Watchdog: Coyotes arena lease may be illegal

Prospective Coyotes owner Matthew Hulsizer, CEO of PEAK6 Investments, attends a game at Jobing.com...

Prospective Coyotes owner Matthew Hulsizer, CEO of PEAK6 Investments, attends a game at Jobing.com Arena in Glendale, Arizona on October 16, 2010. (CHRISTIAN PETERSEN/Getty Images)

PAUL FRIESEN, QMI Agency

, Last Updated: 2:28 AM ET

The next battle over the future of the Phoenix Coyotes could be fought in an Arizona courtroom.

The Goldwater Institute, a public watchdog organization, says a proposed arena lease between the City of Glendale and incoming Coyotes owner Matt Hulsizer may contravene an Arizona law which prevents politicians from paying more than fair market value to a private business.

A vote by Glendale city council to accept the deal with Hulsizer, effectively keeping the Coyotes in Phoenix, long-term, was expected to be a formality, passed Tuesday night.

NHL commissioner Gary Bettman and deputy commissioner Bill Daly were at the council meeting, along with Hulsizer, the Chicago entrepreneur set to buy the franchise from the league for $170 million.

Bettman assured councillors Hulsizer would be approved as an owner by the NHL board of governors, while Hulsizer’s speech included a pledge to keep the team in Glendale “for a very, very long time,” according to the Coyotes, via updates on Twitter.

The purchase would end a long-running soap opera that began when former owner Jerry Moyes threw the team into bankruptcy in May, 2009.

But the court battle over taxpayer subsidies could be just beginning.

Saying there are too many financial uncertainties in the deal, Goldwater said the agreement could amount to an “unconstitutional subsidy” for the Coyotes.

The organization pointed to the $97-million arena management fee Glendale would pay Hulsizer over the first five years of the agreement, calling it “grossly disproportionate to the fair market value” and potentially violating a “gift clause” in the state law.

In previous years, the Coyotes bore the brunt of the costs of managing the arena.

Goldwater, which has had some success in shaping public policy in the past, also questioned the city’s purchase of parking rights for $100 million.

An article in Tuesday’s Arizona Republic says the deal with Hulsizer is actually more expensive for Glendale taxpayers than the subsidies former owner Jerry Moyes asked for before declaring bankruptcy in May, 2009.

The city would also have been better off, financially, if it had accepted deals with previous suitors Jerry Reinsdorf and Ice Edge Holdings, the report said.

Reinsdorf’s deal, though, had an out-clause that would have allowed him to sell the team if it didn’t become profitable after five years.

The lease with Hulsizer keeps the team in Glendale for 22 years, the duration of its arena lease.

Of course, Glendale was more desperate this time around, too, with a Dec. 31 deadline looming, after which the NHL had the right to sell the franchise to someone who’d relocate it.

The NHL, in fact, had such a tentative deal in place with Winnipeg’s True North Sports and Entertainment, backed by Manitoba Moose founder Mark Chipman and Canadian billionaire David Thompson, an investor in True North.

Before the council meeting, Coyotes chief operating officer Mike Nealy appealed to fans in an open letter on the team’s web site, encouraging them to show their civic politicians how they feel.

“Wear your jerseys and help the Coyotes win the biggest fight that we have faced,” Nealy wrote. “Show the league along with 29 other NHL cities and Glendale City Council that Arizonans fight for what they believe in.”

Acknowledging that initial anticipation for the Coyotes in the desert eventually turned to apathy, Nealy said the team has a bright future under GM Don Maloney, head coach Dave Tippett and Hulsizer.

“Rarely, if ever, are we afforded a do-over but ... the Coyotes are ready to call Arizona home for the long term.”

Some 300 people, some wearing Coyotes gear, filled the Glendale council chambers on Tuesday.


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