Clint Bolick

Getting taxpayers off a dangerous hook

Posted on March 15, 2011 | Author: Clint Bolick
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The City of Glendale, Ariz. is planning to borrow $100 million so it can send a check for that amount to Chicago businessman Matthew Hulsizer to help him buy the Phoenix Coyotes. That type of transaction is exactly what the Gift Clause of the Arizona Constitution was designed to prevent: furnishing public debt or providing public funds to a private individual or corporation for personal gain.

The deal has the team selling parking rights to the City, which the dealmakers say will provide sufficient revenues to repay the bonds. But there are two problems with that. First, the City may already own some or all of the parking rights. Second, it's quite clear the revenues will not come close to repaying the bonds.

So the City pledged sales and excise taxes as collateral for the loan. That means if the team goes bankrupt again, or if parking revenues fall short, taxpayers are on the hook for potentially hundreds of millions of dollars--on top of the $180 million the City borrowed to build the hockey arena in the first place.

The solution is simple: take the taxpayers off the hook, and place responsibility where it belongs: with the new owner.

The City and Hulsizer share two dubious beliefs. First, although the Coyotes have lost $25-$40 million every year and already have plunged into bankruptcy, they think Hulsizer can make the team profitable with “a few tweaks”. Second, they say parking revenues will suffice to repay the bonds.

If they truly believe those things, then there should be no problem with Hulsizer, rather than the taxpayers, borrowing the money. That way, if the shaky premises on which the deal depends prove faulty, Glendale taxpayers will not have to pay for another costly blunder by the City of Glendale.

If the City truly wants to keep the Coyotes, it should act within the law and stop playing Russian roulette with taxpayer money. If Hulsizer is willing to skate up to the puck, the Coyotes' endearing mascot Howler need not be an endangered species.

Clint Bolick is director of the Goldwater Institute’s Scharf-Norton Center for Constitutional Litigation.

Learn More:

Goldwater Institute: Glendale, the Phoenix Coyotes, and the Hulsizer Deal

Goldwater Institute: Goldwater Institute v. City of Glendale (public records in Coyotes negotiations case)

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