Glendale, Arizona City Council Cancels Sports Subsidy Contract

Published July 31, 2015

The City of Glendale, Arizona is canceling the city’s subsidization of the Arizona Coyotes National Hockey League team, ending an agreement to transfer $225 million in taxpayer funds to the sports team’s owners over 15 years.   

Kurt Altman, director of national affairs and special counsel for the Goldwater Institute, an Arizona-based think tank, says the contract between Glendale and the Coyotes was always a bad deal for taxpayers.

“Glendale was paying the ownership of the Coyotes, a private enterprise, $15 million a year to have the Coyotes in the city and ‘manage’ the arena,” Altman said. “They were supposed to bring concerts in, and whatever else the arena was used for besides hockey. A comparable management contract otherwise would only be for about $5 million.

“The deal was that the ownership group would give Glendale a share of revenues from parking and the naming of the arena—which they estimated would be $2 million and ended up being only $250,000—to make up the $10 million difference,” Altman said.

Taxpayers’ Loss, Owners’ Gain

“Fast-forward a couple years, and they’ve been short $10 million a year, and the Coyotes are losing about $30 million annually,” Altman said. “It’s not even close.”

Altman says the team’s owners were the only winners in the original deal.

“It’s not a losing proposition for the ownership group,” Altman said. “These guys are private entities that are basically taking subsidies from … tax dollars and walking away with them. It was a riskless proposition for that ownership group. They had nothing to lose, but the taxpayers do.”

Playing Hardball

Marc Edelman, an associate professor of law at Baruch College’s Zicklin School of Business, says sports teams hold taxpayers hostage during negotiations.

“The way that sports leagues operate in the United States puts an incredible amount of pressure on local municipalities to fund stadiums, even where in a free market they otherwise wouldn’t,” Edelman said.

“Each of the four premier professional sports leagues operates as a monopoly, meaning that if a city wants to have a professional sports team on the highest level of a given sport they will either have to recruit one of the existing teams to come to their market or convince the league overall to expand,” Edelman said. “They cannot just create their own team and compete in that league.

“As a result, it creates a situation where there is incredibly high demand for professional sports teams and very low supply,” Edelman said. “In this type of situation, sports teams and leagues are able to extract humungous subsidies from municipalities by threatening that if the municipality is not able to pay their demands, the team will play elsewhere.”

Elizabeth BeShears ([email protected]) writes from Trussville, Alabama.

Internet Info

John Jasina and Kurt Rotthoff, “The Impact Of A Professional Sports Franchise On County Employment And Wages,” International Journal of Sport Finance: