Under the agreement between the City of Glendale and Greg Jamison, the city would pay Jamison $17 million the first year from a city budget that covered a $35 million shortfall with layoffs, service cuts and tax hikes. Glendale Mayor Elaine Scruggs said she couldn’t support the deal because of the city’s depleted finances. The city has just $2.1 million left in its rainy-day fund.
“Can I vote to take on a 20-year obligation?” Scruggs asked. “Can we afford these payments?“
The annual city payment to Jamison fluctuates over the 20 years, but it averages $15 million. Jamison would pay the city rent for Jobing.com of approximately $13 million over the two decades. And Glendale would continue to receive a ticket surcharge, estimated to raise $60 million over the life of the lease, plus 15 percent naming-rights revenue for the arena, estimated at $4 million to $10 million over the life of the agreement.
So let us use the 15 million per year from CoG to the Coyotes. 15 million spread over 41 home games plus 1 preseason game is $357,142 dollars. From that amount, subtract the rent ($15,476 per game), the ticket surcharge ($71,428) and the median dollar amount for naming rights [7 million] for $8,333. The net amount going from the City of Glendale to Greg Jamison is $261,905. What is missing from the equation is the parking revenue generated from each ticket and the sports district sales tax.
From the Tucson Citizen June 6, 2012 by Lisa Halverstadt and Craig Harris:
Glendale Councilwoman Joyce Clark has said the benefits of keeping the Coyotes in Glendale outweigh the costs the city must bear to keep them. The sales-tax revenue generated by 41 game nights helps Glendale cover its long-term arena debt of about $12.6 million per year
Phoenix Finance Director Jeff Dewitt said Glendale’s offer to pay Jamison $17 million in 2013 to operate Jobing.com Arena is roughly $4 million more than the annual operating cost for the Phoenix Suns to manage US Airways Center in downtown Phoenix.
“We don’t pay them anything to operate it. We shared in the cost of building it, and we get fees from them,” Dewitt said. “That is completely different than the Glendale deal, obviously.”
Dewitt said the Suns also pay roughly $9 million a year to service the debt on the team’s portion for construction of the arena in 1992 and renovations in 2004. The NBA team also pays the city another $2.5 million annually in rent, revenue sharing and capital improvements. In total, the Suns’ annual cost to play and manage the downtown Phoenix arena is about $24.5 million.
Another paragraph from the article:
Dewitt said it’s difficult to compare the operating costs between the arenas because the WNBA’s Phoenix Mercury and the Arena Football League’s Arizona Rattlers play in US Airways Center and having those two franchises increases costs.
Analysis: The Mercury and Rattlers are not money making operations. Both lose money when you have to cover the cost of the arena rental along with the general expenses of the team (players, coaches, trainers, staff, ticket sales, advertising, etc). The Phoenix Suns as well as the City of Phoenix and State of Arizona contributed to the stadium build and renovation. The City of Glendale built Jobing.com themselves. What you have is different from what Mr. Dewitt described. The Suns cost 24.5 million. The Coyotes will cost an average of 15 million per year. Glendale has an entertainment tax district to help repay the cost of the arena.
Financial statements submitted to Glendale when Jerry Moyes owned the team show arena operators spent $10 million to $13 million on utilities, staffing and other costs in the five years before the trucking executive entered the team into bankruptcy. At the same time, the arena brought in $6 million to $7 million. The net cost to operate the arena never surpassed $6.5 million.
Analysis: The net cost listed is not the true net cost as it does not cover the loan or the debt service. That was paid by the City of Glendale. It will now by paid by Mr. Jamison. It is harder to keep ice than it is a hardwood court. The first year the Glendale was ready for operation the NHL was in lockout. Meaning, there was no revenue from the arena that went to the City of Glendale. Not one dime from the parking fee, ticket surcharge, NHL salaries, team employee taxes, food and beverage. The arena opened to a negative cash flow that they have not recovered from.
Conclusion: The City of Glendale needs to get out from underneath the cost to own and operate the arena. Mr. Jamison will help them accomplish this. They always have the option of charging for parking at Westgate, like every other team does. Additional revenue can be generated through additional sponsorship and added events at Jobing.com which increase foot traffic at Westgate and allows the vendors access to more potential dollars.
The cost to pay for an empty arena and a vacant Westgate are much higher that the deal before them.