Commentary

Motives questionable in Coyotes deal

Updated: March 4, 2011, 1:55 AM ET
By Scott Burnside | ESPN.com

While embattled Glendale mayor Elaine Scruggs was warning her constituents Thursday of impending financial woe if the Phoenix Coyotes pack up and leave town, we were reminded of the old comic strip Wizard of Id.

In one of the popular Johnny Hart/Brant Parker strips, a subject from the beleaguered medieval kingdom of Id tells the king that a poll shows half the subjects think he should be boiled in oil.

The king asks about the other half, and is told they favor kerosene.

That is pretty much the plight of the taxpayers of Glendale when it comes to the Phoenix Coyotes.

On one hand, local politicians have made such a hash of the sale of the team that they must provide millions of dollars in givebacks to Chicago businessman Matthew Hulsizer in order for him to buy the team and keep it in Jobing.com Arena, a facility that was built with about $180 million in taxpayer dollars.

On the other hand, there is the Goldwater Institute (GWI), which allegedly represents the interests of the taxpayers but is slowly but surely squeezing the life out of the deal. It has threatened a lawsuit over the legality of the sale and, specifically, the municipal bond issue that is at the heart of the proposed deal with Hulsizer.

Makes you wonder whose interests are really being represented here.

From afar, it seems like such a simple thing.

The city of Glendale, for all its many foibles and missteps along the way, has an army of lawyers.

So does Matthew Hulsizer.

And the Goldwater Institute sure does.

One assumes no one involved would knowingly enter into a deal that contravenes Arizona state law regarding gifts from a municipality to a business entity.

But that is what the Goldwater Institute is alleging.

Now, ESPN.com has learned the city believes the loss of the team ultimately would cost the city and its taxpayers $510 million in lost revenues, taxes and jobs, not to mention the $25 million the city guaranteed the NHL this season to cover losses while the city worked on a new arena lease with prospective owners.

If the Goldwater Institute is really about protecting the rights of taxpayers, wouldn't you think it would want to work with the city of Glendale to avoid that kind of devastating loss?

Hulsizer, aware of the concerns expressed by Goldwater over previous possible deals, met with Goldwater's lead counsel, Clint Bolick, in December.

Hulsizer outlined the deal at that point and was left with the impression that there were no major issues.

Yet GWI has warned off potential investors in city bonds that are crucial to generating the $100 million that will go to Hulsizer as part of the new lease agreement. Those funds will go to buying the team from the NHL.

Yes, the city of Glendale apparently didn't take the Goldwater people seriously enough and dragged its heels on providing documentation about the lease agreement. But is that a reason to scuttle a deal, potentially costing the municipality for years to come, as opposed to working with the city to ensure the deal is done properly?

The NHL has hired a consultant, John Kaites, to work with the Goldwater people to find some common ground on how the lease deal with Hulsizer might get worked out and allow Hulsizer to buy the team from the NHL, ESPN.com has learned.

Kaites worked with Chicago White Sox/Chicago Bulls owner Jerry Reinsdorf on his failed bid to buy the Coyotes, a bid that also included significant givebacks from the city of Glendale.

Kaites has been able to speak with some of those involved, but, so far, multiple sources have described the Goldwater role as delaying and interfering as opposed to proactive and helpful.

Maybe that's not GWI's mandate.

Meanwhile, the league's patience grows thinner by the day. Depending on whom you speak with, it's believed the time for a resolution one way or another is at hand.

Scruggs said Thursday that "we are now at a point where time has run out."

Local media reports indicate Scruggs would not elaborate on what that means exactly.

One of the main issues is who owns the parking rights and how much revenue it might generate. That revenue is crucial to underwriting the sale of the municipal bonds.

The numbers vary. One consultant who provided numbers to the city has been cited in a fraud case for exaggerating potential revenues from municipal bonds sales, but information provided to ESPN.com indicates the city of Glendale is working on estimates that suggest it will receive between $60 million and $80 million from parking revenues in the lease arrangement. There also is an expected $5 million in naming rights for the parking that the city could realize.

The Goldwater Institute questions whether the city owns the rights to the parking. But if that is an issue, how complicated can it be to figure out who is right, especially if that is the basis for the lawsuit Goldwater has threatened and which in turn threatens the completion of this deal?

Even late Thursday night, there was some indication that talks were pointed in the right direction on sorting out the parking issue, sources told ESPN.com.

Likewise, there seemed to be some headway in selling the city bonds that are crucial to getting the lease deal done with Hulsizer.

In the end, how does trying to scare off investors help the process?

Are there other agendas at play here?

Politics? Personal profile? How about the tight connection between Goldwater Institute board members and the Arizona Diamondbacks? Does it somehow help the Diamondbacks in a hardscrabble economy if the Coyotes leave town?

None of these questions should be at issue when the community is staring down a potential half-billion-dollar hole in the ground. Should it?

The city of Glendale has agreed to pay $100 million of the $170 million sale price for the team that Hulsizer has agreed to with the NHL.

The city of Glendale will receive back the $25 million it guaranteed the NHL to cover operating losses while the city tried to strike a deal with a new owner. The Hulsizer group also has agreed to absorb this year's losses, estimated at $40 million.

In addition, Hulsizer has agreed to buy the arena at the end of its useful life, which is expected to generate anywhere between $40 million and $130 million.

Also, there is a $250 million relocation penalty Hulsizer would pay if he tried to relocate the team at any point during the 30-year lease he hopes to sign with the city of Glendale.

Assuming Hulsizer and the team stay for the length of the lease, the city believes there will be an additional value to the municipality of between $290 million and $350 million.

Is it a great deal for the citizenry of Glendale?

Did we mention the oil and kerosene?

But what are the alternatives?

The NHL has gone to the wire to keep this team in Phoenix. It will not absorb any more losses. It has a deep-pocketed owner in Winnipeg ready and waiting, and a Canadian city that is feverish at the prospect of the NHL returning.

It will happen unless the Goldwater Institute and the city of Glendale can somehow work through whatever competing agendas are at play here.

There's lots of blame to go around. Lots of fingers to be pointed, but in the end, it makes you wonder whose interests are being protected here -- other than those of the citizens in Winnipeg.

Scott Burnside covers the NHL for ESPN.com.