Mayor of Scottsdale comments: Mar 28, 2011 0:38:51 GMT -5
Post by neufeld on Mar 28, 2011 0:38:51 GMT -5
Lane: Likely Coyotes buyer can take burden off Glendale taxpayers
1 commentby Jim Lane - Mar. 28, 2011 12:00 AM
A decade ago, Scottsdale and Glendale faced off in competing bids to become the new home of Phoenix Coyotes hockey. In the end, Glendale offered a much more lucrative deal to the then-owner and won the bid. In view of what has transpired since, with the amount of risk and cost associated with this debacle, we should be glad that Scottsdale lost.
Glendale borrowed $150 million to build a new hockey arena, only to watch the Coyotes struggle mightily in their efforts to attract more fans and stop losing money. Then, our West Valley neighbor became trapped in a thorny dilemma with the team's bankruptcy two years ago. If the Coyotes folded or left town, Glendale would lose its main source of revenue to help it repay its arena debts. Desperation creates an environment for desperate acts. As a result, the city temporarily waived rental fees and then offered up another $25 million in cash to keep the team afloat.
Now, Glendale has increased the risk for taxpayers by seeking to borrow another $116 million to facilitate the private purchase for a new owner. Throwing good money after bad can be a desperate strategy. In the past, cities engaged in these types of large "risk" capital investments with disregard for the true risk or downside.
There is an incompatibility in risk-capital markets with taxpayer bailouts or taxpayer assumption of risk.
The reality of this risk is not fair to a community that already has put so much of its credit on the line for this single private franchise. Glendale taxpayers originally shelled out $180 million for the facility. The potential buyer, Matthew Hulsizer, has a great opportunity to rescue the Coyotes and respect the existing taxpayers' investment commitment.
Hulsizer's success as a Chicago investment-fund manager has brought him personal wealth and access to financial capital to expand his business portfolio. As a man with considerable wealth, he has said, "I don't need the city's credit to buy the team." So why saddle Glendale taxpayers with risk in his personal investment in purchasing the team?
In a recent announcement, Hulsizer said the Coyotes, through his newly formed company Arizona Hockey LLC, will guarantee that Glendale will get its $25 million back and receive $75 million over 30 years from parking, rent fees and other revenue sources connected to the arena.
The Arizona Republic has estimated that Glendale will still be on the hook for up to $362 million with interest. This includes the hundreds of millions of dollars that the taxpayers have already invested to build the stadium and its surrounding infrastructure. This is not something that the taxpayers in any city can afford in the current economic environment.
For Hulsizer's guarantee to have any meaning, he has to turn the Coyotes' financial fortunes around. The team has never made a profit during the 15 years it has played in the Valley. So the danger for Glendale taxpayers is all too real. Hulsizer has said that, with a few "tweaks," he could make the team profitable.
If he truly believes that, he should take the lead - and the financial risk - and spare the taxpayers. It would appear he is in a position to gain everything, while Glendale taxpayers are in a position to lose everything.
I don't envy Glendale today. The city has gone to great lengths to hold on to the Coyotes. Losing the team would be a difficult challenge. Matthew Hulsizer can step in to spare taxpayers from further risk and keep the Coyotes in Glendale by putting his own money on the table in the purchase of this private franchise. How about it, Mr. Hulsizer?
W.J. "Jim" Lane is the mayor of Scottsdale.
Read more: www.azcentral.com/arizonarepublic/opinions/articles/2011/03/27/20110327lane28-coyotes-buyer.html#ixzz1HrznV1zC
Read more: www.azcentral.com/arizonarepublic/opinions/articles/2011/03/27/20110327lane28-coyotes-buyer.html#ixzz1HrzNsIMT