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From the editor's desk: the logistics of relocation

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We now know how much money the Arizona Coyotes lost in year one. With that in mind, let's talk about relocation.

Matt Kartozian-USA TODAY Sports

"Are the Arizona Coyotes going to relocate?"

In my time at Five For Howling, the question above is the one I've gotten the most. I've gotten it from friends, family, Twitter users, and even the odd college professor here and there. The news that the Coyotes have lost $16.6 million in the first year, and $34.4 million as far as accounting for the out-clause goes, is not exactly quieting whispers of relocation.

Yet, for as long as discussion of the Coyotes' relocation has been around, it never seems like there's an actual cost-benefit analysis of keeping the franchise in Arizona versus moving it somewhere else, like Quebec City, Seattle, or Las Vegas.

Back in 2009, when the Coyotes were on the verge of being moved to Hamilton, Ontario, the potential relocation fee for the team was set at $101 million (though the NHL would argue the total cost of compensation the league would need to offset damages was $195 million). Given the near exponential rise in (albeit pricier) expansion fees, a relocation fee is going to be high - perhaps as high as $200-300 million.

That number, as well as the $50+ million IceArizona would lose in order to trigger the out-clause in the Gila River Arena management contract, are sunk costs. They don't go away just because the franchise changes locales. They have to be made up somehow if the investment is to be considered profitable.

So the calculation is a simple one. Will the difference in profits between Arizona and a place like Quebec City or Seattle offset the cost of relocation within the lifespan of the investment? If yes, relocation makes financial sense. If no, then it doesn't.

And with only 180 days to exercise that option in the arena management agreement, I'm sure that calculation is already underway within the ownership group.

Thoughts

  • I'm legitimately interested in the results of the City of Glendale's audit. I get the feeling they aren't going to return the same numbers.
  • Why that happens is more likely to be due to methodology, as opposed to ideology. Glendale can't opt out of the agreement anyways, and I don't think a majority of the council as it stands today would have voted for this deal back in 2013. In that sense, Glendale might be happy to see the Coyotes relocate.
  • Will the Coyotes hit the $50 million threshold? I'd say it's almost certainly going to happen. That's by design, as there's no point putting an unreachable out-clause in the arena management contract anyways.
  • Louis Domingue is steadily diminishing the Coyotes' need for a backup goaltender next season. If they do opt to sign a veteran guy, it may come after the season starts.
  • It would also not surprise me if Mark Visentin got another crack at the backup job during next season for a series of games. He's been injured all year in Portland, but the Coyotes are not simply going to give up on him.
  • The Joe Thornton situation in San Jose is one of the oddest self-inflicted player/management conflicts to surface in the NHL this year. Boy, he'd be the perfect candidate to play top center in Arizona if he were to be traded.
  • It probably doesn't happen though, for several reasons. Trading within the division is one problem, for starters. He makes $6.75 million through 2017, and San Jose is going to want a nice return in exchange for him should the relationship deteriorate that far.
  • Still, Arizona might be in a better position than most to bid for him. They don't have cap problems, they have more 1st/2nd round draft picks over the next two years than pretty much anyone else in the NHL, and they're unlikely to be serious Cup contenders until after Thornton's contract expires.

Storylines

  1. Can Arizona take advantage? Two of this week's opponents, Colorado and Pittsburgh, are in the midst of downturns. Can Arizona sneak a win or two against them?
  2. Can Arizona score? The Coyotes have scored one goal or less in all but one game in March. That must change.
  3. Which Mike Smith will we see? Smith had been having a pretty darn good March until the Devils game. He'll face three very good offenses this week.

Player to Watch

Craig Cunningham received over 15 minutes in playing time in the Coyotes' last game, including penalty kill minutes. He has legitimate speed, so it looks as if Dave Tippett is placing a fair amount of trust in him.