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Coyotes facing more taxing roadblocks

Petitions on lease and Glendale sales-tax increase clouding franchise's financial future

00:00 EDT Friday, July 06, 2012

Once again, threats to the sale of the Phoenix Coyotes are mounting, which means the NHL is facing some unappetizing choices over the future of the franchise.

A petition to overturn a city sales-tax increase was delivered to suburban Glendale city officials Thursday. That could torpedo Greg Jamison's proposed purchase of the Coyotes from the league.

Another petition to put the lease for Arena, one that is to pay prospective owner Jamison $324-million (all currency U.S.) over 20 years, to a public vote is due either Monday or July 16. The date is the subject of some legal wrangling between Glendale and the two taxpayers who are gathering signatures.

If the petition is filed and upheld, then the lease approved by city council last month will go into limbo until November when it will be the subject of a referendum in the municipal election.

Glendale council voted last month to raise its share of sales tax to 2.9 per cent Aug. 1 in an effort to deal with a $35-million deficit as well as a $20-million payment to Jamison for managing the arena. The increase is expected to raise $22-million but is opposed by many business owners. (Including county and state taxes, the current sales tax in Glendale is 9.5 per cent; the increase would take it to more than 10 per cent).

If the tax hike is repealed, it is possible Glendale officials can make other cuts to raise the money to pay Jamison. However, acting city manager Horatio Skeete told the Arizona Republic earlier this week Glendale may not be able to afford the annual management fees owed to Jamison. Glendale spokeswoman Julie Frisoni said Skeete will not comment further on the lease.

At the same time, both candidates for mayor in the November election along with five candidates for council, signed a public letter asking Skeete not to sign the lease with the Coyotes.

Frisoni said it will take city officials several days to ensure the sales-tax petition meets the state legal requirements and the same process will apply to the petition on the arena lease.

NHL deputy commissioner Bill Daly did not respond to a request for comment. However, Frisoni said the city is continuing to work on the sale to Jamison and will deal with any other problems "when and if that happens."

Frisoni said the NHL extended its management agreement for Arena by 30 days until Aug. 1 in the expectation the sale will be completed by then.

But Jamison made it clear he needs the arena lease to complete his purchase of the club, which leaves the league with some unpleasant options.

The first is to continue the NHL's ownership of the Coyotes for one more year, which means paying for losses that could be more than $40-million. But unlike the past two years, there will likely be no $25-million payment from Glendale to offset the losses. Frisoni said there has been no discussion of another payment if the NHL can't sell the club.

NHL commissioner Gary Bettman has long refused to consider moving the Coyotes. Doing so now would be difficult but not impossible. But the only candidate with an arena that could be whipped into NHL shape quickly is Quebec City and Bettman has never shown enthusiasm for that move.

In some NHL circles, a more drastic solution is envisioned. The Coyotes could simply be folded, its 23 players sent to other NHL teams through a dispersal draft and the league would operate with 29 teams next season.

This would allow the NHL to collect expansion fees of $100-million or more each from Seattle and Quebec City, the top candidates for NHL teams, rather than a single relocation fee of $60-million or so for the Coyotes. That is a gain of at least $140-million.

However, this would create legal headaches with lenders holding the Coyotes franchise as collateral and probably the NHL Players' Association. So the NHL's longest limbo dance will continue for now but a nasty choice could be coming quickly.

© The Globe and Mail

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