Coyotes Troubles Continue

The NHL’s Phoenix Coyotes may have made it to the Western Conference finals before being knocked out of Stanley Cup contention by the Los Angeles Kings, but Glendale, Ariz., officials are having to sweeten the pot to lure a buyer willing to keep the team in town.

City officials are negotiating a Arena lease agreement that would give a potential buyer of the team, whose former owner filed for bankruptcy protection, $17 million a year to manage the arena, according to Bloomberg News. The NHL took ownership of the team for $140 million when Coyotes owner Jerry Moyes filed Chapter 11 in 2009. Another potential buyer made an offer but with plans to move the team back to Canada.

The NHL stepped in, and Glendale agreed to subsidize the Coyotes’ losses until a new buyer emerged. Valued at a league-low $134 million, the Coyotes’ annual losses clock in at $24.4 million, despite a playoff run, according to Forbes.

Wanting to keep the team in cash-strapped Glendale, yet needing to offer financial incentives to potential buyers, poses a tricky problem for the city. It also underscores the inherent risks cities face when they offer such incentives.

Glendale offers the $17 million management deal even as it struggles to close a $32 million budget deficit, laying off 49 workers and considering a sales tax rate that would make it one of the highest in the nation, Bloomberg reports. Complicating the issue is the Coyotes’ failure to meet expectation in years past.

“They said under the worst conditions financially, we would make over $100,000 on the arena each year,” city councilman Phil Lieberman told Bloomberg. “How could it go wrong? It would cost us nothing.”

Instead, subsidizing the Coyotes losses has cost the city some $25 million a year. And complicating the issue further, the ownership group that built and the nearby Westgate City Center retail, residential and hotel complex only completed one-third of the development. Arena bonds were to be paid by sales taxes generated by Westgate.

“They’ve got a a big hole in their budget to keep the ice hockey team in town,” Tim James, an economics professor at Arizona State University, told Bloomberg.

The NHL announced it has reached a tentative agreement with a potential buyer, former San Jose Sharks CEO Greg Jamison, after the Coyotes advanced to the conference finals for the first time since the franchise moved to Arizona, according to Bloomberg.