next 11 years, in return for which it gets 200 parking spaces for commuters catching a municipal bus. The mall, called CityNorth, will be home to an Ann Taylor Loft and other retailers, as well as residential apartments that are already being rented. Arizona Republic columnist Laurie Roberts summed up the deal earlier this year by noting the city will spend about $487,000 for each commuter parking spot. “Wouldn’t it be cheaper to just chopper them in to work?” she wrote.

 

 Here in Canada, where we just want more hockey, what is important is this:

But Susan Freeman, a Phoenix attorney representing Balsillie in the bankruptcy proceedings, said the CityNorth case could hinder’s Glendale’s ability to offer incentives and aid to the Coyotes.

Important to note, is the fact that our friends in the Goldwater Institute are all over this one as well:

The Goldwater Institute watchdog group is challenging the legality of the CityNorth incentive in court, saying it violates the state’s gift clause rules.

Freeman said if the Arizona Supreme Court rules against the CityNorth subsidy from Phoenix and puts greater restrictions on such incentives, that could hamstring economic concessions Glendale might be able to offer the Coyotes. The NHL team has lost more than $300 million since moving to the Phoenix market in 1996 from Winnipeg.

In previous posts we looked at possibilities that the attraction to Glendale had to be in land development, and the coalition that was ‘in the wings’ was not being presented. As such, it was a bit of a question and a mystery. And, as the lawyer for the ‘group’, John Kaites had said, it will take a lot of people to make the Coyotes succesful. I think we know the real truth. It will take a lot of people hungry to feed off the land subsidies that will make this deal fly, right?

The truth is, as a standalone opportunity, in light of the tax crunch the City of Glendale has had with the failing team, there is little to no room to share tax revenues with the new owners, regardless of the CityNorth results.

But, it is very interesting to examine another aspect of this case that brings us back to the question, “Why would anyone want a piece of this team, or want to wait to be paid as creditor?”. The answer lies in private corporations proffiting off the backsides of the taxpayers. Governments are a great source of ‘easy money’, and the problem governments get into, is they start to rely on private corporations to fund infrastructure and land development opportunities. When the private corporations and investors become too powerful, and the municipalities too desperate, this breeds the possibility of taxpayer exploitation.

The players in this game again are Jerry Reinsdorf as the proposed new owner, and his ability to rework the debt, including Michael Dell’s share.

Well, Michael Dell may have a lot of reasons to continue to support this cause, as he is in pretty deep already, with one of his other companies, MSD Capital. You see, MSD Capital is one of the investors in the CityNorth deal for subsidies.

This comment from the article says it best:

No doubt about it: Phoenix is broke. Mayor Phil Gordon is flying to Washington to beg for federal bailout bucks so frequently, he should probably register as a lobbyist.

Michael Dell

Michael Dell

So it’s downright bizarre that, in the midst of this nightmare, city leaders are fighting desperately to give away $97 million to wealthy investors. Never mind all the neighborhoods in this burg that have lost senior centers, bus routes, and library hours — we’re hoping to give our money away to an Arab emirate, a wealthy Saudi family, and even Michael “Dude, You’re Getting a” Dell.

So, when Jerry Reinsdorf came in with what we would consider a ‘no brainer’, are you kidding offer, we weren’t necessarily privy to the real sale here. We were’t advised that this wasn’t about the Phoenix Coyotes, Jim Balsillie, Gary Bettman, or the dude getting a ‘Dell’, it was all about the big money……how private corporations, and the players in that game, make lots of money from average taxpayers like you and me.

I guess things really aren’t as they would seem. And, isn’t it nice that there are people that don’t mind keeping the Coyotes in Glendale? Golly gee, shucks! Unfortunately, it is not likely for reasons that we would expect from the next ‘White Knight’. And, note to Daryl Jones and Research Edge, you might have to learn as did Jim Balsillie ; logic doesn’t always prevail.

Obama

Obama

Now things become a little clearer perhaps, when Ron McLean interviewed Gary Bettman on HNIC. When Bettman said it wasn’t about Hamilton vs. Phoenix, or Jim Balsillie, or Gary Bettman (himself), it was about the powers that be. Well, it may not have been about the powers that we would expect. That is, within the NHL Board of Governors. It may be an issue for the  U.S. Government to deal with. It is a fair bet that when Ron McLean spoke of the ‘Investment Bankers’ that would build arenas for free, and Gary (Bettman) said he wasn’t sure what he was talking about, I think it’s fair to say he knew exactly what he was talking about.

At first,  it struck me as odd when I heard it mentioned that the U.S. Senators were behind the Coyotes staying in Glendale. I could not understand why politics would play a role. But, with taxpayer dollars at risk, it does become a political issue.

Could this story be touching on a ‘much bigger’ question? Time and some more political wrangling may tell.

 Maybe I was wrong. Maybe this is just as good as the O.J. Simpson trial.

As for our efforts to bring the NHL back to Canada where it would be important for the pure  and simple sake of hockey enjoyment and it’s true fans, I will agree with Jim Balsille.  Where politics is involved, the only way in is through the ‘side door’ .

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6 responses to “Is the Coyotes Case about the Infrastructure of America, Greed, and the abuse of the Taxpayer?

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  6. Pingback: So what ‘they’ are suggesting is that the court can be manipulated? « Make It Eight, eh? Hockey again for Winnipeg!

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