Glendale And the Phoenix Coyotes

Glendale Mayor Elaine Scruggs discusses the city’s challenging effort to keep the Phoenix Coyotes hockey team stationed in Glendale.

Transcript:

Ted Simons: Good evening, ask welcome to "Horizon." I'm Ted Simons. Three Maricopa County sheriffs employees have been arrested and charged with drug and human smuggling. In a late afternoon press conference, sheriff Joe Arpaio announced the arrest after deputy and two sheriff's detention officers. The deputy, officer Alfredo Navarette, had two suspected illegal immigrants living in his house. Also of note, he had been trained by ice. One of the detention officers arrested, Samantha Neville, is romantically linked with the leader after truck smuggling operation and is pregnant with his child. Seven other people were arrested with all being arrested accused of being part after syndicate to smuggle human and heroin from Mexico.
The city of Glendale approved sending $25 million that will keep the coyotes in the city for at least one more season. Earlier today I talk to Glendale mayor Scruggs about the city's efforts to hold on to the coyotes. Good to see you here. Thanks for joining us.

Elaine Scruggs: Thank you very much for inviting me.

Ted Simons: Let's talk about the status now of the coyotes in Glendale. Where are you?

Elaine Scruggs: The coyotes will stay and play in Glendale one more year. And that is because two weeks ago we approved a management agreement with the NH -- the NHL, the owner of the coyotes. And they are also managing our arena for us, just as I think the suns manage U.S. Airways and everybody -- every facility has to have a manager. So we entered into an agreement for them to manage the arena one more year, so that means the coyotes will stay and play for the next season.

Ted Simons: And that's a $25 million agreement. Correct?

Elaine Scruggs: Maximum $25 million.

Ted Simons: Why is it worth $25 million to keep this going? Not the first time it's been a $25 million deal, and it may not be the last time, because there's an extension in the deal as well, correct?

Elaine Scruggs: It's a possibility. It's not an automatic rollover. A possibility to extend. It's not in anybody's best interest. The national hockey league will want to sell the team. They don't want to own the team forever. So why is it in our best interest? The answer is because if that team was not there, the city of Glendale would still be spending on the average, 17 to 18 million dollars a year just to keep the enterprise going. People think of the team and forget everything else that goes on in the arena. So if you stop and think about our arena, University of Phoenix stadium, U.S. Airways arena, Chase Field just does baseball, but if you stop and think of everything that goes into a payroll of people who go out and secure activities so that the arena can be used to getting ready for shows that are in there, everything you have to have insurance, you have to have electricity, you have to have ushers, ticket takers, security, everything that goes into running a facility, the 18,000 people can show up at and be entertained in, that costs money. So our fixed expenses in there would be a minimum of $17 million if the team was gone. With the team there, because of the way the contracts were set up originally, there is some shared costs of having to do with advertising, promotions, it raises the costs a little more. But the team itself brings us revenue. So if we didn't have the team, we're spending $17 million but we don't have the revenue. The team just from the basic costs that they have to pay us, the rent, ticket surcharges, we're look at over $3 million a year. But then their real effect is in sales tax for their -- the people coming to the games and what they spend out in west gate and so forth.

Ted Simons: So that would be the reason why, I would imagine, the city was ready to basically give the Hulsizer group, the owner seemed like he was the last one in line here, and we'll talk about that in a second as well, but $100 million in terms of selling bonds to keep that team in Glendale.

Elaine Scruggs: Well, that's all mixed up. You have several things all mixed up together. There were a couple of parts to the agreements we entered into December 14th of 2010. One had to do with the purchase of parking rights from the team owner, which would be Mr. Hulsizer. That would then give the city the right to charge parking. So that would get paid back through costs of people paying to park in the area. Then there was a management agreement, which is exactly the same thing we just got through talking about. Somebody has to pay the 175 people it takes to run the arena. So either the city of Glendale starts up a whole new department, arena management, which probably we wouldn't be very good at, or we hire somebody to be a manager.

Ted Simons: I gotcha. And I'm trying to figure out if the parking fees and the management operation, the overseeing of that as well, if that is working up to the $100 million in bonds that were to be sold to keep that team. Again, talk about the dynamic there and why it's worth the city going through this process to go through all this.

Elaine Scruggs: We really -- just like any other large commercial entity, you need an anchor tenant. Think about -- let's think about something else entirely. Let's think about a shopping center where the major department store moves out. What happens? Everything starts to go down, because you need an anchor tenant that brings the foot traffic in. In so the anchor tenant is the coyotes. The coyotes bring in about 600,000 people a year. Then the other activities, the concerts, the shows, whatever else goes on, is maybe another 600,000 people a year. You don't want to lose those 600,000 people. So we are trying to keep an anchor tenant in a facility that we own, and must pay to operate.

Ted Simons: Do you need, though, to pay a perspective owner or to at least allow a perspective own to get as much money as $100 million, or whatever the figure may wind up being, is that necessary, and if it is necessary, is everything OK with this particular enterprise? Because that sounds like spending an awful lot of money to make sure something is still around.

Elaine Scruggs: You know, and if you look at it that way, it does -- I agree, it does sound that way. We are look at everything in the long-term. We're looking at over 30 years. We have studies that show we're going to recoup that money, it's not like it's just gone. So the question is, why do you have to give it in the first place? Because that's how the market works. I think senator McCain said it best. He said maybe it's not the perfect system, but this is what works. You can see it going all over the entire nation. Mr. Hulsizer came and talked to the national hockey league. We have to remember, national hockey league decides who they're going to sell to. If Ted Simon shows up and they say I don't think Ted Simon can make a go of this, they're not going to sell it to you. They wanted to sell to Mr. Hulsizer. This is how it worked out for Mr. Hulsizer. We bought parking rights, those would pay back the money that was going to Mr. Hulsizer. The other part of it is arena management gets back to the same thing. Somebody has to manage that arena. It's better if the entity that owns the anchor tenant manages it, than somebody else who might put in conflicting activities. Think about how much fun it was when the Arizona Cardinals football game was scheduled the day before the Fiesta Bowl. Didn't that make people happy? No. It did not. It caused a lot of commotion. So it's better have you your anchor tenant taking care of the management because face it, they are the stability of the arena.

Ted Simons: You mentioned that this would bring in money, revenue, this would be a good thing for Glendale for years to come. But we're dealing with an operation that's already filed bankruptcy once, has never made a penny while it's been here in the valley. Why -- let's keep it to citizens in Glendale. Taxpayers in Glendale. Why should they be encouraged with that kind of a track record? A, and B, what happens if something bad happens in three, five years? That whole 30-year plan goes down the tubes, doesn't it?

Elaine Scruggs: Either that or it goes down the tubes right now tomorrow. It's Mr. Hulsizer, whoever the eventual buyer is, it's his problem to worry about whether that team makes money or not. I think there are some owners of sports teams that regularly show a loss and that's the way they do business. As long as he is paying his bills to the city of Glendale, as long as he is putting a quality product on the ice, this is the first time the team has gone to the playoffs back-to-back years, in I don't know, forever. Do you know that the coyotes bill Daley, the deputy commissioner of the NHL, stood up at our council meeting two weeks ago and he said that the increase in gate revenues for the Coyotes surpassed every other team in the national hockey league. Give this team a chance. So Mr. Hulsizer's willing to build a quality product team, which I think has happened ever since we saw Dave Tippett. People are coming back. People only want to go watch a team that really performs well.

Ted Simons: You're saying the risk is worth taking for this long-range plan with an operation that again, so far hasn't done that well in terms of the bottom line. The risks is worth taking because you're seeing progress and you're seeing something that should be around, because again, the critics, some critics in particular are saying there is no guarantee. There is no guarantee that they're going to be around more than three, five, seven years. There's no guarantee.

Elaine Scruggs: But we know that they will be here more than a year from now. You know, right now -- let me just back up and say we have been involved with the arena, Coyotes since 2001. There is a body of knowledge, and there's a body of data and a body of information that somebody picking up a newspaper reading this for the first time has absolutely no access to. We know how it all fits together. How it fits together with West Gate, with other activities in that area. I still say you have to separate out whether the team and the team owner is making a profit or not from whether the city is making a profit.

Ted Simons: I think the other side would say -- the critics of the deal would say, have you to be worried about the team because the team wasn't making a profit before and they went belly up. So that would be a concern.

Elaine Scruggs: I understand that. But the team that was not making a profit before also had absolutely no focus on building a quality product. Which led to them continuing to go downhill. Do you know that 80% of the season tickets have already renewed for next season? That is unheard of for something that seems like any time you pick up a newspaper or turn on the TV, you're being told the coyotes are a disaster. 80% of the season tickets have already renewed and 600 more have purchased. New.

Ted Simons: With that in mind, and you mentioned the Hulsizer group, as being a potential buyer, are there other potential buyers?

Elaine Scruggs: And that would be a question you'd ask the National Hockey League.

Ted Simons: Are you aware of other potential buyers?

Elaine Scruggs: I have been told there are others who are interested. Everything has to be vetted through the national hockey league. They don't start with the city of Glendale. If the league is not willing to even think about selling the team to them, there's nothing for us to be doing.

Ted Simons: It would affect how much money, how many bonds would need to be sold by the city of Glendale if the next owner says I only need 50. I only need 20. So it does factor in.

Elaine Scruggs: But you have to start with the national hockey league. What I'm saying is, to my knowledge, the national hockey league has not sent anybody to our doorstep, to say start dealing with this person, because we're thinking of telling Mr. Hulsizer we've changed our mind. If that's happening, it's not something that I know about.

Ted Simons: Last question, and we've had the Goldwater Institute on talking specifically about this issue. As obviously as you know, they have trouble with the deal with the Hulsizer group. Why is this not a violation of the Arizona constitution's gift clause as the Goldwater Institute says it is, and if the Goldwater Institute has mucked up the works by threatening to go to court, and thus made selling these bonds near impossible, why hasn't the city gone to court over all this?

Elaine Scruggs: I'm going to first honor a commitment to our city attorney, I'm not going to try to give legal advice and explain why its not a violation of the gift clause and he's not going to try to pass the budget and be a mayor. So you would need to get a sensible answer you need to talk to the city attorney as to why we believe it is not a violation of the gift clause. In answer to your second question about why we have not sued the Goldwater Institute, we will keep our options open and if that seems to be something viable we may go ahead and do that. But the whole idea that the city of Glendale was ready to file a lawsuit was started by one reporter. Printing it in the newspaper. We never said that.

Ted Simons: OK.

Elaine Scruggs: We never said that.

Ted Simons: So you're not necessarily on that particular track.

Elaine Scruggs: We have discussed the possibility and have indicated that if the situation was right and if it seemed in the best interests of the city of Glendale, we would be willing for the city attorney to bring this back to us. We never said we were going to file the lawsuit on any particular day or anything of that nature.

Ted Simons: OK. I lied. This is my last question.

Elaine Scruggs: OK.

Ted Simons: As far as residents of Glendale, you've got a high debt load that's pretty high, especially for these sports projects and the whole nine yards. Critics of the Hulsizer deal and who knows what comes next, but critics say the debt load is already very high. For a city of Glendale size. It is worth taking the risk of adding more?

Elaine Scruggs: First of all, for our meeting two weeks ago I've heard this thing about our debt load, our billion dollar debt load for so long.

Elaine Scruggs: It's been reported, yes.

Ted Simons: Yes, it has. So I got out the budget book and I only did the cherry pick the easy stuff, went to the schedules and I didn't go into all of them. And I came up with $711 million worth of debt for police, fire, homeland security, parks, libraries, and other services, municipal buildings, the things that citizens require and want in order to have a good quality of life. So of this so-called billion dollar debt, which really doesn't exist, 711 million of it is all voter-approved and it's for the very things our residents want so they can enjoy living in the city of Glendale. The other debt through municipal property corporation, which is a totally separate financial arrangement for our arena, our arena, I think the debt is -- with the infrastructure and all is around 180 million. The building is worth 220, the equity in it is 65 million. That's doing better than people are doing in their own homes. But nobody wants to talk about that. So it is a very manageable debt or else we wouldn't have the third highest credit rating that Moody's gives out.

Ted Simons: So what you're basically saying is, it is worth the risk because Glendale is looking that the and saying, the debt load isn't necessarily as high as people say and the risk isn't necessarily as great as people say.

Elaine Scruggs: Definitely. And the debt load, you know Ted, even if the coyotes leave, we still have the debt on that building can, don't we? But we don't have as much activity to help us pay it. Remember, what happens in the arena, it's not -- gosh, I'll sound like Las Vegas. It's not just what happens in the arena stays in the arena, but those people go out and keep maybe 40 other businesses viable. Because they shop in those stores and they neat those restaurants, and they stay in those hotels.

Ted Simons: Can we get you back to talk about the reservation and the casino and that whole nine yards?

Elaine Scruggs: We'll talk about the city's opposition to the creation of an Indian reservation within our municipal planning boundaries.

Ted Simons: Standing invitation.

Elaine Scruggs: Thank you.