Wednesday, March 9, 2011

The Phoenix Coyotes conundrum

Beyond the incredible soap opera of the Phoenix Coyotes
ownership, what does it all mean to the larger world of
pro sports - and the Columbus Blue Jackets?
While I am first and foremost a Columbus Blue Jackets fan, it's impossible to follow the CBJ without at least a passing interest in the bigger picture stories and issues around the NHL.  Take the whole Chronic Traumatic Encephalopathy story in relation to the late NHL pugilist, Bob Probert.  Or the ongoing drama that is the attempted sale of the Phoenix Coyotes to Matt Hulsizer.

As I understand it (and I'm almost certain to be incorrect on some of the presumed facts): The NHL - current owner of the 'yotes, having brought the team out of bankruptcy - and Hulsizer have an agreement in principle for Hulsizer to buy the team.  The deal is contingent, however, on a host of considerations from the City of Glendale, Arizona - where the 'yotes are the prime tenant in the relatively new arena.  The last, and biggest, of the concessions is the City issuing $100 million in public bonds (For those who don't understand public finance, it's like a municipal mortgage.  You issue bonds to finance big, debt-incurring projects like road or building construction and then pay the bonds off over the course of years - principal and interest.) to subsidize Hulsizer's deal.  The City then gets a guarantee that he won't move the team until 2041 at the earliest.

The Arizona-based government watchdog group, the Goldwater Institute (named after the late Senator Barry Goldwater, arguably the father of the modern conservative political movement), apparently is of the opinion that this use of public debt could be illegal.  The Institute seems to have scared bonding agencies into holding off on issuing the bonds (You don't issue bonds unless you're certain they all will sell.) by hinting at the possibility of a lawsuit should be bond issuance take place.  This functionally has stalled the entire sale.  NHL Commissioner Gary Bettman was in Phoenix yesterday and strategically blew a gasket about Goldwater to anyone who would listen.

The City of Glendale, Arizona has made a huge gamble
on pro sports, as is evidenced by pro sports facilities for both
the NFL Cardinals and the NHL Coyotes. 
There's a lot more to this story, including the looming "threat" of the NHL moving the 'yotes to Winnipeg (with a suggested cost to Glendale of $500 million from having an empty arena and lost supporting business revenue!) and the possibility that Hulsizer will give up on the 'yotes and buy any of a number of other NHL franchises that are for sale.  But I find the whole story fascinating.

As a grad student in the field of public administration here in Ohio, the implications for the City of Columbus and the Columbus Blue Jackets are perhaps most intriguing.  Nationwide Arena is the only UN-subsidized arena deal in the entire National Hockey League.  Beyond that, Columbus voters have indicated (prior to the construction of the arena and the arrival of NHL hockey into Central Ohio) that they did not want public monies to be spent on this whole endeavor.  Yet, the team is losing money due to that unique arena arrangement and now is hoping to tap into the local share of the forthcoming new casino taxes (as I predicted - go figure!).  This, in an era where the new Governor is touting the state's fiscal crisis as a rationale for upending the status quo in so many corners of our civic life.

The themes between Phoenix and Columbus are so similar: A private endeavor can't justify its existence on purely market-based economic grounds and thus looks to the public sector to pick up the pieces.  What would be really interesting is to learn how many other pro sports teams are in the same boat...or which sports teams are able to make it without taxpayer help (might be a smaller group!).

This is nothing new, however.  Back in 1998, the Chicago-based (conservative) Heartland Institute was shouting from the rooftops about the whole issue of taxpayer subsidy of pro sports arenas.  This, only two years after Cincinnati voters approved a (now-insufficient) sales tax to build Paul Brown Stadium for their NFL Bengals.  There are other examples in the article, but the Cincinnati one is most striking (and most "local" to Ohio).

What makes this even more interesting, however, are the times in which we live.  Nearly every state in the Union has a healthy budget deficit.  Gov. Kasich is throwing around an $8 billion figure for us in Ohio.

What if those new casino tax revenues will be needed to prop up other, now-underfunded, ambitions that could include, say, college sports?

Watch the full episode. See more Need To Know.

In light of this, how much does the public want (or need) to subsidize its bread and circuses?  (Franklin County Government already owns the Columbus Clippers, you know...)

Moving along... Are the days of taxpayer-funded sports palaces over, or at least on hold?  Does Ohio have a watchdog with the legal/public relations firepower of a Goldwater Institute to play the issue to a stalemate?  And what REALLY is in the best interest of the public?

I'm in the stretch run toward my Masters degree and understand that my upcoming final quarter will feature a "capstone" paper.  Gosh, how I'd love to investigate this issue in much more detail.


  1. Every other struggling sports team's problem is that it's not based in Cleveland.

    I'm passive about the team moving, but still get a good chuckle when people stress that the Jets are coming back. Thanks for shedding light, DBJ!

  2. While I'm presuming that you're talking about the 'yotes potential move to Winnipeg, Birdy, let's be clear that I'm in no way suggesting that the Blue Jackets are going to move. That's the last thing I want anyone to take away from this post.

  3. I guess I find the whole thing fascinating more from the standpoint of: I'm taking notes to see exactly how far Little Mr. Bettman is willing to go to keep a team with much bigger debt and much less fan support than the Jackets in its current market. I'm all about precedent. There's a certain sect of the CBJ fanbase that thinks Bettman has been out to screw the team since day 1, and they may be right.

    It's important, from my chair here in the peanut gallery, to establish a trend for exactly how far he'll go to keep a franchise from moving, all factors being similar. If he jumps through all of these hoops to keep the Coyotes in Phoenix and then turns around and lets the Jackets walk at the first sign of real, real trouble, well, then I guess we'll know. :-)

  4. Excellent point, DP, and one I was considering adding into the post but decided against in the interest of keeping the post from being too ungainly.

    My guess is that Bettman has his line in the sand (pun intended?) in Phoenix to satisfy US television bidder interests. If you lose the Phoenix market - as weak as gate receipts are - you have a geographic hole in TV hockey coverage that teams in L.A., Denver and Dallas just can't patch up. To be a "national" league, you need a "national" footprint. And Phoenix is the only pro market in that desert southwest region. That's why the league is doing what it can to bolster the two Florida teams. (Yet, interestingly, they appear lukewarm on Atlanta. It could be that they're out of white knight ownership bullets for marginal hockey markets, what with Hulsizer in Phoenix and Vinik in Tampa.)

    Now look at Columbus. It can be argued that the town was a split Red Wings/Penguins town before the Blue Jackets arrived on the scene. Surely the CBJ have carved their own niche, but these "backup loyalties" (my poorly constructed term) still could come into play.

    But let's be clear, I still don't see Columbus moving as long as the McConnell family controls the team. For all of their apparent frustration with the finances, there's an irrational component to their ownership (Civic pride? Noblesse oblige? Displaced machismo?) that appears to dial the family in despite the costs. I mean, the original Mr. Mac built the arena DESPITE being rebuffed at the polls. Not exactly a rational move.

    Still, I buy where you're coming from and might join you in the peanut gallery on this issue. Could be an interesting vantage point.

  5. Geez DBJ -
    It would seem that begging an interview from the new Mr. McConnell would be a great resource for a 'capstone paper' not to mention the humble blog. ;)


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