Professional Sports Leagues Are Sucking Maws for Subsidies
Forbes produces an annual list of the market value of various sports franchises. If I were a grad student, a great study would be to try to figure out what percentage of these valuations came from public funds (free stadiums, tax abatements, direct subsidies, etc). I bet the number would be high.
In the case of the Phoenix Coyote's hockey team, the percentage would actually be over 100%. The team is worth barely $100 million, at best, but has received hundreds of millions in subsidies. About 13 years ago the city of Glendale, AZ (pop: 250,000) built them a $300 million stadium. Almost immediately after that, the team started to threaten to leave, and the pathetic city of Glendale city counsel voted subsidy after subsidy, paying the team $10 million a year in direct subsidies. When the Goldwater Institute successfully sued to end this practices, the city found creative ways to hide the subsidy, for example giving the team a management contract for the stadium whose price was inflated by the amount of the subsidy (the contract was for $15 million a year but when it was finally competitively bid, it came in at $5 million).
After all that, the team apparently has no shame is coming back to the trough yet again:
The Arizona Coyotes and National Hockey League Commissioner Gary Bettman on Tuesday threatened to move the franchise out of Arizona if the Legislature does not approve $225 million in public financing for a new arena in downtown Phoenix or the East Valley.
Bettman sent a three-page letter to state Senate President Steve Yarbrough and House Speaker J.D. Mesnard encouraging them to push through a public-financing bill that is stalled in the Senate amid a lack of support from lawmakers. The struggling NHL franchise wants out of Glendale, saying it's not economically viable to play there even though that West Valley city financed its 13-year-old Gila River Arena specifically for the Coyotes.
"The Arizona Coyotes must have a new arena location to succeed," Bettman wrote. "The Coyotes cannot and will not remain in Glendale."
Good God, what brass!
Postscript: I was immediately embarrassed to see that I had use maw's instead of maws. I make stupid grammar mistakes but this generally is not one of them I make that often. Unfortunately, on the road, I had no way to fix it. Fixed now.
J_W_W:
Its almost as if the middle of the desert isn't a good place for a hockey team!! ;-)
March 8, 2017, 10:46 amKip Phoenix:
Even worse, the whole "hockey in the desert" idea was Bettman's to begin with.
March 8, 2017, 10:52 amSamWah:
Glendale done drunk the Kool-Aid. They're dead, Jim.
March 8, 2017, 11:25 amJaedo Drax:
They were counting on the snowbird population, not realizing that the snowbirds don't really want to go and sit in a freezing arena for 2 hours to watch a shitty product, when the whole point of being a snowbird is to get away from winter.
March 8, 2017, 2:49 pmNot Sure:
Southern California wasn't a good place for a hockey team either, until the team wasn't crappy. My dad and I had season seats for the Kings when they were barely able to manage to get 6,000 people in the 16,000+ seat Forum.
March 8, 2017, 3:15 pmMatthew Slyfield:
"when the whole point of being a snowbird is to get away from winter."
Which means they probably wouldn't want to watch a winter sport even if they could be toasty warm.
March 8, 2017, 3:19 pmMatthew Slyfield:
Nah, they're just sleeping...
https://www.youtube.com/watch?v=4vuW6tQ0218
March 8, 2017, 3:20 pmFred_Z:
So, us Canuckis done body checked Glendale into the financial boards, eh?
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March 8, 2017, 9:00 pmJeffersonRand:
Yeah, here in San Diego, we had the Chargers Dean Spanos trying to swindle city tax payers to pay for a new stadium. Luckily, after two ballot measures Spanos supported to fund his stadium failed with the voters, he finally got the hint and moved his team out of San Diego. The ironic thing is that the NFL could have afforded to pay for a new stadium for the Chargers in San Diego and stage the Superbowl in our beautiful weather every year. Why they did not see the economic advantage of doing this, I do not know.
March 8, 2017, 10:09 pmTodd Ramsey:
Without comment on the details of any specific arena deal, there is an important non-monetary benefit of subsidizing a sports franchise. An obvious example: Although my 12 year old son rarely attended a Seattle Sonics game, he (and I) received a huge non-monetary benefit from the ability to root for and care about a team in Seattle. This benefit not accounted for in the cost/benefit analyses I see about pro sports franchises. And if you have been in a city when a team makes a championship run, you know there is a large and real psychic benefit to the community and its individuals.
March 9, 2017, 7:21 amI wish local governments could collude to avoid offering incentives to pro sports franchise owners, but they can't. So the taxpayers in sports franchise cities end up paying for the "rooting" benefit they receive from the existence of a local team. Unfortunately, the tax is not fairly allocated between fans and non-fans. I don't think that can easily be solved.
glenn.griffin3:
>> "Unfortunately, the tax is not fairly allocated between fans and non-fans"
March 9, 2017, 8:23 amThis is easily solved -- fund your team with ticket sales and merchandise revenue. Even better, it's voluntary!
Tanuki Man:
... that I had useD maw's instead is maws ...
March 10, 2017, 11:54 amJohn O.:
There's a ton more to the Coyotes saga than just a ice hockey team that wants to move into a new house. The current ownership had to content with a number of problems they inherited from the previous owners and their messes and they feel extremely burned by the City of Glendale pulling out the lease from them two years ago so they've been working on getting their situation fixed with a more permanent facility closer to the core of their fans. The team has done various studies to find out where its primary fans are and they've consistently painted a center point that is within the South Scottsdale-North Tempe-Northwest Mesa area where the original arena was planned to be built in the late 1990s and early 2000s. What happened was in the mid-2000s the arena issue was temporarily resolved when Glendale offered the owner at the time a place next to the Cardinals stadium. It made financial sense at the time to the owner of the team at the time to move there but it seriously hurt attendence as its primary fans stopped driving from the East Valley to the West Valley for every game. This compromise undermined the team's success and mostly because the financial situation was already dire at the time from bleeding money leasing at an unfavorable rate the Suns' Arena.
The new owners that have owned the team since the bankruptcy has been quite upset with how the City of Glendale handled their negotiations in 2015, the owners felt like the city pulled the rug out from them. So while they've been able to negotiate short term leases, they don't see Glendale as being favorable from a leasing long-term standpoint and an attendance standpoint. The new owners have been more interested in doing what previous owners didn't and stopped the hemorrhaging of money and make the team profitable while they work out a new home.
I've been following the team's fanbase and they seem to follow a same pattern, they view the Glendale arena to be too far away. You have to remember the land its build on is not well developed because of the restrictions from the Luke Air Force Base, in order to keep the base open the city and state have limited the type of development in and around the flight paths of the base to reduce noise complaints and keep the Air Force happy. It does have freeway access on the Loop 101, but its still 45-60 minutes drive from the core area of its fans in the East Valley so attendance is low in bad years. The owners have decided its best to fix this as soon as they can.
The last proposal I saw from the team owners was that they'd pay for most of the new construction upfront, the idea was that the risk was being assumed by them and the only thing they wanted from the state was to get a refund on the state sales tax inside the arena. Most arenas are funded by tax districts, for instance the Cardinals stadium and the Glendale arena are funded by two separate district taxes. Its novel to ask for a sales tax refund, but I think the idea betrays what they're trying to do and that's assume the risk entirely. The team owners knowing that if they can't keep the team profitable in a new arena closer to its core fanbase, then they lose and the team leaves or is sold and the state pays them nothing. The owners were really excited to work with ASU on a plan to build it on Rio Salado Parkway on the now closed Karsten Golf Course. A large section of ASU land from the Karsten Golf Course to much of the baseball fields are being redeveloped to pay for the Sun Devil Stadium rehabilitation, but the deal with ASU to share the facility with the ASU ice hockey team collapsed when the Legislature viewed the proposal as a backdoor deal of subsidizing the team. From what I was able to get in reports from sports news sources in Phoenix was that the ASU funding they were asking for to do capital improvements to the campus hinged on whether or not they were going to spend any money building a new arena on the Karsten Golf Course.
There's quite a bit of political drama in the whole sports facility thing and I'd like them to succeed in Phoenix and not move to another place. There's quite a bit of prestige in being a native of a city that has a team win a sports title. At the same time though I understand the problems with all the subsidies but this isn't a Coyotes exclusive problem, its actually inherent in all the sports teams. The financial windfalls the Cardinals receives makes the Coyotes look like first grade stuff, I was never happy with the either team moving so far out into the West Valley and at such an expensive price tag. The difference is that the state government is paying for the Cardinals stadium while the city of Glendale is paying for the Coyotes arena, one has significantly more economic pull than the other and you can see why the Coyote deal is unsustainable. My preference if I had to have say was to build an arena for joint tenancy of the Suns and Coyotes, but currently the owner of the Suns wants none of that as he'd loose out on a large sum of money in concessions from operating the arena.
March 10, 2017, 3:35 pmJohn O.:
Coyotes draw fans from transplants and converts who are native. I was born and raised in Phoenix and ice hockey never crossed my mind when the Coyotes showed up because basketball is the sport that Phoenix truly had first. I played basketball and loved the Suns growing up, but then I got older and moved out on my own to Buffalo NY and found myself in a city that only has two sports, hockey and football. I fell in love with hockey following the Sabres then realized the Coyotes back home and have been following the drama as much as I can since.
Its all disappointing but the issues of the Coyotes are complex and have little to do with being in the Phoenix market, it has more to do with bad decisions and bad compromises that created a financial mess for the team.
March 10, 2017, 3:46 pmirandom419:
I would say that most sports teams are worthless, as they should be, when you deduct the cost of the required stadium. Just like solar and wind whose only purpose is to make people feel warm and fuzzy.
April 14, 2017, 1:24 pm