What happens to Coyotes, Glendale after two years?
GLENDALE, Ariz. — The Glendale City Council on Friday voted unanimously (7-0) to approve an amended, two-year Gila River Arena lease and management agreement with the Coyotes.
The new deal gives Glendale the cost certainty it sought in the form of a fixed, $6.5 million management fee. The short-term agreement removes the immediate uncertainty the Coyotes faced in a drawn-out and potentially unsuccessful lawsuit — uncertainty Coyotes president, CEO and co-owner Anthony LeBlanc said had an impact on the team.
"I sat in the war room on the opening of free agency on July 1 and was concerned," LeBlanc said when asked why the team reversed course and settled out of court. "We did hear from a number of agents that said ‘no, we don’t even want to have a discussion (about signing there).’
"The real crystallizing moment for us … was the day that we signed (restricted free agent) Mikkel Boedker and he would only go as far as a one-year deal. We got together as an ownership group and said, ‘this is not the way we can run a hockey team.’"
The details of new agreement are here. What happens after two years is anybody’s guess. Here are the possibilities.
While the Coyotes have had an often-contentious relationship with Glendale, there remains the possibility they could negotiate an extension.
"I would like to see us structure something with Glendale on an extended basis sometime over this next year," LeBlanc said. "Nobody benefits from a short-term deal like this."
Two of the principle architects of Glendale’s decision to void its original agreement with the team — Mayor Jerry Weiers and Vice Mayor Ian Hugh — are up for re-election in 2016. Hugh and councilmembers Bart Turner and Lauren Tomalchoff — both of whom voted to void the deal — face potential recalls (so is deal proponent Gary Sherwood), although it’s unclear how far those efforts will progress.
Even if those players remain, both sides struck a conciliatory tone on Friday with LeBlanc offering to host quarterly meetings with the city and Weiers offering to have a drink with LeBlanc. If the Coyotes’ six-year saga has proven one thing, it is that there is always a new twist just around the bend.
Gila River Arena still is a terrific building for watching hockey and, at present, is the only building available in the Valley for hosting NHL hockey.
Despite both sides’ sugarcoated comments and the insistence they are focused only on the future of the Coyotes in Glendale, the team is certain to explore the possibility of getting a new arena built elsewhere in the Valley. The belief internally is significant momentum for making that happen exists.
Phoenix Mayor Greg Stanton has been vocal about his desire to bring the Coyotes downtown in a shared arena with the Suns, although there are numerous financial and political hurdles to cross before that could happen.
"Both sides are more than willing to at least chat about that possibility at the right time," Stanton fold FOX Sports Arizona. "By adding the Coyotes we can improve the situation downtown and we can add value."
There have also been indications that the Salt River Pima-Maricopa Indian Community has interest in building an arena, which could bring the Coyotes closer to the majority of their fan base, as well as the wealth and population base of the Valley. That location presents far fewer political and financial hurdles than downtown.
If the team believes the new arena is moving forward, it could choose to re-up with Glendale on a short-term agreement (perhaps as short as one year) while construction takes place, or it could explore playing at Talking Stick Resort Arena as a short-term fix.
If momentum for a new arena dies and the Coyotes’ relationship with Glendale reaches its end point, the Coyotes would be forced to explore relocation. LeBlanc said all Valley options would be explored and fully exhausted before a possible relocation is considered.
"It seriously is not on the table now or in the near future," he said.
With Las Vegas and Quebec City both applying for expansion franchises, the best relocation options for the Coyotes might be Portland and Kansas City, which both have existing arenas. Relocation could also make sense for Seattle, which would otherwise be looking at a combined price tag of at least $1 billion to build an arena and pay the league’s expansion fee. A much smaller relocation fee would be more palatable to investors who wonder how the team will become profitable, but Seattle would still need to get an arena built.
Both the league and IceArizona have said previously that they view Phoenix as a better market than either Portland or Kansas City, but the NHL has made it plain how much it covets the Seattle market.
Location has clearly hurt the Coyotes’ attendance efforts since moving to Glendale in 2003. The majority of the team’s fan base is still in the northeast and southeast Valley, where the city’s population and wealth bases also reside. In 2000-01, the Coyotes averaged 14,224 fans at America West Arena despite missing the playoffs. In 2011-12, the year they went to the Western Conference Final, they averaged 12,420 and they have not topped 14,000 in any of the past six seasons since coach Dave Tippett came aboard and gave the team a boost in credibility.
The initial reaction would be Glendale did. The city got the cost certainty it wanted while the Coyotes lost somewhere between $1 million and $2 million in revenue, based on public records of the first two fiscal years of their previous agreement.
I would like to see us structure something with Glendale on an extended basis sometime over this next year. Nobody benefits from a short-term deal like this.
Anthony LeBlanc, Coyotes president, CEO and co-owner
"For our citizens, for our taxpayers, we now have certainty. We know how to balance our budget. We know what that money is going to be when we’re balancing our budget," Weiers said. "This was everything that I had hoped it would be."
The question that both legal experts and councilmembers have raised, however, is what will this decision look like if the Coyotes leave Glendale in two years?
From the time it took over in 2013, IceArizona has targeted Year 3 of its ownership as the year it at least hoped to break even, so it’s difficult to say how the original, 15-year, $225 million deal would have looked one, two or three years down the road if Glendale had given the ownership group time to fully implement its plan instead of attempting to void the deal less than two years after it was signed.
An Arizona Republic story this week noted that Gila River Arena’s 14 non-hockey related events this past fiscal year are less than what IceArizona projected (23) when it hired Global Spectrum (now Comcast Spectacor) in October of 2013. It bears mentioning, however, that the arena doubled the number of concerts and events it hosted this past fiscal year from the previous year, attendance was up 131 percent from the previous fiscal year and ticket revenue jumped nearly 90 percent to $585,914, according to city records.
Glendale councilmember Gary Sherwood told FOX Sports Arizona that if the city loses the Coyotes, some councilmembers believe they can fill the lost dates with more non-hockey events and a minor league hockey team that could average 8,000 fans per game.
A quick scan of the top two minor leagues’ average attendance figures raises significant doubts about that projection. No team in the ECHL averaged at least 8,000 fans last year and the league average was 4,598, according to TSN. Only five teams in the AHL (the NHL’s main feeder) averaged 8,000 fans and the league average was 5,508.
Among southern markets, San Antonio’s AHL affiliate drew the best average attendance of the two leagues at 6,579, but that arena is less than three miles from the downtown core and the team faces far less competition from other sports since San Antonio does not have NFL, Major League Baseball and NHL franchises, or major conference university athletics.
When the Coyotes considered bringing their AHL affiliate to Glendale last season, they projected a best-case scenario of 3,000 fans per game. It’s highly unlikely, however, that the NHL would allow an AHL franchise/affiliate to play in the Phoenix market if the Coyotes were still here and that club was not affiliated with the Coyotes.
As for booking more non-hockey events, the 20,000-seat Ak-Chin Pavilion and US Airways Center will make it difficult for Glendale to make inroads. Ak-Chin Pavilion, which is owned by American entertainment behemoth Live Nation, will host 14 events in the next two months alone and books the vast majority of concerts in the Valley. Centrally located US Airways Center was scheduled to host 65 concerts and family shows this year.
Beyond revenue projections and filling of vacant dates, legal analysts have also wondered how much self-inflicted damage Glendale has caused to its reputation by reneging on a business deal less than two years after agreeing to it.
"Even if they eke out a victory in the short term… they could still lose in the long term by damaging their brand for future negotiations," Rodney Smith, the director of the sports law and business program at ASU’s Sandra Day O’Connor College of law, said last month. "Anyone is going to think long and hard before they decide to do business with Glendale."
Councilmember Gary Sherwood said Friday that Westgate Managing Director Jeff Teetsel is already feeling those effects.
"He lost a customer the day they announced that they were cancelling the agreement," Sherwood said. "It was a customer that was going to fill a property that had just left. The businesses know: when you have those 41-plus dates certain for hockey, that’s a big deal. That impacts their bottom line."
LeBlanc said all of the Coyotes’ sponsorships are tied to the team, not the city or the arena. If the Coyotes leave Gila River Arena, those agreements would either transfer with the team to a new Valley location, or they would wrap up early.
The naming rights agreement with Gila River is only in place as long as the team plays in the arena. Agreements with Levy Restaurants, Ticketmaster (and clearly FOX Sports Arizona) would transfer with the team if it moves elsewhere in the Valley.
It’s not as attractive as a long-term deal, but as LeBlanc noted with the uncertain outcome of the lawsuit in mind, "A two-year deal is better than no deal. We know where we’re playing for the next two years."
Whether the Coyotes will be able to attract free agents, sponsors and season ticket or suite holders, with the future uncertain, remains to be seen. The best thing the team could do to allay fears is either extend its deal with Glendale or secure the promise of a new arena elsewhere in the Valley.
"I understand people having concern because the two-year timeline is a bit of a surprise to many people, including us," LeBlanc said. "It wasn’t our desire.
"But if we had an intention of leaving the Valley, we had the opportunity to do that this summer with a clear out and we went the other way. Our focus was ensuring we could stay here. We continue to believe very strongly in this market and we’re encouraged about the future."