Local Paper Continues Its Relentless Campaign for Sports Team Subsidies

Several days ago, I wrote how our local paper, the Arizona Republic, was engaging in a coordinated campaign to get the city of Glendale to subsidize the private purchase of our professional hockey team with a $200 million bond issue.  The logic of this is mainly to save the previous $180 million bond issue the city unwisely issued several years ago to build an arena for this same hockey time as well as the sweetheart commercial real estate deals it has cut adjacent to the stadium.   All in all, the city proposes to spend a cumulative $380 million of public money to hold on to an asset valued by third parties at $ 116 million.  And through all of this spending, taxpayers will end up with not a dime of equity in this asset.

At the time, I thought the campaign had been relentless, going on day after day with both editorials and news articles making cases to subsidize the team, and hammering the Goldwater Institute for actually questioning the legality of transaction.  I mean God forbid anyone would actually interpret the Arizona Constitution "gift clause" that says governments in the state cannot give money to private businesses as potentially barring Glendale from giving money to a private investor so he can buy the hockey team.

But when I called the campaign relentless, little did I know it would continue day after day through the rest of the week.  Every day we get a new article that is basically an editorial in disguise, with the opposing position, if included, down around paragraph 25.   Today's is just a masterpiece of such yellow journalism, which includes no opposing viewpoint at all, and includes this classic gem that is almost a caricature of itself:

Rick Myers and his wife have worked as part-time ticket-takers since 2004, the year after Jobing.com Arena opened and they visited for the first time.

"This arena is not brick and mortar, ice and air-conditioning. This arena is a family," he said.

Craig Van Kessel, a disabled military veteran, agreed.

He said six months after getting a job with the team, when he had major surgery, his co-workers called, sent cards and offered help. The team also donates prizes each year for a Western Amputee Golf Association tournament that Kessel helps organize.

If the team leaves, he said, it affects "us little people."

John Minor, a guest services employee, said he counts friendships among the fans he meets at the arena, while Kyle Olson, director of arena events, said he's taught his toddler to howl like a coyote.

Can I barf now?  Seriously, if you were doing a caricature of bad anecdotal arguments for a typical concentrated-benefits-diffuse-costs government program, could you do any better than this?  We are talking about $200 freaking million dollars here.

Nowhere in any of its editorials or news articles acting as thinly veiled editorials does the AZ Republic reveal that it is an enormously interested party to the transaction.  The Sports Section sells papers, and the presence of an additional major league franchise adds a hard to measure but most definite contribution to the paper's bottom line.

Postscript: The key issue that spurred this is that the city's bond issue is facing higher than expected interest costs.  The city and the AZ Republic are trying to lay the blame on this on Goldwater for stirring up bad karma.  But in fact there are at least six factors for why bond interest rates might be higher:

  • The major bond ratings agencies recently put the city of Glendale on a credit watch list
  • Sales tax revenues that pay for the bonds are way down in AZ and Glendale
  • The city is investing $200 million in a $116 million dollar asset without getting any equity
  • The city has a history of failed bond issues, as evidenced by the previous $180 bond issue they are trying to bail out with this one
  • There is a general sense of wariness nationwide in government finances being overdrawn that may be spilling over into the bond market
  • A local think tank has raised legal questions about the deal — legal questions that turned out to be correct in a parallel case.

Incredibly, our paper has spend over a week harping on just one of these, which to my mind seems the most trivial.

Postscript #2: And by the way, this team is in bankruptcy.  Where is the plan for how that will be avoided in the future?  Won't we be in the same spot five years from now, just with twice as much bond debt?

  • Mesa Econoguy

    As a Goldwater member, I'm strongly encouraging them (with donations) to sue the crap out of Glendale, which they likely will.

    They will also likely win (just as in the CityNorth case), because the deal structure is highly suspect, and even if that passes legal muster, the procedure getting to this point does not.

    This is no time to go floating munis - the muni finance market is an absolute disaster, but these clowns are hell-bent on throwing more money the city and state do not have at this non-problem.

    Sue them.

  • Tim

    Two notes: The team is not in bankruptcy. The previous owner filed Chapter 11, but the team was bought in the chapter 11 asset sale. It's the new owners, which happen to be the NHL, that are trying to sell the team with leveraged municipal bonds.

    Sources (http://sports.espn.go.com/nhl/news/story?id=6185492) have the city suing the Goldwater Institute, and some of the directors, for "a legal form of interference...warned them off purchasing the bonds." I wonder if the prospectus pointed out the legal uncertainty. If it didn't include the legal risk in the safe harbor; would the city be liable to bond purchasers?

    Either way, it looks like the city has a week or so to sell the bonds; or the team will move (back) to Winnipeg.

  • mahtso

    I don’t see that this is a ploy to sell papers, but I really don’t know.

    What I think it is, is a fundamental belief (of the editors/publisher) that spending taxpayer money on this sort of thing is good. It goes to the question “who knows best how to spend the money we earn?” In my view, the Republic thinks the government knows best.

  • Ted Rado

    Like it or not, local governments are run by the local businessmen. They are interested in promoting activities that will increase their business. The mayor and most city council members in virtually all our cities fit this description. Growth, growth, growth is their watchword.

    I personally would prefer to see less growth and a simpler, more stable, lifestyle. Also, I am not a sports fan, so I could care less if we have pro teams in the community. The majority rules, however, and this is what we get. I hope the bond issues to pay for sports arenas and other projects to "improve" the community are well thought out and funded. The bonds should be paid out of the revenue from the new facility so that folks like me are not subsidizing someone else's interests.

  • IgotBupkis, President, United Anarchist Society

    Q: Won’t we be in the same spot five years from now, just with twice as much bond debt?

    A: Yes.

    .
    .
    .

    Correction: Yes, DUH.

  • MJ

    Consider it TARP for local sports franchises.

  • http://www.chaching411.com Jay Veniard

    I am a die hard Coyotes fan, who HAD season tickets for 2 years. I discontinued my season tickets because I live in the East Valley and it was a 1hr 15min drive during rush hour. I was told by a Coyote ticket rep when complaining about the drive, that roughly 70% of the season ticket holders at America West, when it was America West, lived in the East Vally. So my question is who was the genius that thought this was a good business decision?

    The way I read it, a bunch of business men and influencer's from Glendale made a VERY bad decision and I'm sure none of them are going to be financially effected personally by the Coyotes moving away from Glendale. I mean come on, I'm a small business owner and if I make bad decisions for my business no one bails me out.

    Has anyone thought about moving the Coyotes back to what is now US Airways Arena? I know it's not the best venue for hockey, but at least it's a more convenient location for EVERYONE in Phoenix. Just one loyal hockey fans opinion.