Tony Tavares asked the National Hockey League for permission to accept Glendale’s request that he audit the financials of IceArizona, owners of the Arizona Coyotes and lessee to the city at Gila River Arena, Glendale. The former president of Disney Enterprises and the Anaheim Ducks of the NHL, plus president of several baseball teams and past president of Spectacor Management Group venue management company and an arena manager in his own right, talked to Venues Today about his current assignment and the state of the industry in general.
What happened with the Coyotes?
I had met some people in Glendale when I was going through the process of buying that team with John Reinsdorf and a local attorney named John Kaites four years ago. The city audit department decided they would prefer someone with industry experience to audit IceArizona. There are a bunch of CPAs on city staff and they know how to do the financial auditing. What they were concerned about was industry knowledge of ticketing and events. With all the CPAs I’ve done business with, I can’t tell you how many times they’ve said this is this and I say no, that’s not that.
What financials will you be auditing?
There are three main revenue sources the city concerns itself with. Tickets – there is a surcharge on every ticket sold, which varies with hockey versus other events. Naming rights — the city receives a percentage of naming rights. And they receive a share of parking revenues. Finally, there is an escape clause in the Coyotes' contract. [The 15-year, $225-million contract signed with Glendale in 2013 contains a clause that allows the Coyotes to relocate if they lose $50 million over the first five campaigns.] If the Coyotes hit a certain amount of losses over a five-year period, they have the right to tell the city they no longer want to stay in Glendale. It’s defined within the contract. My job is to go in and make sure what they are reporting is accurate. The city has no input at all on team expenses. I just have to look at the certified financial statements for reasonableness and compliance with the contract. It is what it is after that.
Why did Glendale need to hire an industry expert?
You can read this in the local paper — the city is frustrated because IceArizona is not giving them the financial records. Since four years ago, we tried to buy the team, I disclosed to the city the fact that I did bid on this franchise with a group. I said I won’t take this audit on without the approval of NHL offices and I called them. They encouraged me to do it. They’d rather work with people who understand the industry than people who don’t. It’s an hourly fee with an upside limit.
When do you start?
I’ve started already reading contracts and documents. When I start in earnest is as soon as financial statements are provided to the city. Then I plan to be back in Glendale.
How long does it take once you get the papers?
Once I get the docs, it won’t take long. I give my report to the city probably within 30 days. I operate under the assumption there are no fun and games going on unless proven otherwise. If that happens, the city gets the report they are in compliance, and they move on to next year. I’ve been hired only for this year.
Have you done this before for any other teams?
No, but my background is accounting and finance. Before I became a building manager I was comptroller of Providence (R.I.) Civic Center. I worked in accounting before I got into arena management. And when you start doing mergers and acquisitions, you had better know your way around a financial statement. And I know ticketing cold and sponsorship cold. I don’t think there’s any risk of me missing anything.
What are the kinds of things you look for?
What auditors do is reconcile all the reports that are generated. In sports, that’s the ticketing report generated off of the computerized ticketing system, those numbers shared with the leagues and those shared with the promoter or ticketing rep. When everyone says we sold $5 worth of tickets, and another says no, we sold $3.50, you reconcile all of the reports to make sure there is consistency. I fully suspect there will be no surprises. The city is just concerned with the ticketing portion. It’s almost like looking at sales tax for a state audit.
Would this preclude your further involvement in the team?
They just got a new owner coming in [Andrew Barroway joined CEO Anthony LeBlanc]. He’s expressed interest in making it work there and being a longterm owner.
In your experience, what do they need to make that happen?
In a nontraditional market like that, you need to put a great product on the ice and consistently be in contention. It’s more than a year of fix. It’s like what L.A. has done recently. Winning the Stanley Cup helps, but they’ve been really consistent. Anaheim is really consistent now winwise. You have to build that in a nontraditional market. The arena is challenging because of the competition in the market, amphitheaters as well as arenas. Everyone is beating everyone up for the events.
How has the arena industry changed in your opinion?
I remember a point in time when the arenas were very profitable. Those were in the days when you had local promoters and they were very profitable. The first challenge indoor arenas went through was amphitheaters. For a period of time they put a hurt on the indoor arenas. Then things started balancing out when people in my age group stopped going to amphitheaters. Arenas saw a little bit of resurgence. Then, with all the promoters gone and only three large promoters left in North America, the promoter has to make money. The band squeezed even harder. The acts are taking all the money now. And in a marketplace where there is more than one arena, then the arena is really hurting. For example, in a region like Worcester, Mass., Providence, R.I., and Boston, those three buildings beat each other up for the same acts in many cases. The act feels it doesn’t have to play every building. They don’t have to pick up and move equipment. Now it’s basically, from what I can see, plays by region – one building getting two or three shows.
Does your job with Glendale have anything to do with that state of the industry?
It’s a plain vanilla assignment. I was retained because they wanted someone with industry experience.
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