The Phoenix Coyotes Ownership Saga Almost Reaches An End

By:  Christian Deme, Ruling Sports intern (Twitter:  @TheSportingBiz)

The Phoenix Coyotes ownership saga that has dragged on for four years has finally seen a glimmer of light at the end of the tunnel.

The National Hockey League has owned the Coyotes since 2009 after former owner Jerry Moyes put the team into bankruptcy. Since 2009, various bids by potential buyers have fallen through, as recently as last week, leaving the team in the hands of the NHL.

On May 25, the NHL approved the sale of the Phoenix Coyotes to the Renaissance Sports & Entertainment Group, headed by Canadian businessmen George Gosbee and Anthony LeBlanc and American businessmen Avik Dey and Daryl Jones.

The complexity of the sale of the Coyotes lies in the necessary lease agreement with the City of Glendale, which owns Arena, the current home of the Coyotes.  While the Coyotes have enjoyed moderate success on the ice, the financial state of the team is in shambles.

Sports arenas can be a tremendous boost to a local economy in a number of ways. Namely, arenas hosting professional sports teams can attract fans that attend the games and generate revenue. This is the main reason the Coyotes are having trouble completing a sale. The City of Glendale fronts the hefty checks to the NHL to cover the Coyotes’ operating losses and to keep the team in Arena, while having to consistently battle one of the lowest attendance rates in the league.

Lease agreements in professional sports serve as a documentation of contractual rights between a sports franchise to use a facility in exchange for that franchise’s pledge to play their home games at the same facility. Professional sports lease agreements also serve as a contract to delineate the rights and responsibilities of the parties concerning the operation and upkeep of the facility, as well as their financial arrangements. In certain cases, a lease agreement will require a team to pay the facility owner a flat rate rental fee, while in others the fee will vary based on a percentage of revenue generated by the sports franchise.

When stadium financing agreements involve public funds, government authorities typically require teams to enter into a non-relocation agreement to prevent the franchise from moving to a different city. This is a way the owners of the arena protect the interests of the taxpayers to prevent injury to the welfare, recreation, prestige, prosperity, and trade and commerce of the community.[1] As Arena is owned by the City of Glendale, public funds are in the mix for a lease agreement with the potential new owners of the Coyotes and a non-relocation agreement could play an interesting role in determining the future of a team not able to draw fans.

Renaissance must reach an agreement with the City of Glendale to keep the Coyotes in the desert. Glendale Mayor Jerry Weiers is in a difficult predicament due to the amount of funds the city is pumping into efforts to keep the Coyotes in Glendale, while dealing with little fan interest in the Coyotes. Glendale could be on the hook for up to $15 million per year over a long-term lease for arena management fees, while also paying off the construction debts of their arena. Glendale has already felt the weight of the struggling Coyotes coupled with the downturn of the economy and has had to lay off public workers and has even considered using its city hall and police department as collateral for a loan. Mayor Weiers has gone on record stating that he has approximately $6 million budgeted for arena management fees, because he refuses to cut into the general fund of the city any more to support a failing hockey team.

It will be interesting to see what happens with Renaissance Sports and Entertainment Group’s bid on the Coyotes. The two sides are quite far apart from agreement on arena management fees, but a positive aspect about Renaissance’s bid is that they are a diverse group of investors coming from both Canada and the United States. This may help the financial viability of the franchise in the future. Regardless of what happens, NHL attendance figures don’t lie and the Coyotes have been near the bottom of the league, if not the very bottom, in attendance every operational year for the past decade.

It will take a savvy marketing miracle to turn the Phoenix Coyotes around and make them profitable, otherwise we may soon see the Coyotes’ survival skills tested in a cooler climate.

[1] “Successful Partnering Between Inside and Outside Counsel” by Lonn A. Trost, Irwin A. Kishner, and Daniel A. Etna

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