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By Frank Maduri
May. 12, 2017

The Arizona Coyotes have had an off season of turmoil marked by the sudden resignation of their Chief Operating Officer and the search for an additional minority partner in the ownership structure. This news follows the announcement this spring that the new arena deal that the team was negotiating with Arizona State University had fallen through.

The team was lobbying the state legislature rigorously to appeal for enhanced public funding for a new arena either in downtown Phoenix or in the East Valley. They were requesting that the legislature consider the creation of a tax zone that would encompass the area around the new arena site. The expenditures within that tax zone would provide the public funds for the arena construction. It should be noted that the state legislature just went into recess without that bill for the stadium financing gaining approval.

The local news sources have reported that the nexus for the inclusion of another minority partner is for the influx of new capital funds needed to subsidize the ownership contribution to the construction of a new arena facility. The current arena in Glendale is not a feasible location for the team or for their fan base. It was a site chosen by a previous owner of the team, and the travel from downtown Phoenix to the current arena is very inconvenient.

The NHL informed the political factions involved back in January that the team will not continue to play in the Glendale arena that a new arena location needs to be secured to keep the franchise in Arizona. This could present a situation where Glendale could fight to keep the team from leaving, which some local officials in Glendale have discussed with state level officials.

However, the most critical component for a city to keep a team from relocating, even if it means to another site within the same market, is the structure of the lease. The case for Glendale is very weak because the Coyotes ownership have the leverage there, the lease has two years left on it.

The Coyotes also have leverage in that the legislators at the state level in Phoenix are going to attempt to make every possible accommodation to keep the team from leaving the state, even if that means cutting Glendale out of the process at this point.

The next steps in this process will ultimately begin with the selection of a site for the arena now that the Arizona State/Tempe site is no longer being considered. The downtown shared arena concept with the NBA’s Phoenix Suns will most likely be brought back into the mix, and that plan does have solid political support as well because it would mean constructing one arena and not two separate facilities.

The Scottsdale site on the Indian tribal land will be reviewed as will another site in the East Valley. The downtown concept probably makes the most sense as the current ownership group has spoken publicly about the initial years of the Coyotes existence in Phoenix. The arena was not built for hockey, so it had a ton of obstructed view seats and other issues, but it was sold out frequently because of the convenience of the location within that metropolitan area.

The political process has to always keep in mind the public perception of a given situation, and the Coyotes new arena deal is no exception. The public appetite for utilization of tax money for the purpose of a new sports arena can be a slippery slope. That is part of the rationale behind the push to get the tax zones instituted which have become part of the proposals for other sports facilities in other cities at this point.

The shared arena concept could have better traction with the public because it will also involve the Suns, who have deeper roots in Phoenix and appeal to a much broader fan base. It should be noted that the owner of the Suns, Robert Sarver, is not interested in building a shared arena with the Coyotes.

The political process may not give the Suns that option, they may only provide funds for one facility. Both teams prefer having their own separate venues, for obvious reasons revolving around splitting revenues if they were to be partners in a shared arena concept. The Coyotes have less leverage because it is so well known that they want out of Glendale. Their best “card up the sleeve” is relocation to another market, but that carries with it a great deal of risk.

The relocation option for the Coyotes though is certainly diminished by the expansion of the league to Las Vegas, which takes away a market they could have leveraged with a relocation threat. The latest rumors for the Coyotes relocation are Portland and Seattle, but they would have to start from the beginning with cultivating a fan base, sponsorships, and branding. Seattle has no suitable arena for the team either, which weakens the case for relocation to that market.

Then, you have to factor in that the NHL league office wants a team and a market presence in Phoenix, so the Coyotes will most likely remain in the desert. It is now a question of where they will eventually end up. The shared arena with the Suns is a really intriguing idea from a variety of viewpoints. The downtown Phoenix location would be ideal for the Coyotes to increase their attendance numbers which will have a direct impact on revenue.

The way these teams operate today though, they all want their own facilities to maximize revenue generation. This situation will be fascinating to observe as it plays out through the process. The Suns could “overplay their hand” and the Coyotes could end up striking a deal on their own for a new arena. In that case, the state legislature will have little motivation to green light the Suns new arena and would more likely provide funds for renovations to their current arena.

Conversely, the Coyotes could end up holding out for the right deal and not getting it, while the Suns could work to get a tribal land deal done or “put the screws” to Phoenix to leverage a deal downtown that cuts out the Coyotes. It is more drama in the desert, which for Coyotes fans, has been the status quo now sadly for many years.