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12-20-2010, 03:53 PM
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Join Date: May 2007
Location: Arizona
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Originally Posted by CGG View Post
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.
So the operating costs do offset what the Owner gets as a "fee". That was my question. Thanks for answering it. The Goldwater Institutes potential concerns aside, my only point was that the owner doesn't pocket a fee AND the city still pays the operating expenses. He gets a fee, and takes the risk the fee will more than offset the expenses of arena management. With every new event the operating costs increase marginally. I wonder if anyone knows what the "nut" is just to keep the building operational. I have heard wide ranging numbers from less than $10M up to $18M. If we are talking about less than $5 - $10M a year, I'm not so sure this is the GI's best argument. It seems buying the right to sell parking for $100M is what people are focused on down here.

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