Gila River Arena, Glendale, Ariz., in full swing.
The one certainty about the Arizona Coyotes deal to play in the city of Glendale, Ariz., at Gila River Arena is that it is not done yet. But every indication is that the new two-year truce agreement satisfies the immediate needs of both parties – for the Coyotes to avoid a lawsuit and pursue their options, and for the city to cut its losses by at least $2 million a year for the next two years and gain an exit clause it had not had before.
Then interpretation begins anew and what-ifs abound in a situation that seems to have no precedent, nor does it seem to set one.
On July 24, the Glendale Council approved an amendment to the existing 15-year lease that keeps the National Hockey League team in Glendale, reducing the management fee paid to IceArizona to manage the city-owned facility from $15 million to $6.5 million.
In return, IceArizona keeps all revenue from ticket surcharges for arena sports and entertainment, parking revenue and naming rights revenue, an amount that had seen the Coyotes paying the city about $6 million a year.
The financial exchange basically leaves the city with a $2-million annual loss now instead of $5-$6 million and the Coyotes do have an upside if they can sell more tickets and gain more incremental revenue to help cut their own losses.
But the amendment to the contract also allows the city to hire a new arena manager after June 30, 2016, if the city gives IceArizona a 90-day notice. Spectra Venue Management is currently in the second year of a six-year deal to management of the arena for the Coyotes.
The exact meaning of that clause is also tied to the next codicil, that IceArizona terminate Craig Tindall, the team's general counsel and a former city attorney, and not employ Julie Frisoni, a former Glendale deputy city manager. Those two were the subjects of the potential lawsuit the city planned to bring against the Coyotes based on a state conflict of interest law.
Until the Coyotes name a new general counsel, the amendment to the agreement will likely not be finalized and therefore the fate of Spectra is unknown, at least in terms of length of stay.
To see the amendment, click here and go to number 4, the lease and the first amendment.
Those close to negotiations seem to agree this was the best possible compromise. If the lawsuit had gone forward, the lease would be immediately terminated, and under the threat of a lawsuit, Coyotes owner Anthony LeBlanc had less likelihood of finding partners, investors and options. And the city, which under the original agreement had no out except to sue would not have the luxury of controlling its own fate. The city had been locked into a long-term deal it considered onerous with no out. Now, even if they shut the arena down, they will, they believe, lose less.
The Coyotes spin on things also involves waiting until a new city council is seated after the elections in November to hammer out a new long-term deal.
What now? Some think the Coyotes will move, but moving is expensive and disruptive and not usually a first option. LeBlanc is on record as saying he’s not interested in moving.
Rumors have begun to surface about building a new arena, either in Scottsdale, a town of megabucks residents, or at Talking Stick Reservation, an interesting scenario, especially if somehow, some way LeBlanc and Robert Sarver, owner of the Phoenix Suns who currently play at Talking Stick Resort Arena in downtown Phoenix, joined forces in both building a new arena and negotiating a better Regional Sports Network deal.
For Glendale, options might include running the arena as an entertainment venue only, a scenario that might not cost them much more than keeping the team, but that’s to be determined. Phoenix is a very competitive market, one where, as one source put it, every promoter contract is bitterly fought between the basketball arena and the hockey arena, likening it to hand-to-hand combat. How would a third arena fit into that scenario?
Everyone agrees the Glendale situation is unique, with no precedent and hopefully not precedent-setting.
The fact is the main revenue streams for a team are ticket sales, regional sports network licensing fees, suites and club seats sales and sponsorships. Cities generally win on taxes on admission, sales, parking, food service and tickets, especially if the venue does well in attracting visitors and other events and new development. Glendale has the whole Westgate Mall experience, which had revitalized the area.
For Monty Jones Jr., who is GM there for Spectra, keeping the staff motivated and the events coming is the priority. According to other former GMs who have run buildings during upheaval, and there are many given the nature of the business, the keys to keeping employees on task are opportunity and fun.
Tony Tavares, Preeminent Sports, who ran the Montreal Expos of Major League Baseball prior to their pending sale and move, said the key is, “Make sure everyone is having fun. Don’t focus on the negatives. The staff I had in Montreal was devoted to making it work as long as we stayed there. It was price and it was having fun.”
Spectra also runs University of Phoenix Stadium for the city of Glendale, answering to the Stadium Authority, so they have a history with the city, though it was the Coyotes who brought the private management firm into Gila River Arena because the new owners were new to sports and arena management.
With so many ins and outs to deals, each one is an individual case. From Glendale’s side, the existing long-term lease was a lopsided obligation. For the team’s side, they now have two years to decide to make plans.
The potential of a Talking Stick Reservation arena for the Suns and Coyotes rumor was one picked up by Sports Business Journal. Two major tenants would bring 2.2 million-3.5 million visitors to the reservation a year, not a bad number for casino properties to gnaw on.
What next? No one knows.