Glendale AZ City Management is Just Awful
For years I have excoriated the City of Glendale, AZ (a western suburb of Phoenix) for its myriad subsidies of the Coyotes NHL hockey team. When Glendale finally had the chance to walk away several years ago, I (and many others) begged the town not to throw good taxpayer money after bad and re-sign some sort of subsidy agreement with the team. For you see, even after getting a stadium at taxpayer expense, the team still demands millions of dollars a year in operating subsidies to stay in town.
But the town insisted on throwing more taxpayer money at the group buying the Coyotes from the NHL out of bankruptcy. The problem was that there was a gap between the NHL's asking price ($200 million) and the team's value in AZ ($100 million). First, they tried to give them a direct subsidy, but the Goldwater Institute sued to stop that and won. So instead, the city buried the subsidy in a stadium management contract. Here is how I described this contract at the time it was signed:
The NHL came down to a price of $175 million, still $75 million or so above what the team is worth. The City had already sought arms-length bids for the stadium management contract, and knew that a fair market price for that contract would be $6 million per year. It ended up paying the buying group $15 million per year for the 15-year contract, representing a subsidy of $9 million a year for 15 years. By the way, the present value of $9 million over 15 years at 8% is... $75 million, exactly what was needed to make up the bid-ask gap. Again, I think the city almost had to do it, because the revenue stream it was protecting is likely higher than $9 million. But this is the kind of bad choices they saddled themselves with by building the stadium in the first place.
So only now that they have signed the contract and a private party has taken over the Coyotes based on the city's contract, Glendale is trying to unilaterally tear up the contract. They have some thin reed of a "conflict of interest" claim that is based on the overlap of payrolls for one guy between the City and the Coyotes by a couple of days. This seems like an absurd claim gen'd up just to try to solve Glendale's buyer's remorse. My gut feel is that it is never going to fly in court.
What a bunch of losers. You should never have signed the contract, but now that it is signed, you actually have an obligation to live by it, particularly since a private party paid $100 million extra for the team mainly on the strength of this contract.c If you want out, declare bankruptcy (which actually might not be too far away for the city).
