In Breakaway of Its Own, Arizona City Scores on NHL’s Coyotes

Hockey was probably always going to be a longshot in the desert. But nobody expected what’s playing out in sunny Glendale, where the city’s done the unthinkable to the Arizona Coyotes.

Tired of doling out $15 million a year in subsidies, the Phoenix suburb last week abruptly cut its payments to the National Hockey League franchise by more than half. The move, pretty much unheard of in professional sports, was the latest blow for the Coyotes, the league’s third-lowest in attendance last season, holder of the worst win-loss record in the western conference and the butt of jokes.

What Glendale did “is almost the exact opposite of what happens in these extortion situations,” said sports economist Victor Matheson of College of the Holy Cross. “Typically the team extorts more payments out of the taxpayers.”

The city canceled its stadium lease contract with the Coyotes in June, done with funneling so much to them as part of the deal even as it was cutting municipal services and raising the sales tax. The Coyotes’ owners, who had rebuffed a suggestion they take a smaller bite out of the Glendale budget, sued. A long legal tangle seemed inevitable until the two sides suddenly settled. Annual payments will now be $6.5 million.

Anthony LeBlanc, the team’s chief executive officer and one of four owners, wasn’t thrilled with the process or outcome. “We didn’t like negotiating with a gun to our head,” he said. “Unfortunately, sometimes business reality takes over.”

Winter Sport

The reality was that Glendale seemed ready to battle it out in court, with hockey season starting in about 11 weeks.

More than a few civic leaders also appeared not to be terribly worried the Coyotes might pack up their sticks and leave. Only some locals would notice. A typical home game draws about 13,000 people, in a metro area of more than 4 million.

Hockey might have modest popularity in the Valley of the Sun because, even with all the snowbirds, a winter sport doesn’t compute where the average annual temperate is 72 degrees. Or it could be the team’s lousy performance of late. (One of the jokes: What’s the difference between the Arizona Coyotes and a mosquito? A mosquito only sucks in the summer.)

Or maybe there’s just too much competition in Glendale, which hosted the Super Bowl in February. The city is home to the University of Phoenix Stadium, where the National Football League’s Arizona Cardinals play, and to a spring training park for the Los Angeles Dodgers and Chicago White Sox.

Wringing Money

Glendale took on debt a few years ago to build Camelback Ranch for Major League Baseball; under fiscal pressure today, it drew the line at the price for the Coyotes.

Many cities are weary of sports subsidies. Las Vegas rejected bonds for a soccer arena last year, and the Atlanta Braves are heading to the suburbs because Atlanta Mayor Kasim Reed refused to bankroll a replacement of Turner Field. St. Louis, San Diego and Oakland haven’t responded enthusiastically to their National Football League franchises’ efforts to wring money out of them for new stadiums.

A raft of academic studies have concluded subsidized pro sports don’t typically expand a tax base or generate new revenue. But for Glendale, population 234,000, the issue was immediate: It’s strapped for cash. It has cut back on libraries, parks and police youth programs, forgone capital improvements and slashed 22 percent of its workforce.

The City Council unanimously approved the new lease deal for Gila River Arena, which anchors the $1 billion Westgate Entertainment District. Revenue from the 2.9 percent city sales tax is pledged to repay bonds for the $220 million stadium.

Called Credit-Positive

There was applause from some quarters for any deal that prevented the Coyotes from leaving. “The fact that they are keeping an entity alive to draw crowds is certainly a positive for their sales taxes,” said Todd Curtis, who manages the $280 million Aquila Tax-Free Trust of Arizona. Moody’s Investors Service called it credit-positive.

Standing up to the Coyotes was the right thing to do, said Gary Hirsch, a city Planning Commission member and critic of the municipal relationship with the team, which he called “ridiculous.” But Hirsch, who attends a few games a year, said the the goal wasn’t to banish hockey. “It was about giving the taxpayers of Glendale a deal they can live with.”

As for the Coyotes, LeBlanc said owners agreed to the city-friendlier deal because the uncertain future was making it tough to sign free agents before the season starts.

After emigrating in 1996 from Canada, where they were the the Winnipeg Jets, the Coyotes regularly made it into the playoffs but changed hands several times and were taken over by the NHL after a 2009 bankruptcy. The current owners bought the franchise in 2013 and sealed the $15-million-a-year deal, which would have cost Glendale $225 million over the next 15 years.

The Coyotes are set to meet the Pittsburgh Penguins for the first home match at Gila River on Oct. 10. Negotiations over the next stadium deal will start sometime after that; the contract signed last week expires in July 2017.