Why the RSE Agreement Isn't Dead Just Yet

Christian Petersen

RSE's rejection of the reverse out-clause proposal by the City of Glendale has justifiably sent the hopes of many Coyotes fans into the dustbin. But there still may be reason to think the deal is not dead yet.

This afternoon the City of Glendale held a workshop during which it publicly announced that it had proposed a counter agreement involving a "reverse out-clause", which gave the city the same rights to terminate the agreement as RSE had. It didn't take long for RSE to come up with a response:

This news has sent Coyotes fans into a tailspin of despair. It appears that the deal between the City of Glendale and Renaissance Sports & Entertainment as originally proposed will not survive, and the Coyotes days in Phoenix are numbered.

It appears.

Call it self-delusion. Call it blind optimism, but I still don't believe this is over. There are many reasons to think that there will still be something to vote on come July 2nd.

The Deal Has Died Before

Last week, the major story was that the deal between RSE and Glendale had been pulled off the table, because the city wanted concessions that RSE simply wasn't willing to grant. But it was revived less than 24 hours later and pushed to a July 2nd vote. Anthony LeBlanc has been at this in some capacity for four years now; there are a lot of ups and downs in the process, and the timeline in this case is the only major difference.

The Nature of the Reverse Out-Clause is Not That Bad

The specific wording of the out-clause under Glendale's plan would, according to their attorneys, open a 180 day window at the end of Year 5 that would permit either side to terminate the agreement if either could demonstrate in excess of $50 million in losses. The thing is, with all the revenue streams that RSE has proposed, that's extremely difficult. If you based you just used the projections RSE provided, the actual cost of the agreement ($15M fee - revenue streams) would be roughly $7-8M. Multiply those numbers by five. Both are less than $50 million. Throw in the addition $1-1.5 million that Glendale would get from the supplemental ticket surcharge (the $1.50 one), and the $50 million threshold gets even harder to reach. Even if RSE were to capitulate and agree to the reverse out-clause, they would likely be in a far deeper whole after the fifth year than Glendale would ever be.

RSE Has Seen This Before

Per Craig Morgan again:

Had RSE never been presented with this idea before, I would completely agree with everyone else that the deal would probably be dead. But they haven't, which means they also knew it could have possibly been resurrected in the future. But there is one, extraordinarily important thing that needs to be considered.

The Out-Clause is Not the Goal

Read the statements of the principal players. Look at the quotes they've made, and the posturing they've taken. Both sides essentially desire the same thing: long-term success in Arizona. What has been the primary concern of Acting City Manager Bowers and Mayor Jerry Weiers? Guaranteed revenue streams. The City of Glendale doesn't want the deal to implode, and they don't want RSE backing out five years from now. Getting the gap between $6.5M and $15M even closer satisfies virtually every objective Glendale wants accomplished. It makes the Goldwater Institute's subsidy argument ever harder to sustain. It improves Glendale's short and medium term financial picture. Perhaps most importantly, it lets players like Mayor Weiers and City Manager Bowers demonstrate to their constituents that they refuse to be pushed around by the hot-shot out of town investors and the greedy little Commissioner of the NHL.

Final Thoughts

Can this not work out? Could one side or the other refuse to budge and have this entire thing end in disaster? Absolutely. I'm not saying this will necessarily end in sunshine and rainbows for Coyotes fans. But with everything at stake, and the bleak picture that comes from an abandoned Westgate and an underutilized Jobing.com Arena, there's no reason to believe this isn't 11th hour dealmaking.

Here is the link to all of the proposed changes.

UPDATE:

Someone at the workshop today mentioned to me that Craig Morgan is good at lifting Coyotes fans out of the lows and knocking them off the highs. Case in point:

No one is walking away yet.

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