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NHL: Glendale suit wouldn't impact Coyotes

Nicholas J. Cotsonika
Yahoo Sports

If the City of Glendale sues the Goldwater Institute, saying the group has interfered with the sale of the Phoenix Coyotes, it apparently will not affect whether the NHL team stays in Arizona.

“I don’t anticipate a lawsuit brought by Glendale (to the extent one is filed) will ultimately have any impact on how the franchise issue plays out,” NHL deputy commissioner Bill Daly wrote in an e-mail Monday, when asked how long the league could wait for a legal battle to be resolved.

Glendale and the NHL are working to close the bond deal essential to the sale of the Coyotes to Chicago businessman Matthew Hulsizer. They must find a solution soon, or the deal could fall through and the franchise could move back to Winnipeg, where the Coyotes, then called the Jets, played from 1979-96.

“Time is a factor, but no firm and hard deadlines have been established at this point,” Daly wrote, echoing what NHL commissioner Gary Bettman has been saying for weeks.

ESPN.com reported Saturday that Glendale was expected to file suit Monday against Goldwater and specific members of its board. The public watchdog group has threatened to sue the city because it feels the arena lease negotiated with Hulsizer violates Arizona state law.

Glendale owns the Coyotes’ home of Jobing.com Arena. Under the lease agreement, it would pay $100 million to Hulsizer to use toward the purchase of the team in exchange for the parking rights outside the arena. The city would raise the money through the bond sale and recoup it through parking revenue.

Goldwater says Glendale already owns the parking rights, which would make the deal invalid, and the parking revenue would not be enough to pay the debt, which would make the bond money an illegal gift.

By threatening to sue – and warning potential investors directly – Goldwater has spooked investors and raised interest rates on the bonds. That potentially could cost Glendale millions of dollars in interest if the bonds are sold or millions in damages if the bonds aren’t sold and the team leaves.

A suit by Glendale could force the issue. ESPN.com reported it would ask for “hundreds of millions” in damages and that it is believed the city also would ask for a judgment that the lease agreement is legal.

But there might not be time for that, and Glendale and the NHL are exploring other options to close the sale. They could include restructuring the bond deal or altering the purchase price.

Much is at stake for Glendale and the NHL.

If the Coyotes leave, the city – a suburb of about 250,000 people west of Phoenix – will be left without a main tenant for a $180-million state-of-the-art arena that is part of a larger development of hotels, stores and restaurants.

The league would lose the 12th-largest TV market in the United States at a time when it is working on a new deal for American television. Daly wrote that the Coyotes’ potential move would not have “any impact on our ongoing television negotiations” and the topic had not even been raised in discussion. But one of the main reasons for NHL expansion, dating to the doubling from six to 12 teams in 1967, has been to make hockey a major-league sport by giving it a national footprint in the United States and turning that into TV revenue.

The Coyotes have struggled since moving to Phoenix. They lost $30 million last season and are on track to lose about the same amount this season. They rank second-to-last in the league in attendance this season, averaging 11,626 per game despite sitting in sixth place in the Western Conference and in position to reach the playoffs for the second straight season. The NHL is running the team in the wake of a bankruptcy and years of ownership issues. But Bettman, Daly and others have argued that hockey can thrive in the market with solid ownership.

“With so much uncertainty surrounding the franchise, it’s unfair to test the market on the basis of where that franchise exists now,” Daly said in an interview in October. “Obviously if we transition to new ownership and secure the franchise long-term in Phoenix, I think you’ll see a significant uptick in how the fans respond to the club.”

If the NHL can’t keep the Coyotes in Phoenix, Winnipeg appears to be the leading contender for relocation. It has a deep-pocketed ownership group waiting in the wings and a passionate fan base hungry for the return of the highest level of hockey.

But while it seems certain the hockey side would thrive in Winnipeg, where pucks are as native as the prairie, the business side is less certain. Winnipeg is the eighth-largest TV market in Canada, behind even Quebec City, which also lost its NHL team in the mid-’90s and wants the league to return, and there are concerns about the population and corporate base. The MTS Centre – currently home to the American Hockey League’s Manitoba Moose (the farm club for the Vancouver Canucks) – seats 15,015 and would be the smallest arena in the NHL.

CBC.ca reported that the NHL has done several detailed analyses of the Winnipeg market, and according to a couple of sources, the league estimates revenues of about $70 million per season. That would be double the revenue generated by the Coyotes and about $20 million more than the revenue generated by the Atlanta Thrashers, another franchise with ownership issues that could move to Winnipeg. But it would still be the lowest among Canadian teams.

The NHL is fighting to keep the Coyotes in Phoenix because that market gives it the best potential for growth in the long term. But there is a lot of work to do in the short term.

“I’d like to see them remain,” said Jimmy Devellano, the Detroit Red Wings’ senior vice-president and alternate governor, who has seen even his Original Six franchise go from empty seats to sustained success since owner Mike Ilitch bought it in 1982. “They’re a major-league city with a huge population. We have teams on the West Coast. They have a real competitive team now, a team that likely will be in the playoffs two years in a row. I know their attendance is up over the last few years. I know that it is better. You just hate to lose good American cities.”

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