Home > Business, Hockey, Sports, Weekend Feature > Phoenix Coyotes will still have a snowball’s chance in Arizona after sale

Phoenix Coyotes will still have a snowball’s chance in Arizona after sale

Phoenix Coyotes National Hockey League NHL Shane Doan

Phoenix Coyotes captain Shane Doan.

As the National Hockey League’s season teeters on the brink of cancellation for the second time in less than a decade, there’s one burning issue that will not be solved by these negotiations, and that’s the ownerless financial abyss known as the Phoenix Coyotes.

Every professional sports league has its poor cousin franchises, those teams that just can’t keep up financially with the likes of the New York Yankees, Toronto Maple Leafs or New England Patriots. But the Phoenix Coyotes have become more than just the NHL’s poor cousin. Phoenix is the poor cousin who moves into your basement, eats your food, sleeps all day and swears he’s looking for a job, but he’s holding out for a management position, thank you very much.

The Coyotes have been for sale since 2005 when then-owner Jerry Moyes declared bankruptcy and attempted to sell the team to Canadian BlackBerry billionaire Jim Balsillie, whose stated goal was to move the team to Hamilton. NHL Commissioner Gary Bettman was enraged by Balsillie trying to enter the league by the back door, and he eventually beat the Research in Motion CEO in court. The win allowed the NHL to buy the team with the goal of flipping it to an approved owner at a later date.

Fast forward to the end of 2012 and the league still owns the Coyotes. The Coyotes remain a horrible draw in Arizona thanks to a poorly-placed arena and, more significantly, an inability to win over a sun-drenched marketplace. Even after two consecutive playoff appearances, the Coyotes have been unable to turn anything close to a profit. In fact, the opposite is true: their hometown of Glendale has been footing $25 million a year for the last two years to cover the team’s losses and keep it as the anchor tenant at Jobing.com Arena. They’ve been throwing good money after bad to keep that arena operational while the NHL has strung the city along with almost-owner after almost-owner.

The Phoenix ownership saga may come to an end this year, but it’s also very likely this latest scheme will fall flat. Former San Jose Sharks president and CEO Greg Jamison declared he would buy the team this summer, but he’s been checking under the couch cushions for cash ever since, and the sale has not been made. It was close to happening in September but was delayed while Jamison sought more funding. Now he has the dough and Glendale will hold a vote on the lease deal on Tuesday.

Gary Bettman and Greg Jamison NHL Phoenix Coyotes ownership Glendale

Prospective Phoenix Coyotes owner Greg Jamison (left) with Commissioner Gary Bettman.

Jamison’s purchase price is expected to be in the $160 million range, but the NHL often inflates their announced sale numbers. Regardless, the finances between Glendale and Jamison are where the numbers get interesting.

Jamison is locked in for a 20-year term. He will pay the city $286 million in rent to use the arena, but will receive $320 million to manage it. Nevermind that his management skills are apparently less valuable than Hulsizer’s ($39.4 million per year offered to Hulsizer, compared to $15 million for Jamison), but the city remains in debt to whoever buys the team. The Arizona Republic ran the numbers on the Jamison deal and concluded that even if the Coyotes reached the Stanley Cup Final every year for the next 20 years – an impossible proposition in itself – the city would still stand to lose about $9 million on the deal.

Jamison’s close, but he’s not the first to almost buy the team. Bettman has, at various times, had investor group Ice Edge Holdings and Chicago investors Jerry Reinsdorf and Matthew Hulsizer ready to buy the team, but each time the deal has fallen through, whether under the threat of lawsuits by the watchdog Goldwater Institute or because the numbers simply did not make sense.

Despite the unattractiveness of the team, Bettman has repeatedly told media outlets that he’s got multiple investors lined up to buy it. Each time all hope seems lost, Bettman does the management equivalent of drunk dialing an old girlfriend: he rings up Ice Edge, Reinsdorf, or another of his buddies to kick the tires and make the team look attractive. Jamison – a Bettman pal from his Sharks days – may be the one to close the deal, but it’s looked like this before. The closest suitor before Jamison has been Matthew Hulsizer, who showed up at some Coyote playoff games with the jersey and foam finger act before turning down a sweetheart deal from Glendale so he could buy the St. Louis Blues instead.

Glendale has been, in many ways, the culprit of its own demise. Mayor Elaine Scruggs and city councilors have been adamant that the arena must hold on to its anchor tenant in order to keep the surrounding strip mall alive and provide jobs in a state economy crippled by recession. To that effect, Glendale has twice covered the NHL’s operating costs of $25 million per year to keep the Coyotes in place. They dipped into emergency funds to finance the 2011-2012 season and were forced to cut city services to pay the NHL. Library, police, road repair and firefighter budgets took a hit to keep the hockey team in the desert.

Every deal for every prospective owner has incorporated some form of loss protection or exorbitant “arena management fee” to be paid by the city to the purchaser. Glendale tried to sell bonds to help Reinsdorf raise $165 million to buy the team, and when that deal fell through, they were ready to pay Hulsizer $197 million over five years to run the arena and parking facilities nearby.

The problem with Jobing.com Arena is that it’s what real estate developers call a green banana. It was built in the path of major real estate development, but that development is still years off. The arena currently serves as the anchor point for a cluster of bars, restaurants and retail stores surrounding it, but it remains a pain for people to get to. It’s a good arena with a good NHL team, but it’s in a bad location in a hot southern state where ice is normally only found in a glass. Add to that this NHL lockout, and whatever progress they’ve made with their recent winning ways will have slipped away during this period of inactivity.

The Glendale vote on Tuesday is expected to come down to a single swing vote, and even if it passes, the Goldwater Institute will likely sue on the grounds that the city is subsidizing a private business venture.

All sense suggests the NHL should pull up stakes and move to a more viable market like Quebec City or southern Ontario.

But this thing stopped making sense years ago.

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