Editor's Note from Jordan: Promoting this to the front page to give it the views it should receive. My thanks to Greg for putting this together after contacting me yesterday. This is certainly an interesting dialogue and despite our feelings regarding GWI and their motivations, seeing them attempt to express them on "paper" is informative. So thanks again to Greg for taking the initiative on this one and getting it put together as a FanPost.
I'm Greg Dunaway and I'm a longtime Coyote fan. I was at the first game in 1996 and while I've split time between CA and AZ because of work and school, I've always been passionate about hockey both as a fan and as a player. Over the last year, Coyote fans have had their collective hearts ripped out by the constant ups and downs of ownership issues. We've faced it from all sides- from smug Canadians, from other NHL fans about our perceived "lack of knowledge" to angry missives by local politicians.
To make matters worse, all we really hear are secondhand rumors from not so trustworthy sources. To that end, I decided to email the Goldwater Institute's Clint Bolick to try and see if he would engage me and answer some of my questions. Clint answered all of my questions and I am grateful to him. Throughout our conversation while I acted antagonistic, he returned with calm, cool and rational answers. It certainly turned my attitude from a "F*&* these guys" to a "Sh** we need a solution- fast."
I still think it is in the best interests of EVERYONE in Arizona for the Coyotes to stay in Phoenix. However, as I wrote to Clint, that while we may disagree, at least I understand why. I hope this helps other Coyote fans in understanding why there is seemingly no end in sight for us (that's my opinion after our exchange- the GWI doesn't seem willing to budge), but you can tell that Clint is passionate in why he is against the sale and that it is not an easy thing for him to do as a sports fan, but instead is a matter of principle for him.
My thanks to Clint Bolick for taking time to answer my questions when he didn't have to. While I fired off email after email, Clint remained calm and understanding- something I doubt I could do if I were in his shoes. Here are the unedited emails and at the end- statement from the GWI's president.
UPDATE 03/09/2011 - Added reaction to Bettman's statement.
Dear Mr. Bolick,
As a politically oriented conservative, I normally find myself siding with you on nearly every issue.
However, when it comes to the Phoenix Coyotes deal- ENOUGH IS ENOUGH.
As citizen, taxpayer and hockey fan, I am exhausted with the hangups in this deal. The Hulsizer deal is not perfect, but it is a hell of a lot better than watching a team and the primary draw for attendance in a huge public funded building fly away to Canada. You and the Institute have created a catch-22. The fans need to come back to make the team solvent, but the fans won't come back without the commitment of the city and owner. Nothing is being accomplished and frankly, I'm sick of it.
Drop the lawsuit. Move on. Fight Obamacare. Do anything else. We've had enough.
Thank you for your perspective.
I appreciate your response.
As I'm sure you are aware, the attached facebook photo of you has recently come to light. You can't be serious?
Are you really this sophomoric and childish?
Is it all a big joke to you? It isn't to the thousands of people whose livelihoods depend on the success of the Coyotes and Westgate.
I hope you their concerns SERIOUSLY when you continue to drag your feet for the sake of headlines.
Dear Mr. Dunaway,
When we’re being threatened with a $500 million lawsuit, yes, I do take it seriously. However, if there is a chance to inject some humor in a very tense, high-stakes situation, I will do it.
I own that sweatshirt because I happen to be a fan of the Coyotes. I hope the City can fashion a lawful deal.
We are not “dragging our feet.” We are slogging through 10 years of complex legal documents that meander through bankruptcy proceedings, and which the City would have been well-served to produce a long time ago.
Thanks for writing.
The City would have been well served so that the might Institute could lord over the proceedings? I don't understand. What exactly are we to gain by losing half a billion dollars a year in revenue from the Coyotes? Certainly your star is rising in the conservative world, congratulations. I get that- but as a watchdog you are supposed to act in the public's interest. Losing a team is a lose-lose FOR EVERYONE. If there were 4-5 potential owners I could understand this stonewalling. We have hours, not weeks.
Instead of posturing, when will the GWI try and be proactive to find a solution? I would rather my tax dollars be spent on a full stadium than on an empty one sitting uselessly for 90% of the year.
Are you and your institute interested in a solution? Or is the lawsuit your ticket to fame?
I do appreciate your willingness to respond to me.
I am responding again because you clearly have a sincere concern, but I have to tell you how off-putting it is to question our motives. Even though I strongly disagree with what Glendale has done here, I assume their motives are sincere, and frankly I assume the motives of most of the people we square off against to be sincere. I have a nearly 30-year record in the law. GI has a 25-year record in public policy. There is no one here who could not earn more money, or more fame, elsewhere.
You must be unaware that Goldwater has had a public records lawsuit against Glendale for two years. Glendale’s attorney, Craig Tindall, instructed a subordinate (in an e-mail inadvertently sent to us) to “play with” or “ignore” our requests, despite court orders to comply. Our role is to determine whether there is a constitutional violation. We cannot do that until we have scrutinized hundreds of complex, interlocking documents. If the City had provided those documents earlier, or conducted its negotiations in the sunshine rather than behind closed doors, we would be much further ahead of where we are. But it did not, so we are where we are.
Oddly, you accuse us of wanting to “lord over” the proceedings, yet then complain that we have not been proactive in finding a solution. Which is it? We have put a solution on the table weeks ago: if the parking rights are as valuable as Glendale and Hulsizer contend, then he should be on the hook if the revenues prove insufficient, not the taxpayers. I am hopeful that the deal will move in that direction.
I appreciate the thoughtful response. Hopefully this email will clarify my concerns and I can leave you in peace.
Glendale included opinions from two separate law firms indicating that in their opinion the deal was legal. I'm assuming that you disagree with these firms.
Since you and the institute are aware that the NHL could move the team tomorrow, what is it exactly that you are waiting for? I've listened carefully to interviews given by both you and COG, they claim they are compliant with your requests, you claim they are not. So what is it you are looking for? Where's the smoking gun? Is it some hidden document in a drawer? As someone who is paying attention, I can't tell. So the average citizen is going to be clueless.
And while this may not be a fair argument, you must realize that with Gary Bettman flying into town today that the NHL is serious about moving this team. Is the economic disaster that moving a team entails worth it for a constitutional violation that you haven't found yet? If your position is that you haven't sued because you don't know- then we've really come to it. Can you/are you going to find something in the next 72 hours? This is what bothers me the most. You have to know, as a Coyote fan, that given our history, the future is brighter with Hulsizer, we can can return to solvency and the glory days of sell outs at AWA.
If two legal firms (whom as you were thoughtful enough to indicate probably are playing fair, as we hope everyone on all sides is) were able to determine that the deal did not violate the gift clause, why are you "dragging your feet?" That is what lead me down the road of what could be motivating you other than a desire to a) see the Coyotes leave or b) increase visibility for GWI. I'm not going to comment on the implied conflict of interest with the Kendricks, I don't know enough about it, so all I can think is that you arenot going to find something, but could perhaps be interested in a "moral victory" via silence.
If you don't believe you can determine the legality, you should say so. Your silence is destroying what remains of the public's investment in Westgate and the Coyotes.
While we may disagree I still very much thank you again for your time,
Dear Mr. Dunaway,
Thanks for your response. I’ll forward you our president’s statement from yesterday, which explains what we have been looking for.
I appreciate your clarifications, these sort of dialogs are helpful in understanding where we stand. While I still don't agree with the GWI's stand, I do understand more of the "why."
To a successful resolution,
Last question, I promise. Do you or the institute have an opinion about the law firms that Glendale hired to analyze the deal?
I noticed you didn't get a chance to answer that question in our last exchange. These emails have been very illuminating and would help the thousands of Coyote fans across Arizona understand why GWI is taking this stand.
Thanks---that is one purpose of putting out the statement. I am a huge sports fan (my colleague Carrie Ann Sitren even more so)---it is a test of one’s principles to apply them against something you care about.
The law firms who were asked to analyze the deal were given a set of facts by the City, including the assumption that the team owned the parking rights. I would not have expected those firms to dig beneath what the City told them. Our job is to do just that.
News reports indicate that renegotiations may be under way, but that Hulsizer may not be willing to put more skin in the game. Fingers crossed that something positive is worked out.
UPDATE: I asked Clint about Bettman's assertion that the GWI has all the documents they need to prove that the parking lot is OWNED by Glendale:
Wish we knew what those docs were---the ones the City and buyer have identified establish the opposite.
Goldwater Institute CEO Darcy Olsen’s Statement on Rumored Glendale Lawsuit
Saturday afternoon I learned from a reporter that the City of Glendale intends to file a lawsuit against the Goldwater Institute. We have not yet been served, but if the City files a lawsuit against the Institute, it will be frivolous and unsuccessful. The Goldwater Institute’s efforts to obtain public records and to determine the constitutionality of the Coyotes deal advance the public interest and are fully protected by the First Amendment.
Let me be clear: the Goldwater Institute will not stop this investigation.
The Goldwater Institute files lawsuits when public officials abuse the law and all other options are exhausted. We also file only when we have all the relevant facts to properly assess a situation. Because Glendale continues withholding public documents, in spite of a court order to release this information to the public, our analysis of the deal remains incomplete.
The City of Glendale has been under a court order to provide the Institute with all records and documents pertaining to the Coyotes sale since July 2009. On Thursday March 3 during a press conference, Glendale Mayor Elaine Scruggs said “Glendale has provided the Goldwater Institute with everything they have asked for.” The statement was clearly misleading. During the following 36 hours, the City proceeded to release an additional 750 pages of documents to the Goldwater Institute.
Glendale has been deliberately recalcitrant in providing public records. In one email City Attorney Craig Tindall specifically directed his deputy attorney to “play with” or “ignore” the Goldwater Institute’s request seeking to view public records subject to the court order.
The Institute has continued meeting with City staff and attorneys to discuss our concerns about the sale. In the last three months, Goldwater Institute attorneys and staff have met with and had phone conferences with Glendale and buyer Matthew Hulsizer at least a dozen times. In addition, the Goldwater Institute has extended an invitation to Mayor Scruggs, Mr. Hulsizer, and NHL Commissioner Gary Bettman to gather for a meeting that would be open to journalists.
Because so much of this deal has been conducted behind closed doors and out of public view, we believe any future meetings or phone conferences should be conducted openly and transparently. We believe the media should be able to report first hand on the interactions between interested parties.
We recognize that Glendale has dug itself into a financial hole by building the taxpayer-funded Jobing.com arena for a team that has proven financially unsustainable. However, the City must find a way to improve its financial situation within the boundaries or the law. Likewise, we hope the city can find a way to attract great sports teams like the Coyotes without the unconstitutional use of taxpayer funds.
The Gift Clause of the Arizona Constitution prohibits gifts by subsidy, loan or otherwise to private individuals or corporations. Under the current structure of this deal, Glendale will send $100 million to Mr. Hulsizer to assist him in buying the team and will pay him another $97 million to manage the arena for the next five-and-a-half years. Giving public funds to the buyer of a sports franchise raises red flags under the Gift Clause.
In Turken v. Gordon, the Arizona Supreme Court ruled that a city may provide financial support to a private enterprise only if it receives a tangible benefit of roughly proportionate value. That does not include indirect benefits, such as jobs or tax revenues, but only direct benefits that make the transaction a valuable contract rather than an illegal subsidy.
The $100 million payment to Mr. Hulsizer is primarily in return for the sale of parking lot revenues by the team to the city. However, the City may already own a significant portion of those rights. If so, the city essentially is “selling” parking revenue rights to itself, which would be an obvious sham and a clear violation of the Gift Clause.
The city insists the team owns the parking rights. Unfortunately, it has not yet been able to demonstrate that it does. It has identified numerous documents in support of its assertion, but they tend to show the opposite. Notably, the current agreement recites that “to the best of [the team’s] knowledge, it was the intent of the City and Grantor’s predecessors in interest in connection with the Arena Facility for Grantor’s predecessors in interest to have the right to use and, to some extent, in other ways exploit 5,500 vehicular parking spaces on or in the immediate vicinity of the Arena Land.” That is hardly the certainty required to demonstrate that at some point over the past ten years, the city transferred parking rights that are now contended to be worth as much as $100 million.
Even if the team owns some or all of the parking rights, the value must be roughly proportionate to the compensation paid. The city has given the public the impression that it would use only parking revenues to repay the $100 million in bonds used to finance the payment to Mr. Hulsizer. However, when the draft bond statement was released, it was revealed that the city is pledging excise and sales tax revenues if necessary to repay the bonds. That is extremely significant, because it means that if the team fails again—at any point over the next 30 years—or if parking revenues are insufficient to repay the bonds, Glendale taxpayers will be on the hook to repay the bonds through their tax dollars. The financial consequences could be catastrophic.
The city initially used two studies for the contention that parking revenues would be sufficient to repay the bonds, one by TLHocking & Associates and another by Walker Parking Consultants. We hired a national consulting firm to review those reports. Our consultant found that the city’s reports relied on untenable assumptions and, even then, the projected revenues would be insufficient to repay the bonds, leaving the shortfall to the taxpayers.
The Institute expended $7,000 for this evaluation, only to discover the city withheld another study by Walker Parking Consultants purporting to justify the payment to Mr. Hulsizer. We have not yet evaluated the new study as it was only recently provided to us, but the fact that the city found it necessary to pledge sales and excise tax revenues corroborates the view that parking revenues will be insufficient to repay the bonds.
There is an easy solution to this problem. If Glendale and Mr. Hulsizer believe that parking revenues will be sufficient to repay the bonds, then it is Mr. Hulsizer, not the city, who should guarantee any revenue shortfall. That would prevent serious harm to the taxpayers and place the financial responsibility where it should be: with the owner of the team, rather than on taxpayers’ shoulders. Taxpayers should not be asked to take a risk that the prospective owner is unwilling to take with his own money.
Glendale asserts that because the Goldwater Institute has expressed concerns about the deal, it has caused the bonds’ interest rates to rise. On January 25, 2011, Goldwater Institute attorney Carrie Ann Sitren sent a letter to various bond-rating entities (attached) stating that “the Goldwater Institute is currently investigating a potential legal challenge to the constitutionality of the lease” of the arena. The letter noted, “If the Institute were to initiate litigation on this basis and prevail, holders of bonds arising from the financing of the transaction could face the risk that the transaction would be held unconstitutional and void.” Prospective bond purchasers must not be kept in the dark about potential legal risks, which would be akin to the seller of a home failing to disclose serious construction defects.
We are not anxious to sue over this deal or any deal; to the contrary. But we are anxious for government bodies to follow the law. If this behavior can be subject to a retaliatory lawsuit by a legion of government attorneys, then journalists, bloggers, and regular citizens across the state are all at risk.
The Goldwater Institute is doing what the City of Glendale should be doing on its own: working to protect taxpayers. There should be no need for an independent organization to take the city to court to ensure public documents are made public; the city should make public records public. There should be no need for the Goldwater Institute to file a lawsuit to block this deal because the city should not craft deals that violate the Constitution. Until the city does its job, the Goldwater Institute will be there, asking questions, exposing the truth, and filing lawsuits if and when such action becomes necessary.