The proposal by an outside source that would allow the City of Glendale to purchase the Phoenix Coyotes became clearer in specifics as to how the city could purchase part of the team in new documents obtained by The Glendale Star.
An unnamed source within the city manager’s office said the city did reach out for more information on the proposal. Acting City Manager Dick Bowers could not be reached for comment.
While the National Hockey League by-laws state that, “… the maximum amount of equity ownership in the entity that may be sold to the public is 49 percent,” legal experts have said that by-laws can be changed, particularly when a municipality has funded 100 percent of the team’s expenses for almost half a decade without the ability to recover its costs.
The proposal sent to city council would have the city purchase 49 percent with an identified private investment group investing the other 51 percent. It is based on the terms currently being reported that the NHL has agreed in principal to with Renaissance Sports & Entertainment (RS&E).
That private investment group has not been identified at the time of this writing.
The city and private group would pay $85 million upfront in one payment, then would call for the NHL to receive an additional $85 million in the form of an interest bearing note maturing in five years.
Under the proposed plan the city and investor group would each provide for this initial payment in proportion to their ownership percentages. To finance the city’s portion of the upfront payment to the NHL, the city would issue taxable municipal bonds that would additionally provide funding for five years worth of arena management fees and expenses, in an amount of up to $14 million per year.
With debt service payments by the city on the bonds estimated to be approximately $2.5 million per year, the difference between this estimated payment and the city’s current budgeted $6 million per year for arena operations would be used to retire city debt prior to the bond maturity.
On top of that, any additional net operating income from the running of Jobing.com Arena would also be used to retire the debt before the five-year maturity. Based upon realization on the rate of revenues, the city would be in a position to retire a substantial portion of it’s approximately $115 million of new debt before the fifth year.
A source close to the NHL said that the league is aware of this newest proposal, and “… they are a little intrigued because it would keep the Coyotes in Arizona, which is what they want in the long run. A key point would be the private investment partner, but it wouldn’t be as big a stumbling block because it would only be 51 percent owner.”
RS&E is in negotiations with the City of Glendale to acquire a $15 million per year arena management fee to run Jobing.com Arena, and is the focal point of RS&E being able to purchase the Coyotes.
Councilmembers, while not speaking publicly on the matter, seem to be as confused on the matter as everyone else, with no actual numbers being offered by RS&E.
Reports have said that RS&E is willing to give the city a percentage of team ticket surcharges, parking revenue, arena naming rights and “other potential profits,” but do not expand on those with any actual dollar amounts.
City council is expected to vote on the proposal for RS&E July 2, and sources have said that if the city were to vote against the deal, RS&E would not be able to acquire the financing needed to purchase the team and keep them in Arizona.
Seattle, Wash. has been mentioned as a possible ‘Plan B’ for the NHL, with a group apparently willing to offer $220 million for the team to relocate them.
Also reported is that the NHL is willing to allow the City of Glendale a five-year payoff plan of the $25 million the city owes the league for running Jobing.com Arena since 2009, when the league purchased the Coyotes out of bankruptcy.
The five-year plan is tied to the city agreeing to the RS&E arena management deal.
Glendale has discussed mortgaging city structures, including parking garages and City Hall, to help pay for the Coyotes deal and the money owed to the NHL.