Wednesday, March 16, 2011

Goldwater Institute announces lawsuit against Glendale; Matthew Hulsizer vows to press forward

If they haven't been already, the battle lines have now been drawn. It is safe to say, even inked.

The Goldwater Institute announced last night in a press release their plans to sue the city of Glendale, Arizona on the legality of the sale agreement between the National Hockey League, Phoenix Coyotes prospective owner Matthew Hulsizer and the municipality. The most important part of their statement read:

Under the pending deal, Glendale plans to borrow $100 million to help Mr. Hulsizer purchase the team. The bonds ostensibly will be repaid from parking revenues, but the city has pledged sales and excise taxes as well. According to Moody's Investor Service, the city's existing debt level already is three times higher than the typical city of its size. Additionally, the city will pay Mr. Hulsizer $97 million to manage the arena over the next five-and-a-half years.

The Goldwater Institute has determined the agreement violates two prohibitions of the Arizona Constitution, which requires that no Arizona government "shall ever give or loan its credit in aid of, or make any donation or grant, by subsidy or otherwise, to any individual, association, or corporation..." The Goldwater Institute prevailed in a similar case against corporate subsidies last year in the Arizona Supreme Court.

The first part of the clause is violated by Glendale's decision to provide its credit to make a payment to Mr. Hulsizer, who will use the proceeds to purchase the team. The city's credit rating was lowered by Moody's due to its debt overload, thereby increasing the cost of city borrowing. The second prohibition is violated because under the Arizona Supreme Court's decision in Turken v. Gordon (the CityNorth case), Mr. Hulsizer is not providing roughly proportionate value for the payments he will receive from the city.

In summary, The Goldwater Institute is arguing three things against this sales agreement.

*They believe taxpayer money will be used to raise $100 million toward the purchase of bonds to finance the sale to Hulsizer, therefore making this a gift.

*They believe Glendale already owns the parking rights for Arena and therefore cannot sell it to themselves.

*They contest there will be additional taxes for Glendale residents to pay to fund the Coyotes sale agreement.


Goldwater Institute president and CEO Darcy Olsen spoke with Brahm Resnik two days ago on KPNX-TV's "Sunday Square Off" to once again present her case against the city of Glendale.

video courtesy: KPNX-TV

Brahm started off the interview by asking Olsen if she was an obstructionist, as accused by NHL commissioner Gary Bettman eight days ago.

"I love hockey. Phoenix is full of hockey fans. We'd love to keep the Coyotes here, but it just can't be done on the backs of taxpayers," Olsen first said. "The Arizona Constitution has a ban on giving public money to private interests. And in this case, the taxpayers of Glendale would be essentially buying the Coyotes for a rich Chicago tycoon. We contend that's unconstitutional."

Since Olsen didn't answer the question, Resnik asked it again.

She replied, "If the law is in the way, I guess so."

After that, Resnik had mentioned how Bettman isn't convinced her organization would sue Glendale. Olsen repeated her statement that only within the last week had the municipality submitted 750+ more documents on the sale agreement. I have also heard her say the cliché mentioned on a number of other interviews she's done over the past two weeks, "If it looks like a duck, it walks like a duck. Does it talk like a duck?" If yes, then she said her organization would prevent Glendale from breaking the law.

Resnik next brought up the Goldwater Institute's ability to fund lawsuits. Olsen claims that a Glendale City Council member revealed they didn't even vote on going ahead with their lawsuit against her organization, one that was reportedly to be filed last week, but hasn't happened. She also accused Glendale of their lawsuit threat as a bullying tactic.

The next item was the Goldwater Institute's annual revenue records. Olsen admits that bump ups on their savings come from huge endowment gifts by donors. She says that the number of people who contribute money to their organization grew from 50 in 2003 to currently about 2,000 nationwide. Disputed is any claim they've received donations from Canadian interests in the last 6 to 12 months.

"I'm not aware of a penny coming from Canada," Olsen said. "No, not a single penny that I know of. Now we have a lot of people like you that are Canadian-Americans who live here that support The Goldwater Institute because they like our fight for limited government and free enterprise."

Surely, that put Resnik on the spot right there, didn't it? Let's move on to the next question he asked. He read a reader comment from the Arizona Republic which said Olsen has a winning argument, but isn't winnable in court. Her response was her telling Resnik that if the other side to a case like this one approached her organization about negotiating a re-worked sale agreement, the laws under the Arizona Constitution is not negotiable. Olsen says it's not about the amount of money involved, it's about principle.

"It looks to be a case of taxpayers buying this team for a Chicago tycoon," she added.

Okay, so Olsen won't change her mind in suing even if the sale agreement is re-negotiated. But if the new deal doesn't cost any new sales taxes, it sounds like she would be on a witch hunt against the city of Glendale and nothing more.

In finishing up her reply to this particular issue, Olsen said that Glendale taxpayers have seen their city's budget debt three times the average size for its population while ignoring the needs of its citizens by attempting to buy the Coyotes.

Resnik then made a point to ask if opposing the sale and letting the Coyotes move out of town would send Glendale into a financial crisis much worse than where they currently stand. Olsen argued a point many outside media outlets including those in Canada have repeated numerous times is that the Coyotes have never turned a profit in their 15 years in Arizona. She believes that just getting a new owner would not be enough to turn the financial fortunes of the hockey franchise around.

Here are two questions I could easily ask in response.

In order to be a successful professional hockey franchise, do the Coyotes have to turn a profit? If the team generates enough revenue for the city of Glendale to match or exceed what has been done so far, isn't that reason enough to keep the Coyotes where they are?

In response to Resnik's question about replacing the revenue lost by any departure of the Coyotes, Olsen repeated her claim she made on March 9th to Toronto's CJCL-AM (Sportsnet Radio FAN 590) Prime Time Sports show host Bob McGown that other sports arenas without main tenants can still make money. She also pointed out that Tohono O'odham Nation's proposal for a gaming casino within city limits would help reduce Glendale's fiscal deficit. However, for someone that is supposed to be adequately educated about the state tax code, Olsen should know that Native American tribes on their reservations are tax exempt. Tohono O'odham Nation has its reservation occupy 4,460 square miles of land in southwestern Arizona. So, if they were to get their casino plan approved, they would have to annex land within Glendale's borders.

Therefore, Tohono O'odham Nation would not contribute to Glendale's coffers on money made on their casino, yet the city would have to take taxpayer money out of their budget to pay for basic infrastructure services such as water and sewer lines. Glendale has fought the tribe on the casino proposal for about as long as this Coyotes ownership saga.


Meanwhile, Glendale mayor Elaine Scruggs hosted a town hall meeting last night at the First United Methodist Church in downtown Glendale. When the topic of the stalled Coyotes sale agreement was brought up for discussion, nearly all were in favor of the deal moving forward.

"We trust the mayor, the council and city staff in every other aspect of the operation of Glendale, and we should trust them here," Glendale resident Gail Meyers told Jeff Dempsey of The Daily News-Sun. "It would be a giant step backward for Glendale if this deal doesn't go through."

In reaction to finding out that The Goldwater Institute plans to sue her city, Scruggs said, "The market valuation is done and the bonds are out on the market," she said. "You all know the ups and downs, turns and twists we've been through and the council feels we have a good agreement."

Obviously if the bonds don't sell, mayor?

"The team will leave for Canada," she said. "We can argue forever, but it is what it is. This is how things are done in the bond market."

Notice how Scruggs sounded certain the team would "leave for Canada" if the deal doesn't happen? Does she know something we don't know? Is she sure it is indeed Canada where the Coyotes would go if they can't stay in Arizona?

Jeff Dempsey did mention in his article that Scruggs might explore the possibility of having Arena host a minor league team should the Coyotes move out of Arizona. But the Glendale mayor may have to keep in mind that the latest reincarnation of the Phoenix Roadrunners as an ECHL team had to cease operations at the US Airways Center two years ago. If that minor league team could not successfully operate in downtown Phoenix for a sustained period of time, skeptics may question the viability of one in Glendale.


During yesterday's 5:00 PM Mountain Time newscast, KSAZ-TV sports anchor Jude LaCava offered some interesting information on how Hulsizer has reacted to the news of The Goldwater Institute lawsuit and what his next step will be.

video courtesy: KSAZ-TV

Can the Coyotes overcome this latest development?

"They plan to weather this," LaCava told news anchor John Hook. "I was on the phone with Matthew Hulsizer and I can tell you he is going to continue to march forward. This franchise has had a 15-year history here going back to downtown Phoenix. But I think right now the question is, what is the legality of their suit and will we finally see a close of this sale."

LaCava then talked about other challenges The Goldwater Institute has made to other major projects in the Phoenix area such as a spring training stadium for the Chicago Cubs in eastern suburb of Mesa, Arizona. His point was this organization is generally against the funding of sports facilities using any amount of taxpayer money whatsoever. In regards to this case, LaCava wonders where the donations to The Goldwater Institute are coming from.

But what if the sale is blocked and the Coyotes leave?

"Your development (Westgate City Center) takes a major hit for many years to come. I think the implications to this are huge," LaCava explained. "Let me say this to fans out there and even if you're not a hardcore fan. Is there a bigger development project when it comes to sports in the entire state than the West Valley? We've had national championships and we've had the Super Bowl at University of Phoenix Stadium."

LaCava also told Hook, "This is a key part of this hub ( Arena) that I think mayor Scruggs says we have to figure out how to make it work. And I think right now Matthew Hulsizer is simply saying, give me a chance to flip this thing. He expressed a real confidence to me in saying I can better manage that arena, I can better manage this hockey team that's getting better and make it more relevant."

Both LaCava and Hook agree this lawsuit symbolizes a drawing in the sand by the Goldwater Institute's conservative point of view, no more public money.

"I think the bottom line that people need to know is Matthew Hulsizer is plotting on. He hopes to complete this bond sale I'm told within the next two to three days. Let's see if that happens," LaCava concluded.

According to LaCava, Olsen turned out an interview at that Phoenix television station. No word as to why she did so.

So in summarizing the last few days, The Goldwater Institute will not back down from their stance on this sale agreement and sue the city of Glendale as it moves forward. There is public support from across the Phoenix metropolitan area and the state of Arizona. That includes those most affected, the Glendale taxpayers. Hulsizer isn't afraid of the pending lawsuit and instead will continue to do his best to buy the Phoenix Coyotes.

Whether or not the bonds sell and the franchise sale is completed, that remains to be seen. The end game to this entire ownership saga may not be done until after the season. For Coyotes fans and the players, hopefully it won't effect on-ice performance in the event the team qualifies for the 2011 Stanley Cup playoffs.

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