A Crony Gift By Any Other Name is Still The Same

Via the AZ Republic

The true cost to operate Jobing.com Arena ranges from $5.1 million to $5.5 million a year, which is about $10 million to $20 million a year less than the Glendale City Council has agreed to pay hockey-related interests to manage the facility in recent years.

The net management costs, included in documents recently published on the city’s website, are bundled in the city’s solicitation for a new company to operate the city-owned arena.

Glendale council members interviewed by The Arizona Republic said they hadn’t reviewed the documents and were surprised by the figures.

“I wasn’t aware of that,” Mayor Jerry Weiers said. “Then again, I know damn good and well that the way it’s been run, they’re not putting anything extra into it whatsoever.”

This is unbelievably easy to understand .  It is a hidden subsidy, and everyone knows it.  The pictures of politicians running around saying "what, we had not idea" is just hilarious.  The Phoenix Coyotes hockey team has the lowest attendance in the league, and loses money.  In addition, the NHL, which owns the team, has committed to its members that it will not take a loss on the team, meaning that it needs to sell the team for north of $200 million.  The team is worth over $200 million, but only if moved to Canada.  In Glendale, it is worth $100 million or less.

The city was close to a deal a few years ago to sell the team.  It tackled the team value problem by basically throwing $100 million in taxpayer money into the pot for the sale (to make up for the difference in value between the asking price and actual worth).  When this encountered a Constitutional challenge (under the AZ Constitution corporate welfare is illegal though you would never know it living here) the city council disguised the subsidy in the form of an above-market-rate payment for running the arena.

So absolutely everyone knows what is going on here.  This has become a massive black hole for the town of 250,000 people that achieves nothing but the self-aggrandizement of the local politicians, who feel like bigshots if they have a real major sports franchise in town.  Oh, you heard that this all actually pays for itself in tax money?  Hah!

The justifications for previous management deals revolved around a commitment to keeping the team in Glendale. Loyal fans pleaded with council members for the team’s future. And a council majority saw advantages, including thousands of fans trekking to their city 41 nights a year to watch hockey and spend money in the city’s restaurants and shops.

The city collects revenue associated with the team and arena through leases, parking fees and tax collections for food and merchandise sales in the nearby Westgate Entertainment District. Those figures have been on the upswing, particularly since an outlet mall opened last fall.

Total collections were $4.7 million in fiscal 2011, and reached $6.4 million through just the first eight months of the 2013 fiscal year, according to the city. That money helps pay, but doesn’t fully cover, the city’s debt to build the arena.

The town spent $300 million on a stadium and subsidized the team between $25 and $40 million a year, depending on how you count it, all to get an "incremental" $6-8 million in tax money.  And by the way, just because they collect it in this area does not make it incremental -- these sales could well have cannibalized another area of town.

  • herdgadfly

    Paying $10 million to $20 million to operate an arena that cost but $220 million to build is absurd. The 250,000 people in Glendale must have unbelievable tax burdens in order to pay for the under-utilized arena and Valley Metro light rail as well. The politicians need to cease operations in the arena and blow away any contract obligations with the NHL. Shutter down!

  • http://www.facebook.com/matthew.slyfield Matthew Slyfield

    I have been waiting for ages for some municipality somewhere to issue the proper response to a threat of "build us a new stadium/arena or we are moving," and end the perpetual blackmail.

    The correct response: "So sad, sorry to see you go. Can we help you pack?"

  • dc

    these people never figured out that "if you build it, they will come" is pretty much ass backwards.

    they need to "be there" before you build it

  • marque2

    I am pretty amazed that they spend 2 billion on a football arena that gets used 8 maybe 16 times a year, throw in a handful of concerts and you get about 20 uses. And then for that 2 billion grossly subsidized by the city, you really just cannibalize the entertainment dollar from elsewhere.

    Allowing a private industry to build an office park on the same 80 acres would bring in 10x the revenue for much less cost.

    Los Angeles did it by voting to not spend on teams, but the politicians have been trying their hardest to subvert that ever since. LA still doesn't have a professional football team, and no-one except the politicians really care.

  • irandom

    I never quite understood how non-government connected capitalists are evil, but crony capitalists are good?

  • LoneSnark

    Why does it NEED to be a professional team? Why can't the league team go to Canada and a bunch of people in the city start an el-cheapo team to play there? Aren't there any other sport cartels which don't cost so much?