Phoenix — Late Friday afternoon, potential buyer of the Phoenix Coyotes Matthew Hulsizer delivered a letter to the Goldwater Institute stating, “Arizona Hockey is willing to modify the lease agreement with Glendale to guaranty [sic] to the city that they [sic] will receive direct revenues from the Coyotes, Arena and parking that have a value to day [sic] of at least $75 million. If the cumulative direct revenues received from the Coyotes, Arena and parking are that amount, than [sic] the shortfall will be the liability of Arizona Hockey Holdings.” No further details were presented.
“The offer recognizes the significant risk to taxpayers under the current deal and to that extent is a positive development,” said Goldwater Institute president Darcy Olsen. “Regrettably, however, the proposal fails to remedy the core legal violation at issue, leaving the expensive taxpayer gamble intact.”
The Arizona Republic reports that the bonds offered by the city of Glendale for Mr. Hulsizer will ultimately cost taxpayers $250-340 million. That figure includes the initial bond offering of $100 million the city plans to issue to help Mr. Hulsizer buy the team, as well as projected interest on that bond. Additionally the city is obligated to pay Mr. Hulsizer $97 million for arena management over 5 years.
Mr. Hulsizer apparently is promising only that revenues from all sources—such as arena events, rental payments, parking revenues—will total at least $75 million over 30 years and that he would make up any shortfall up to that amount. That would still leave taxpayers on the hook for as much as $362 million, which Mr. Hulsizer is not guaranteeing.
Glendale taxpayers have been given no protection against a future team bankruptcy. If the team goes bankrupt again, taxpayers will assume the full cost of bond repayment—this is on top of what taxpayers are already paying for the construction of Jobing.com Arena. Any restructured deal should legally protect taxpayers from liability for the bond repayment if the team fails again.
Arizona’s Constitution categorically prohibits the use of public debt to finance private businesses. Glendale justifies public borrowing on the grounds that the city is acquiring valuable consideration in the form of parking rights. However, the city may already own a significant portion of those rights, and the team does not presently have the legal right to sell the rest. If so, the city essentially is “selling” parking revenue rights to itself, which would be a clear violation of the Gift Clause. The new proposal does not address this.
“We hope Glendale will put a deal on the table that doesn’t expose taxpayers to unnecessary risk,” said Darcy Olsen, president of the Goldwater Institute. In an email to the Institute, Mr. Hulsizer wrote, “I don’t need the City’s credit to buy the team.” The Goldwater Institute has recommended that Mr. Hulsizer use his resources to buy the team and hold taxpayers harmless. In a less than perfect compromise, Mr. Hulsizer could also protect taxpayers by personally guaranteeing the full repayment amount of the bonds.
Mr. Hulsizer also says he is relieving Glendale of its obligation to pay the National Hockey League $25 million for team losses over the last year. It is not clear whether Mr. Hulsizer would actually repay the obligation, or whether the NHL would be forgiving the debt, thus costing Mr. Hulsizer nothing.
The City of Glendale continues to ignore multiple requests from the Goldwater Institute to disclose public information related to the funding source of the $25 million and the documentation supporting the proposed arena management fees.