Coyote Blog

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.

Those of you who are regular readers are probably tired of hearing me rant about the proposed Glendale, Arizona subsidy of the Phoenix Coyote's team (here, here, here), a subsidy that runs afoul both of our state Constitution and of common sense.  This week, George Will enters the fray, and actually quotes me at the bottom of his column.  Most of the column should be familiar to those following the story here, but of course being George Will it is so much pithier than I could tell the story.  I liked this bit:

NHL Commissioner Gary Bettman agrees with McCain that the world is out of joint when people can second-guess the political class: “It fascinates me that whoever is running the Goldwater Institute can substitute their judgment for that of the Glendale City Council.” He will learn not to provoke Olsen, who says, “It happens to fascinate me greatly that the commissioner thinks a handful of politicians can substitute their judgment for the rule of law.”

I am becoming increasingly enamored of the Arizona Constitution's "gift clause," even if it has not been enforced evenly in the past.   This sensible Constitutional provision requires that neither the state nor any municipality in it may “give or loan its credit in the aid of, or make any donation or grant, by subsidy or otherwise, to any individual, association, or corporation.”

This has been interpreted by the courts as meaning that if a state or municipal government gives money to a private company, it must get something of value back - ie it pays money to GM and gets a work truck back.  But politicians will be politicians and have stretched this rule in the past out of all meaning, by saying that they are getting "soft" benefits back.  In other words, they could subsidize the rent of a bookstore because reading is important to the community.  Silly?  Not in California:

The city spent $1.6 million in federal grant money to bring Borders into the Pico Rivera Towne Center and to help pay its rent for nearly eight years.

Now the bookstore at 8852 Washington Blvd. is among the 200 Borders stores closing by April in the wake of the company filing for Chapter 11 bankruptcy reorganization.

But the city still faces paying rent on the soon-to-be vacated 18,100-square-foot site, along with other costs associated with 2002 agreements it made with Borders and with Vestar Development Co., which owns the Towne Center....

Officials said the decision to bring a bookstore into the community was a quality-of-life issue.

So the gift clause originally was authored to stop handouts to railroads and such, but certainly should prevent stuff like this.  When it did not, our Goldwater Institute sued, and it was successful in reigning in these gift clause exclusions.  This is the ruling from a suit over a $97 giveaway to a new mall (the giveaway was nominally disguised as a parking lot).

Indeed, in today’s unanimous decision, penned by Chief Justice Andrew D. Hurwitz, the five Supreme Court judges say that indirect public benefits — like, apparently, beating out Scottsdale for the sale tax from Bloomingdales — aren’t enough to justify a giveaway to a private party.

Previous courts who’ve held that, they say, have misread precedent.

“In short, although neither [of two Supreme Court precedents] held that indirect benefits enjoyed by a public agency as a result of buying something from a private entity constitute consideration, we understand how that notion might have been mistakenly inferred from language in our opinions,” they say. Now that they’ve clarified, the justices seem to be saying, the appellate court must examine whether the direct benefit the city of Phoenix gets — aka. those parking spaces — is enough to justify the giveaway.

For the record, the Supreme Court suggests that the parking garage is not, likely, benefit enough to justify such a tax giveaway.

“We find it difficult to believe that the 3,180 parking places have a value anywhere near the payment potentially required under the Agreement,” its opinion finds. “The Agreement therefore quite likely violates the Gift Clause.”

This was a particularly awful subsidy which tried to move a Nordstrom's one whole mile, over the Scottsdale border into Phoenix (update here).

This is the heart of why Goldwater needs to continue to stand strong against the proposed $100 million Glendale subsidy of the Phoenix Coyote's hockey team purchase.  The city of Glendale and the buyer Matthew Hulzinger (who claims the bond issues is totally guaranteed and safe, raising the question of why he could not have gotten private financing instead) have rallied everyone from our local paper to John McCain to to task of excoriating Goldwater for standing up for the state Constitution.  They claim the deal makes a lot of financial sense.

Beyond the cities BS "total impact" numbers, I ask, "so what?"  This is an important Constitutional principle.  As America slides into a European-style corporate state, I can't think of anything more appropriate than drawing the line on corporate welfare here in Arizona (its certainly a more useful endeavor than some of the goofy legislation currently pouring out of our state house).  Heck, I would like to see a gift clause in the US Constitution