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12-20-2010, 03:38 PM
  #15
CGG
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Join Date: Jan 2005
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Country: Canada
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Quote:
Originally Posted by goyotes View Post
Please correct me if I am wrong, but isn't the $17M going to the ownership group for operating the arena offset by the operating costs? If my understanding is correct, does anyone know what the operating costs are annually?

My point is that the $17M may be more defensible if it is offset with the risks undertaken that would include the operating expenses. Am I totally off base here, or is it just not clear from the lease documents? I have read media reports that could be interpreted as including the operating expenses as a leasee responsibility, and media reports making the $17M sound like a pure payment for providing arena operation managment but the costs all still fall on the arena owner Glendale.
I believe you are wrong, so I will correct you. Let's assume for a second that Scruggy is correct and the operating costs on the arena are $17 million. Let's ignore the basic idea that those costs will decrease if and when the Coyotes go away.

This lease calls for the city to:
- pay $17 million a year for "arena management" to Hulzy
- not pay the operating costs on the arena of (let's assume for now) $17 million
- give up all rights to revenue from non-hockey events at the arena

So, MH gets to book acts at the arena, pocket the revenue, pay the operating cost, and pocket a $17 million fee.

If the Coyotes left, they could:

(a) manage the arena themselves and keep all non-hockey revenue, then pay for the operating costs themselves, or
(b) pay someone a nominal fee (around $1 million) to manage the arena and that firm would keep most of the revenue while covering most of the operating costs

The city is not only paying $17 million to Hulzy, they are also giving up rights to any and all revenues from non-hockey events (with a few exceptions that I'm sure someone will point out). In a sense they are double-paying Hulzy to manage the arena - he keeps revenue generated, and he keeps $17 million in management fees. It is quite easy to prove that outside parties would be willing to manage the arena for much less, and/or keep the revenues and cover the operating costs themselves.

The comments about the $17 million fee offsetting the operating costs of the arena are disingenuous at best, and deliberately misleading. Attempting to confuse people. Remember when MH put up $25 million and the city announced it had somehow escaped from having to pay $25 million in losses? Yeah, that wasn't exactly accurate either. The COG is grasping at straws. They can't actually explain how this benefits them, so they throw a whole bunch of numbers into their fact sheets hoping everyone will fall for it. I don't think it worked for Goldwater.

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