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Glendale may leverage City Hall

By Paul Giblin The Republic | azcentral.com Mon Jun 24, 2013 10:57 PM

Glendale leaders are considering using City Hall as collateral to borrow $30 million to help pay off other loans the city gave itself to cover sports-related debt.

The City Council is expected to vote on the matter today.

The proposed loan is separate from discussions city officials are having with the potential new Phoenix Coyotes owners to manage Jobing.com Arena.

The debt the city seeks to repay goes back to two $25 million commitments the city made to the National Hockey League to operate the arena in fiscal 2011 and 2012, said Diane Goke, the city’s chief financial officer.

Glendale borrowed $45 million largely from its own enterprise funds, which are self-sustaining funds for such services as water and sewer and are separate from the city’s general fund.

If the council approves the plan, city officials will seek outside investors to lease back the City Hall complex for 20 years by making a one-time, up-front payment of $30 million.

In 2010, the state made a similar move to cover gaps in its budget. Lawmakers arranged a sale and leaseback of government buildings, including legislative offices and the Executive Tower where the governor works, to net $735 million in quick cash.

“Is there a sign out front saying ‘Sale pending?’ ” Glendale Councilman Ian Hugh said.

“It’s a sad thing to have a city hall that’s paid for and we have to use it as collateral to pay the money that we’ve given the NHL, because that’s where it’s going,” Hugh said.

Glendale’s collateral would include most of the City Hall complex at the corner of Glendale and 59th avenues — a six-level office building, the two-level council-chambers building and a four-level parking garage.

The city would retain ownership of the complex throughout the term of the overlapping leases.

City employees would continue to occupy and use the structures, but if the city would default on its payments, the lender could take control of the buildings and re-lease them to other tenants for the remainder of the payback period.

That worst-case scenario is unlikely though, Goke said. If the city defaults, a lender more likely would renegotiate terms.

The city would use the investors’ quick cash to mostly pay back the enterprise funds, pay the NHL $5 million the city still owes, plus buy a $1 million upgrade to its computerized payroll system.

Glendale then would repay the lenders by leasing the complex for $30 million, with interest, in installments over 20 years.

The installments would start at approximately $1.5 million a year in 2014 and escalate over the repayment period, Goke said.

City officials expect to secure the loan with an interest rate between 5 percent and 7 percent, ideally around 51/2 percent, Goke said. The total payback amount will depend upon the interest rate the city gets, she said.

The deal is expected to close in July, said John Peterson, vice president of JNA Consulting Group, of Boulder City, Nev., which is working with the city to prepare the loan.

“The understanding here is that we would go out and negotiate this with a private lender, whether a bank or an insurance fund, something of that nature. It’s not intended to be a public bond, where you would go out and sell $5,000 increments to normal investors,” he said.

The City Hall loan is tied directly to the city’s past spending to keep the Phoenix Coyotes, according to a report prepared by city staff members for the council.

The city borrowed from several of its enterprise funds to pay the NHL to manage the city-owned arena in fiscal 2011 and 2012.

The NHL acquired the team in Bankruptcy Court in 2009 and has been trying to sell the franchise to private investors ever since.

Former City Manager Ed Beasley asked the council to approve the first $25 million payment as a bridge for the NHL to manage the arena as league officials completed what was expected to be a quick sale of the franchise to new owners.

Those negotiations dragged on, and the city made a second $25 million commitment.

The first year, the city borrowed $21 million from its landfill fund and $4 million from its sanitation fund.

The next year, the city borrowed $15 million from its water and sewer fund, $2 million from its technology-replacement fund and $3 million from its vehicle-replacement fund. The remaining $5 million has not yet been paid to the NHL, according to a city document.

The city had been making repayments to the various funds, but the City Hall loan is needed to ensure that funds are properly repaid and to shore up the city’s financial standing in the event it needs to secure future bonds, Goke said.

Paying back the enterprise funds will ensure services such as water, sewer and landfill have enough money to operate, Goke said.

Glendale officials considered but dismissed a similar proposal last year. That deal envisioned offering City Hall and the main police station as collateral to obtain a $41 million loan to cover payments to the NHL and on Camelback Ranch stadium, the city’s spring-training baseball park.

Goke could not readily cite another Arizona city that had used its city hall to secure a loan.

Phoenix Coyotes fans to take hit in wallet

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Phoenix Coyotes fans to take hit in wallet

Tickets, parking at arena will cost more in new era

By Paul Giblin The Republic | azcentral.com Fri Jul 5, 2013 11:06 PM

The Phoenix Coyotes became more expensive for Glendale four years ago when the city started paying management fees to the owners.

Now, professional hockey is about to get more expensive for fans.

The Glendale City Council approved a complicated agreement on Tuesday to keep the National Hockey League club at Jobing.com Arena.

The deal calls for the city to pay ownership group IceArizona $15 million a year for 15 years to manage the arena, and for IceArizona to reimburse the city more than $6.72 million a year.

The reimbursements will be comprised largely of pass-along costs to customers who pay for Coyotes games and other events at the arena through ticket surcharges and parking fees.

IceArizona partner Anthony LeBlanc said Coyotes fans appear more than willing to share the financial burden in order to keep the team from moving.

In fact, Coyotes fans have shown that they are among the most devoted in the NHL and perhaps all of professional sports. That’s evident because they’ve stayed loyal to the team during the past four years, since previous owner Jerry Moyes filed the team into bankruptcy and cast its future into doubt, he said.

“I’m a guy who understands what it’s like to be a sports fan,” LeBlanc said. “The fact that your sports team could be ripped out of your location for four years in a row and you stick with your team, to me, that’s a real testament to the level of support these fans have for the Coyotes.”

The fans’ willingness to open their wallets also is important to city officials who approved the deal, trusting LeBlanc and his partners to make good on their promise to return millions of dollars to the city.

“Is this the best deal that we ever could have gotten? I don’t know,” said Glendale Mayor Jerry Weiers, who voted against the agreement, which passed 4-3.

“Now it’s time to put that behind us. It’s water under the bridge. I can’t change what’s happened. All I can do now is make this the very best I can for Glendale, for the Coyotes and do everything in my power to make this successful,” Weiers said.

City officials had hoped to secure a clause in the agreement that would have allowed the city to back out after five years or a cumulative $50 million in losses. However, IceArizona executives said such a clause would kill a deal because it was unacceptable to IceArizona’s lenders, who provided about half of the $170 million purchase price for the team.

IceArizona executives have a similar clause that allows them to back out after five years or $50 million in losses.

In the end, the council voted to approve the deal, trusting the hockey executives’ promises that their turnaround plan will be successful and that the deal won’t cost the city more than the $6 million a year it had budgeted for the arena.

Some of the reimbursements will be derived through naming rights at the arena, but the majority will be financed through pass-along costs.

Parking, other fees

The prospective owners will charge parking fees of $10 a car for hockey and $15 a car for other events for as many as 5,500 parking spaces in the Westgate Entertainment District. Combined, the parking fees will generate $2.2 million a year for the city, IceArizona executives estimate.

In addition, they’ll add ticket surcharges of $3 a ticket for Coyotes games and $5 for other events, for a combined total of $3.2 million, they estimate. There also will be a secondary charge of $1.50 a ticket to create a $1.2 million reserve for the city to tap if IceArizona’s projections fall short.

Coyotes fans already were scheduled to pay a total of $4.45 per ticket for two surcharges in the 2013-14 season. The new formula will push the total to $4.50 per ticket, but fans won’t notice because surcharges are included in the price of Coyotes tickets, team President Mike Nealy said.

Team executives have no intent to raise the face value of tickets by a nickel because of the new agreement. Instead, the team will absorb the five-cent per ticket increase, so a $35 ticket will remain $35 and a $300 ticket will remain $300.

The change will be more apparent for non-hockey events. The new agreement will push the combined total of three surcharges from $5.90 to $6.50 per ticket for concerts, wrestling shows and other events, Nealy said.

Coyotes fan Joe Brewda, who splits his time between Whitby, Ontario, and Buckeye, said he believes fellow fans will be willing to pay the fees.

“There is hardly anywhere you can go that you don’t have to pay for parking. If I go to a Cactus League baseball game, I have to pay for parking, you know,” he said. “Why would I not expect to pay for parking to go to a professional sports game?”

Even with the ticket surcharges and parking fees, Coyotes games will be less expensive to attend than the games of most NHL teams.

“In Toronto, I hardly ever go to a game. I don’t want to pay $200. If people call up and say, ‘I have a couple of tickets,’ or whatever, then maybe I’ll go, if I want to pay $6.50 for an ice-cream bar,” he said.

Reaching out to fans

LeBlanc said IceArizona’s first order of business is to complete the deals with the city and the NHL, both of which should be accomplished within a month. Then, he and his partners — George Gosbee, Avik Dey and Daryl Jones — will focus on the team’s marketing, sponsorship and suite-sales programs.

They plan to change the team’s name from Phoenix Coyotes to Arizona Coyotes by the 2014-15 season. The NHL’s merchandising requirements make a quicker changeover impossible, Commissioner Gary Bettman said.

The prospective owners will retain the Coyotes’ primary logo and colors, LeBlanc said.

“I wouldn’t touch that logo. I think it’s the greatest logo in the National Hockey League,” he said.

The incoming owners want to reconnect with existing fans and attract new followers. One factor that will help is there are a number of grass-roots booster clubs already in place, though most of them went dormant during the past few years, LeBlanc said.

“In the next week or so, our plan is to reach out to them and get together with these fan groups and doing as much marketing and social media and involvement with them as we can,” he said.

The groups don’t need financial support but instead access and acknowledgment by ownership, he said.

In addition, the hockey executives want to increase the team’s staff and review the franchise’s sales and marketing plans.

“We’ve got to grow the organization,” LeBlanc said. “We’ve got to grow the talent. We’ve got a good core group in place, but we’ve got to provide them some assistance.”

LeBlanc, a sales and marketing executive for BlackBerry from 2000 to 2008, said he plans to move from Canada to the Valley during the next couple of weeks or months to personally oversee the efforts.

Dey said he’d prefer to extract LeBlanc from the business aspects of closing the deals with Glendale and the NHL so that he can devote his full attention to marketing the team.

If the ownership group didn’t already include LeBlanc, the remaining three would have sought someone with his type of background, Dey said.

“Having grown BlackBerry from effectively infancy through where it was when he left, there’s probably only a few guys who have that same skill set,” he said.

Committed to staying

The most important message that the new ownership group wants to convey to full- and part-time Valley residents is that the team is here to stay, Dey said.

“We’re committed to the marketplace, and we truly, truly believe that not only can the Coyotes be a very contending hockey franchise on the ice, once we institute our turnaround plan, this franchise should be at a minimum at the middle of the NHL in regards to revenues and evaluation,” Dey said.

Bettman said Tuesday’s City Council vote will boost the new owners’ prospects by ending years of speculation about whether the team will relocate.

“We’re looking forward to working with them to make this franchise the success that everybody believes it can be,” he said. “We’re focused on the team being here.”

Glendale resident and former Coyotes season-ticket holder Matt Hoffarth said he doesn’t know much about the IceArizona executives but thinks they’ve been saying the right things.

“The new ownership is going to spend the money and try to make hockey a more viable sport in this town and try to upgrade the season-ticket holders and sell that arena out,” Hoffarth said.

The new fee structures are manageable, provided LeBlanc and his partners do their part, Hoffarth said. “It can work. They’ve just got to get the right publicity and the right people behind it,” he said.

The parts probably are in place, said Brewda, the fan with lives in Canada and Buckeye. Overall, the Coyotes draw a devoted and enthusiastic crowd, he said.

“There are kids and parents. There are families having a good time. They’re polite. They’re nice people. They’re more knowledgeable about hockey than people would think,” Brewda said.

Moyes, the team’s previous owner, personally congratulated LeBlanc and Dey on Tuesday.

“I’m excited that they got it through and got it done. I just hope that the numbers come out the way they have them projected. I think it’s what’s best for Glendale, and I think, obviously, what’s best for the Coyotes,” Moyes said.

The deal with the city puts pressure on his successors to meet their own projections, but he’s confident they’re up to the challenge, said Moyes, a Glendale resident.

“If they continue to put a quality team on the ice and fans in the seats, the numbers should be OK. That thing should be fine. I’m for it, and I’m glad it happened the way it did,” he said.

Coyotes only to partially rape Glendale taxpayers

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Coyotes payment plan designed to soften blow to Glendale

By Paul Giblin The Republic | azcentral.com Mon Jul 15, 2013 9:21 AM

Glendale officials and potential buyers of the Phoenix Coyotes have agreed to a payment plan that is intended to soften the impact of an arena deal on the city’s budget.

The $225 million deal calls for Glendale to pay the potential ownership group $15 million a year for 15 years to manage Jobing.com Arena, where the Coyotes have played since 2003.

The ownership group has agreed to reimburse the city millions of dollars based largely on naming rights to the arena and a planned new stage within the arena, ticket surcharges and new parking fees at Glendale’s Westgate Entertainment District.

Coyotes deal brings new era for Glendale >>

The reimbursements are projected to range from $6.72 million to $11 million a year, based on revenues generated at the city-owned facility.

The payment schedules are designed to manage the city’s cash flow and to lessen the impact on the city’s coffers, which were important in reducing the city’s financial risk, said acting City Manager Dick Bowers.

According to the contract, the city will complete its $15 million annual obligation to the team in equal $3.75 million payments paid at the end of each quarter.

The team, however, is required to submit a portion of its reimbursements to the city on a continuous basis. Ticket surcharges on all events must be transferred to the city within two business days after being collected, according to the contact.

The team must transfer the city’s portion of parking fees to Glendale on a quarterly basis.

“In a perfect world, we would collect enough in revenue to pay each quarter in arrears, so it doesn’t have to be all paid up front,” Bowers said.

“That prevents us from having to go under, and then play catch-up,” he said.

Glendale officials signed the contracts Monday, less than a week after the City Council voted 4-3 to approve the deal.

The agreement will become final when the potential ownership group, IceArizona, completes its purchase of the team from the National Hockey League, Bowers said.

Dealings between IceArizona and the NHL are progressing, said league Deputy Commissioner Bill Daly.

“Things are going well. The target is to close the transaction and transition ownership sometime during the first week of August,” Daly said in an e-mail to The Republic.

Grant Woods, an attorney for IceArizona, said Mayor Jerry Weiers and city staffers deserve credit for driving a hard bargain.

“It wasn’t exactly what the ownership group wanted, for sure, but that’s how negotiations work. And at the end of the day, we did come up with an agreement that both sides support,” Woods said.

The payment schedule also takes into account IceArizona’s pledge to fill dates at the arena on a year-round basis, Bowers said.

The city initially had budgeted the arena management deal at $6 million a year, so with the team’s continuous-payment plan in place, the city will never be out more than $6 million a year, if the team’s projections hit their marks, he said.

IceArizona representatives did not return calls seeking comment, but previously said their projected reimbursements were based on conservative attendance estimates for both hockey and non-hockey events the arena.

Hours before last week’s council vote, IceArizona executives announced a partnership with arena and stadium management firm Global Spectrum, which is a subsidiary of sports and entertainment firm Comcast-Spectacor.

Reactions to Phoenix Coyotes deal >>

The firm manages University of Phoenix Stadium in Glendale and more than 100 other facilities worldwide.

“We are confident we can do great things together at Jobing.com Arena,” Comcast-Spectacor President Peter Luukko said.

By approving a deal with IceArizona, the council passed on two other potential management firms for the arena. Both had responded to the city’s request for firms to bid for the job.

Four firms submitted bids, but city officials said only two met the city’s qualifications. The qualifiers:

A partnership between SMG, a worldwide venue-management firm, the Arizona Cardinals, which operates Rojo Event Management, and Select Artists Associates, an event-booking agency.

A partnership between Phoenix Arena Development, which manages US Airways Center in Phoenix, and Live Nation Entertainment, which is the world’s largest producer of live music concerts based on total attendance.

Both bids were for substantially less than the amount the city authorized to pay IceArizona, but neither of the other contenders could promise to keep an NHL team playing at the arena, which drives business at Westgate at least 41 nights a year.

Both groups promised to increase bookings at the arena, though neither projected a specific number of events. Instead, the firms highlighted their bookings at other venues to back their projections.

Phoenix Arena Development noted that it books 130 events a year at US Airways Arena.

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Potential issues

Following the Glendale City Council’s arena decision, two city residents pulled referendum paperwork, but only one completed the second step of the process to form a committee.

The residents need to collect 6,956 valid signatures of Glendale voters by Aug. 1 to put the hockey matter on the ballot for Glendale voters. The signature count is based on 10 percent of the November 2012 general election. A specific date for a referendum election has yet to be scheduled.

The paperwork pullers:

Ken Jones — He came up short in two previous efforts to force citywide votes on past potential hockey agreements. Both of the past deals failed for other reasons anyway.

Jones is cautiously optimistic about the current signature drive, he said. “It’s a steep hill to climb, but if you don’t try, you’d never do anything,” he said.

He opposes the current agreement because the city can’t afford it, he said. “In our opinion, it’s corporate welfare from a town that has gone broke trying to be a sports mecca,” he said.

Robert Rebich — He had not formed a committee by Thursday. Rebich is still considering what course, if any, to pursue, he said.

For more articles on the millions of dollars the city of Glendale, Arizona is giving to the millionaire owners of the Phoenix Coyotes check out these articles