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David Shoalts on Phoenix Coyotes Ownership: Different Drum, Still Off-beat

FFH's Ben Shroyer takes a look at Dave Shoalts' newest piece on the Phoenix Coyotes ownership situation, line-by-line in the following editorial.

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Christian Petersen

On Monday our favorite "reporter," Dave Shoalts, wrote a particularity heinous Coyotes sale/ownership report. In it, he spews out the same old tired rhetoric, where he is an expert in all things 'Glendale' and now also an expert in the new NHL CBA, specifically the HHR portion of it.

For those tied to the NHL’s longest-running farce, Tuesday’s meetings between NHL commissioner Gary Bettman, would-be Phoenix Coyotes owners George Gosbee and Anthony LeBlanc and the (relatively) new city councillors of suburban Glendale is a case of once more into the breach.

"NHL’s longest-running farce" Huh, I always thought that the longest-running farce was, that you were considered a respected NHL reporter.

Once more, the NHL has a conditional sale agreement with a prospective owner of this turkey. The condition, as always, is getting a new arena lease, so once more they are going to try to pry millions of dollars out of the Glendale taxpayers in the form of a management fee for Arena.

Like the Millions the Government in Winnipeg pays to "subsidize" the Jets?

The faces may have changed over the years when it comes to the alleged purchasers but the fact they need to squeeze at least $15-million (all currency U.S.) annually from someone other than their paying customers has not. The reason, of course, is that there simply aren’t enough paying customers in the Phoenix area.

Are you really still beating this drum? Attendance is up 8%, this with virtually no marketing budget, and in the 4th year being NHL owned with a constant media threat of relocation. Meanwhile the teams TV ratings are up 118% and they pulled a 1.7 share for the Chicago/Detroit game one, the third highest outside of those two towns. But yeah David, you're probably right, there's no way the Coyotes can get 17k people to show up from a metro area of 4+ million people...

What has changed, though, is the makeup of Glendale council and the city’s finances. There are four new members among the seven councillors, including Mayor Jerry Weiers.

Well, Dave you were half right on this one, The previous council was well aware of the financial situation the City was in. If you can remember way back to 2008 Maricopa County was going through the early stages of the US recession and home values were dropping, fast. The Council (6 of the 7 that were around for the Jamison vote at the time) made the decision to not make any aggressive cut backs on salaries or eliminate very many city positions. This of course snowballed as the recession worsened and the general fund dwindled.

As a group, the council is much less disposed to handing out subsidies disguised as arena-management fees, such as the $50-million the city agreed to pay for two seasons beginning in October of 2009, when the NHL bought the Coyotes out of bankruptcy for $140-million to prevent the team from being moved.

Did your old pal Phil Lieberman pass this info along, or was the first sentence just pure conjecture?

Several of the current Glendale politicians have been quoted recently as saying they believe $6-million per year is the right amount to pay the new owners for managing the arena as part of a lease. One of the few things LeBlanc has said publicly in recent months is that any deal will need a substantial payment from Glendale. He was careful not to be specific but it was not hard to draw the conclusion he was thinking something north of $12-million. LeBlanc and Gosbee, by the way, were silent again Monday.

If you had been keeping track the $6 million has been a placeholder put into the budget since the last council was working on the budget. As for your wordsmithing on Mr. LeBlancs statement of "any deal will need a substantial payment from Glendale" let's look at the actual quote from the AZRepublic:

Anthony LeBlanc, one of the principals in the Renaissance group, has said he would need a management deal similar to the one offered in the past, which would have the city pay an average of $15 million a year.

"We understand that there are some cash constraints, but at the same time, we can’t do a deal that wouldn’t be economically feasible for us," LeBlanc said in February. "It’s a verbose way of saying, ‘Look, we understand that it won’t be the same deal, but we’re trying to find a middle ground that would make sense for both sides.’ "

"make sense for both sides." Yeah, this sure sounds like a take it or leave it offer.

But Glendale, a city of 250,000, had to lay off city employees, including police and firefighters because it was facing a $35-million deficit in its 2013 fiscal year, which ends June 30. The prospects for 2014 are no brighter, as the police and fire departments were recently told there is no more money coming, even if a fire station has to be shuttered.

Many positions that were already empty, and hadn't been filled for years. How many positions will the City of Quebec have to eliminate to build their arena? (Answer: 500)

The key man in all of this is Bettman.

I'd hope so since he's the one trying to sell the team...

If there is a way to get Glendale screaming and kicking to the subsidy table, he will be the one to do it. Insiders already suspect Bettman is willing to subsidize Gosbee and company through the NHL on the alleged purchase price of $140-million (finding a bank to touch it would be no mean feat). Do not underestimate the ability of Bettman to pull a rabbit out of his hat, though.

"Finding a bank to touch it", Really? Because A new CBA that helps out small market teams, a lower salary cap next season with a slower growth rate, many local corporations with headquarters or a large presence in the valley to sell suites to, a fan base rebounding with attendance up 8% YoY, and team valuations that continue climb year after year. I'm sure all those factors would really scare away any bank...

There will also be an obstacle ahead concerning that management fee that might tax Bettman’s ingenuity and perhaps sour Gosbee, a Calgary financier and the money man of the group, on the deal. It concerns the annual management fee, which can be considered a government subsidy if it is high enough. That would make it part of the hockey-related revenue (HRR) that is shared 50/50 with the players.

Is this your attempt to send up the GWI signal? Stop trying to make Goldwater happen, its not going to happen. And yeah, I'm sure the previous studies that show arena management fees at comparable facilities around the country at $12 to $16 million are probably all just fabrications.

Now, the rest of this is open to interpretation, but let’s say the Coyotes get $16-million from the city. It is possible that fee could be slashed by 50 per cent, or $8-million, once it is tossed into HRR and then rinsed through the NHL’s revenue-sharing plan.

"Now, the rest of this is open to interpretation," Like all of your "Articles"? but please, continue...

At present, the Coyotes probably have the lowest revenue in the league. This means they qualify for the highest allotment of revenue-sharing. They got about $18-million last season.

Go on...

The revenue-sharing formula is complicated, but each eligible team’s share is based on something called minimum team player compensation. That is the minimum amount, based on an equation involving the team’s and the league’s HRR, a team has available to pay the players. Its revenue-sharing cheque is based on the difference between that and the maximum team player compensation.


So, if the Coyotes get $16-million in some form from Glendale, it might raise their minimum team player compensation enough to cut into their revenue share, perhaps as much as $8-million. For a team that routinely loses $30-million a year, that is quite a bite.

...and there we go, a general lack of understanding what the "Management fee" is. This deal will likely be setup with two parts, an 'arena management' company, and a 'Coyotes hockey' company. Similar to the way the Nashville Predators and the Florida Panthers operate their teams. Since the "Management Company" isn't "The Team" they are likely exempt from the HHR calculation.

However, there are others who argue adding the $16-million would have no effect on the Coyotes’ revenue-sharing cheque because their revenue is so low it would still be under the minimum team player compensation threshold. Hence no cut would be forthcoming.

And those "others" would likely be right, but for a different reason.

But either way, it makes you wonder why Bettman persists in keeping the Coyotes in Glendale rather than putting them on the block for a buyer who would pay $200-million or more plus a hefty relocation fee if the team could be moved.

Because Gary Bettman can fleece Quebec City, Markham, and/or Hamilton for millions more in "Expansion fees".

Ultimately do you really think Mr. LeBlanc (who has been through this process four times) and Mr. Gosbee haven't been brought up to speed by the NHL in its CBA interpretations regarding city subsidies and HHR calculations? If you honestly don't think the NHL has planned for that contingency, there's an empty seat in an arena in Quebec City I'd like to sell you.