The Arizona Coyotes stadium bill looks like it could be dead on arrival to a vote in the full Arizona State Senate, and it would be a wise move by the state Senators. The deal with the Coyotes as it stands is a great deal for the franchise, but a terrible situation for the people of the state.
Arizona Coyotes Stadium Bill Lopsided in Team’s Favor
The events leading up to this situation have been going on for years. In 2004, the city of Glendale provided most of the funding necessary for the team’s current facility. That funding came in the form of bonds that the city’s taxpayers will be paying on for another 16 years to the tune of $13 million annually.
The shine of the Gila River facility didn’t last long for potential patrons. Since the 2005-06 season, the Coyotes have never ranked above 22nd in the National Hockey League in attendance. The small size of the arena, a capacity of just over 17,000 seats, plays a part. The highest percentage of capacity over a season in those years that the Coyotes reached was 85.6 percent in the 2006-07 season, however.
While the team has struggled to fill Gila River, the city of Glendale hasn’t been very sympathetic. Originally, the city paid the franchise an annual fee for managing the facility. It was the team’s responsibility to maintain the stadium not only for hockey games but concerts and other events as well. In 2015, the city used its option in the lease to outsource that facility management, further hurting the team’s bottom line.
The city then went a step further, actually voting to void the lease with the team in June of 2015 because of what the city perceived as a violation of the state’s conflict of interest law. The franchise sued and got a court injunction to block the city council’s vote, but the damage to the relationship was done.
The team has also struggled to show a regular robust profit in its current venue, actually posting an operating loss of $8 million last season. The hope for the franchise has been the end of their current lease and the possibility of relocating to a better venue.
After the 2017-18 season, the team is free to move. In anticipation of that freedom, the team announced a joint venture with Arizona State University last November for a new stadium in Tempe. With the support of the university community, it looked like a bid for public funds to build the facility would be successful.
That’s completely turned on its head now, however. ASU has pulled its support from the stadium project, not specifying a reason but coming in concert with the introduction of SB1149, which is the piece of legislation in question. It appears that ASU perceived the lopsided nature of the bill, and wanted nothing to do with it. It isn’t difficult to grasp why.
How SB1149 is Lopsided in the Coyotes’ Favor
The bill would provide about 57 percent of the cost of constructing a new stadium for the Coyotes via taxpayer-backed bonds, with the franchise kicking in the other 43 percent. That’s nearly an even split, but the devil is in the details.
The bill gives the state power to create special tax districts of up to 30 acres. Sales taxes within the borders of those districts would increase by two percent. Up to half of the state’s cut of those sales taxes, along with hotel taxes, would go toward paying off bonds used for facilities construction within those districts.
In the Coyotes’ plan, the team would not only receive sales tax revenue from the state but a $55 million contribution from the city of Tempe as well. On top of the nearly quarter of a billion dollars that will cover construction costs, the team also wants control of the auxiliary real estate within the district. Finally, the team’s stated desire for the new stadium is an even smaller seating capacity, so that ticket prices can be raised.
All these factors combine to create a situation in which the Coyotes will recoup their operating losses and work toward profitability not on the strength of their product or their ability to sell it, but on the backs of the taxpayers who live in and visit the area in which their new stadium would be located.
Coyotes’ Failing Business Not Arizona’s Responsibility
It’s going to be difficult for the Coyotes, whom have been losing money for years, to come up with the $170 million that they have pledged for the new stadium construction. It’s inaccurate to pretend that amount isn’t a significant investment for the franchise given its current financial state. That doesn’t change the facts of the current stadium deal, however.
What the Coyotes stand to gain from this deal is quite significant. Not only will most of the cost of construction of a brand new venue to call home be covered with no cost to the franchise, but the team will be able to get more revenue with a bump in ticket prices and controlling the development of the land adjacent to the stadium.
In exchange for having the Coyotes in the neighborhood, the local community gets a sales tax raise and higher prices to pay in order to see the games. The normal sales pitch for public funding for stadium construction is that the surrounding business community will reap the benefits. That’s not true in this case, because the Coyotes would control the surrounding businesses.
In the world of professional sport entertainment, like with any business, success is measured not only by being sustainably profitable but benefitting the community in which the franchise exists. The Coyotes have failed at that first objective, and this deal would put them in position to fail at the second objective as well.
What the Coyotes are essentially doing is trying to use the force of law to extract the money from the people of Arizona that they have failed to persuade those people to voluntarily give them in exchange for hockey games and everything that goes along with that. It’s not the responsibility of the people of Arizona to make sure that the Coyotes succeed, however. In fact, it should be the responsibility of the Coyotes to make life better for the people of Arizona.
Main Photo: GLENDALE, AZ – JANUARY 12: Max Domi #16 of the Arizona Coyotes celebrates with Oliver Ekman-Larsson #23 after Domi scored a second period goal against the Edmonton Oilers during the NHL game at Gila River Arena on January 12, 2016 in Glendale, Arizona. (Photo by Christian Petersen/Getty Images