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Glendale, Arizona, is ending negotiations with the Arizona Coyotes after years of trying to find an arena deal that works for the city and the hockey team.
This means the upcoming season likely will be the Coyotes’ final run at Gila River Arena, where the team has played for 18 years.
City Manager Kevin Phelps’ announcement on Thursday comes nearly a year after he began actively courting the franchise for a long-term commitment. And about a month after learning the team is looking at land in Tempe for a new venue.
Phelps said his decision is not about the team’s interest in Tempe. He said he wants to take the arena in a different direction, including millions in renovations to pack the venue year-round with “more impactful” events. This is in the best interest of Glendale and the Westgate Entertainment District that developed around the city-owned arena, he said.
"I don’t think the Coyotes have ever felt at home in Glendale," Phelps said.
Coyotes President and CEO Xavier Gutierrez in a statement on Thursday afternoon said the team is "disappointed" and hopes the city will reconsider the move.
"We are disappointed by today’s unilateral decision by the City of Glendale to break off negotiations on a multi-year lease extension agreement," he said. "We are hopeful that they will reconsider a move that would primarily damage the small businesses and hard-working citizens of Glendale. We remain open to restarting good-faith negotiations with the City."
Gutierrez added that the team is committed to staying in Arizona.
"Most importantly, the Coyotes are one hundred percent committed to finding a long-term arena solution here in Arizona, and nothing will shake our determination to do what is right for our organization, residents of the entire Valley and, most important, our fans," he said.
Phelps said the decision "was not made overnight or in a vacuum." The city manager said he got input from the City Council, the arena management company and others. He pointed to data showing that events like concerts would be more lucrative for the entertainment area near Loop 101 and Glendale Avenue than professional hockey has been.
The city hired Applied Economics, a Phoenix-based economic consulting firm, to analyze tax collections from events at the arena. A draft of the report reviewed by The Arizona Republic says hockey game-goers typically spend more money inside the arena, while concertgoers tend to spend more on retail and dining at Westgate.
Phelps said he was "somewhat hopeful" for a long-term deal even after the Tempe news broke. But, after seeing the economics report, he said he doesn't think there's anything the team could offer that would change his mind.
Phelps told The Republic that ASM Global, the company that manages the arena, is reviewing candidates to give the venue a multimillion-dollar makeover. He wouldn’t comment on specifics, including costs, of those renovations.
City leaders and Westgate business owners in the past often talked about how the NHL games attracted people to the area. Westgate grew out of farm fields to become a sports and entertainment district that includes the arena, with the Arizona Cardinals’ State Farm Stadium nearby.
New developments increasingly have focused on experiences that can keep visitors in the area for an entire day. A massive Crystal Lagoons Island Resort water park and Mattel theme park recently broke ground. A Tiger Woods mini-golf venue PopStroke is planned. And more dense housing in the area means more residents to support these businesses on the days when there are no arena events, Phelps said.
“For us at this point in time, with all the momentum Westgate has … not having the Coyotes as a tenant was to our advantage,” he said.
Phelps informed the Coyotes of the city's plans in a phone call on Thursday afternoon.
Report: Concerts bring in more than twice as much spending per event than hockey
Phelps, and the city-commissioned report, said adding more special events should make the arena more lucrative than it has been as a pro sports venue.
The report found that each Coyotes game brought in an average of $12,000 in sales and bed taxes in Westgate, while concerts averaged about $25,000 per event in sales and bed taxes in Westgate.
But there are a lot of hockey games. The city would need to come up with 20 more events attracting crowds of at least 10,000 people to make up for the losses in Coyotes-related spending at Westgate, according to the report.
"The Coyotes team hosts 43 home games per season in a typical year, resulting in greater potential for retail and restaurant spending in Glendale on event days," the draft report says. "However, the large number of (hockey) events also means that fans are likely to spend less per event than concert or other event attendees, for whom the concert or other event represents an infrequent special activity."
Per capita, concertgoers spend $58 at Westgate, while hockey fans spend $28 at Westgate, the report says.
Where to go after a year of negotiations
Phelps reached out nearly a year ago to the Coyotes, which has long had a fractured relationship with the city, to try to negotiate a longer lease. The team has played on a year-to-year lease since 2016 and made no bones about its desire to move elsewhere.
Phelps in a September letter to the team and ASM Global said the yearly lease was a strain on all of them. He said he was looking for at least a 12-year commitment to remaining at the arena.
The parties have spent this past year negotiating on the lease, but Alex Meruelo, the billionaire who has owned the team since 2019, and previous owners have long looked east.
Not long after becoming majority owner, Meruelo committed to keeping the Coyotes in Arizona, but characterized staying in Glendale as "a difficult situation."
He ticked off several reasons: The team loses money there. The fan base is elsewhere in the Valley. Corporate sponsors are harder to come by in Glendale. And the team doesn't have a long-term lease.
The Coyotes confirmed in July the team would submit a proposal to develop land just west of Tempe Town Lake.
"Given our determination to remain in the Valley for many years to come, we are actively working to identify the best long-term home for the Coyotes, our devoted fans and this great community," the team said.
Tempe has sought requests for proposals to attract a professional sports franchise and a developer that will build an arena and entertainment center on 46 acres of city-owned land near Priest Drive and Rio Salado Parkway.
Tempe pushed the deadline for those proposals, initially slated for Thursday, to September.
Glendale’s city manager said his decision isn’t about Tempe.
“None of the Tempe timing has anything to do with where we are today,” Phelps said.
Phelps also clarified that his decision would not require City Council action as elected officials put him in charge of the arena negotiations.
From here, Phelps said he would work with ASM on developing renovation plans and a vision for the arena's fit with the surrounding area.
It’s unclear where the Coyotes would play its 2022-23 season. Even if the team works out a development agreement with Tempe, the city must relocate its operations yard from the land, which it sought to do no sooner than 2024, the request for proposal shows. Tempe staffers has proposed using federal COVID-19 funding to speed up the relocation.
A long and rocky road
Glendale’s announcement marks the latest in a long and rocky relationship with the team.
The Coyotes moved to Phoenix from Canada 25 years ago, but quickly found sharing an arena with the NBA Suns wasn’t ideal for hockey. When a deal to build an arena in Scottsdale hit difficulties, then-team owner Steve Ellman struck a deal in Glendale.
Glendale leaders, looking to change the trajectory of development in the then-sleepy suburb, borrowed $183 million to build the arena that opened in 2003. Ellman built the Westgate shopping and entertainment district around it. Glendale planned to pay off the arena debt with the sales tax revenues generated there.
But six years later, the team was bleeding money. Jerry Moyes, who was by then the majority owner, was unable to negotiate a more favorable arena lease with Glendale and filed the team into bankruptcy. He proposed selling the team to a Canadian billionaire who would move the team to Hamilton, Ontario.
Glendale and the NHL fought the move, and for years kept the Coyotes financially afloat as a new owner was sought. City leaders at the time said keeping the team was necessary for the Westgate area’s viability.
Glendale invested millions — all the while some worried the city was on the brink of bankruptcy — to keep the team and pay the arena debt. By 2015, the City Council broke its long-term lease agreement that provided hefty subsidies with the team.
The Coyotes, under multiple owners, has operated on the year-to-year lease ever since.
Glendale has about 12 years left to pay off its arena debt, which amounts to about $13 million annually. How much more Phelps will propose to invest in renovations has yet to play out.
The Republic's Paulina Pineda contributed to this article.
This article originally appeared on Arizona Republic: Arizona Coyotes: Glendale cuts ties with NHL team after 2021-22 season