Saturday, August 29, 2009

A Rock > Glendale < A Hard Place

You can't blame the Glendale City Council for talking tough. An article last week in The Repulsive featured numerous quotes from Glendale officials...

"We have a contract and we want our contract fulfilled", Councilwoman Yvonne Knaack said. "We're going to hold hard on those issues."

"We're willing to work with whoever's there" said Vice Mayor Manny Martinez who added; "We want to do what's best for the city. We don't want to give any money away"

Councilman Phil Lieberman also chimed in; "How in the world can we come up with millions, no matter who wants it?" he said.

And so it goes.

Well yes, Glendale officials wants the arena contract fulfilled. And no, the City is not in a position to bail out the Coyotes and arena. We understand. Municipalities everywhere are having a pretty rough time balancing their checkbooks right now. And above all else, we're taxpayers first here at the X.

But this is sounding more and more like a football game. Talk is cheap. Very cheap. And much like on the gridiron, who talks the best game may not necessarily be the winning side.

Glendale leaders are desperately looking for bankruptcy Judge Tom Baum to uphold the lease as if it was a secured debt. The walkaway cost to any buyer breaking the lease without bankruptcy relief is north of $500,000,000. In the eyes of The City, that would be a fair pay off to cover the mortgage and replace the anticipated lost tax revenue.

But there's trouble on all fronts. The Moyes/Balsillie axis wants the court to throw out the lease and stiff The City. The low key folks at Ice Edge are talking to Glendale but there's no report whether they have made any progress. The Reinsdorf's have already taken their puck and stick and gone home. And now the NHL has bid for the bankrupt team and they have also made it clear that no team can continue to operate under the current lease. In fact their offer to purchase the Coyotes specifically excludes assumption of the current lease.

The bottom line is that no group is willing to take on the building and the lease as it stands now. And eventually Glendale is going to have to come to grips with that reality or face the prospect of an empty building anchoring their crown jewel development.

As incredible as it seems, Glendale's best short term hope right now may be for Jim Balsillie to win the right to bid on the team. If Balsillie survives on Wednesday, the NHL will immediately appeal Baum's decision and almost certainly delay the September 10th auction. That will push off the day of reckoning and once and for all kill any chance of the team moving this year.

If Judge Tom throws out the Balsillie bid, then it's the NHL and Ice Edge still standing, both of whom want the original lease reworked. And if The Ice Edge group doesn't have concessions agreed to by September 10th, then the NHL may win the auction by default.

Best case, Glendale's got time. Worst case, they've got one year. The NHL isn't taking over this team to operate it indefinitely. It will be sold again quickly. With or without help from Glendale. And without help from The City, it is headed out of town.

Ultimately, The City will have to come to grips with making financial concessions to the new owners in the form of a reworked business arrangement.

Now financial concessions can come in a lot of different sizes and shapes.

During the Reinsdorf negotiation with Glendale (ever think that would be remembered as the Golden Era of this mess) a document was leaked by the Moyes legal team that included some of the demands the Reinsdorf group wanted Glendale to consider. Very few people ever saw the complete document and what made the newspaper was the sexy stuff -- an 11.5% tax on the surrounding retail area, parking charges and penalty payments if the team was still losing money in 5 years. We suspect there was much more than that discussed. But at the end of the day, there was no deal made.

And to hear Glendale officials talk, there is no deal on the table. Yes, we will talk but no we can't give you a whole lot right now. We're a little short ourselves. But that is going to have to change if the Coyotes are going to stay. Glendale is going to have to figure out a way to channel more money to team and the arena. And they probably have to assume some risk that after a period of time if it doesn't work, The Coyotes are going to go away.

Want a bizarre suggestion? Perhaps the Indian Casino that is proposed for the Glendale area might like to pick up some of the tab in return for having the City welcome them rather than suing the group and forcing them to find another west side location. Far-fetched? Not really. In Pittsburgh, casinos that won the license to operate in the area are paying the majority of costs for the Penguins' new arena.

Glendale officials would be smart to cut their losses and make a deal sooner rather than later. If the NHL takes possession of the team under their bid, the team will be on a death watch until a lease concession is granted. No one is going to buy the team without a new lease. And the NHL has made it clear that bailing out the team is now a limited time offer.

Smart business people know when to cut their losses. The city fathers and mothers have a pretty clear picture of the economic impact of the Coyotes staying or going. They can only count on the bankruptcy court to hold off judgement day for so long. They are going to have to make a deal or face the consequences.

Experience tell us that the sooner you make the deal the better off you will be. Glendale's got a lot of skin in this game. They need to swallow hard, cut a deal and start this franchise towards a recovery. The alternatives are not tasteful. Not tasteful at all.


  1. great article. the city of glendale needs to WAKE UP. they've been dragging their feet for so long and they will be severely hurt if they cant come to terms with one of these groups.

  2. When is next City Council election in Glendale?

  3. What a great article. You are an excellent writer. You should work for the Repulsive. HA! HA!

  4. i agree with the election theroy, add mayoral election to that. it's time we dumped the whole bunch that seem to have a hidden agenda, that they are hiding behind all their rhetoric and lies.