Ted Simons: The city of Glendale is preparing to sell $116 million in bonds as part of a deal to keep the Phoenix coyotes from leaving the state. Here with the details is Rebekah Sanders, she's been covering the story for "The Arizona Republic." Good to have you back on the show. Thanks for joining us.
Rebekah Sanders Great to be here.
Ted Simons: What is the latest on this deal?
Rebekah Sanders: We seem to be approaching the end of this saga. It's not complete yet, but right now what’s happening is Glendale is looking for investors to buy bonds, essentially to finance a loan that would help the new buyer purchase the team. And would also give Glendale the right to charge for parking around the arena.
Ted Simons: So the owner is basically waiting for $100 million in bonds to be sold, that is money that goes to him and now is that like a done deal right there, or --
Rebekah Sanders: It's not a done deal yet. Because basically what they have to do is convince investors this is a good investment, you'll get a good rate of return, there are risks, but convincing investors that risk is worth it.
Ted Simons: Let's go back, he's getting this $100 million as far as his bond sales are concerned. How much is the owner putting into this deal?
Rebekah Sanders: About we're guessing around $70 million or so. That Hulsizer and some of his minority investors will put into it.
Ted Simons: You guys got ahold of the preliminary bond statement. Correct?
Rebekah Sanders: Correct.
Ted Simons: What did it say? What were they telling investors? What kind of case was the city making?
Rebekah Sanders: This was the draft statement that goes out to investors kind of alerting them we're getting ready to sell these bonds, are you interested. So we got a copy of it from an investor, and it says, look, this is a fairly risky deal, we've got threatened lawsuit by Goldwater institute who are saying this might violate some of our laws about government subsidizing private business. Also, this is how we think we're going to pay back the bonds, but it's not -- it's never a hundred percent sure this is going to get paid back.
Ted Simons: Right there real quickly, how are they saying they're going to pay back those bonds?
Rebekah Sanders: The city will pledge its sales tax base, basically, and so it's pretty strong because the city sales tax base is large. But what that would mean if things got difficult is maybe some services might be compromised for residents if things go poorly. But Glendale's hoping that charging for parking around the arena will be lucrative and will, you know, pay for these bonds for the most part.
Ted Simons: I know studies have been done to see if the parking will indeed be lucrative enough. What are those studies showing?
Rebekah Sanders: There's quite a few studies that the city has commissioned. One showed parking will be so lucrative that all the bonds plus the interest should be able to be covered by parking. That's not included in this bond statement. Instead, investors are getting studies that show that parking will cover maybe a third of the principle even up to a little over the principle. That interest is kind of out there as might have to come from sales taxes.
Ted Simons: I guess the bottom line is, as with many of these kinds of situations, the city is saying the interest rate is enough, the return is enough to, what, make this not necessarily the biggest of risks? Is that the --
Rebekah Sanders: Sure. I mean, if -- it's all about demand. If something is risky you've got to entice the investor with a higher interest rate. That interest rate has not been set, but we're guessing it's going to be at least a bit higher than what would normally happen in a municipal bond sale.
Ted Simons: That would make sense with this kind of risk. All right, now, also the owner, the city pays the owner to manage the arena as well?
Rebekah Sanders: Correct. So this is a second part of the deal. There's lots of parts to this deal. But this is about the owner and his business partners managing the arena, putting on the concerts, having the lights on for the coyotes games, all that goes into keeping that arena running, the city will pay him $97 million over five years for that service, and potentially more after that five years based on a lot of different factors.
Ted Simons: Where does that money come from?
Rebekah Sanders: It's not entirely clear. But the city is hoping that the team will be successful, and in turn the area around the arena will grow, that will generate more business, more revenue for the city, but there's a lot of ifs.
Ted Simons: And I want to get to some of those ifs in a second here. One more thing, this account now, that the city is putting $10 million into an account, and it sounds like the city is basically doing this because if a future city council doesn't want to pay off this stuff, this is insurance so to speak?
Rebekah Sanders: Indeed. There is supposed to be 10 million put into an escrow count that -- account that the team owner could draw on if the city fails to make some of its payments. It's a rainy day fund essentially. And some people say you would think Glendale after all of this negotiating and all of these things they've agreed to, would be all right without this rainy day fund, but sure, there's questions. Will a future council be OK with this? Or will they try and break it?
Ted Simons: What happened, let's get to this possible lawsuit too, because this has to be a factor here. What happens if the bonds are sold and the city winds up losing a lawsuit? What happens?
Rebekah Sanders: It's still up in the air, because there's so many decisions a judge could make. If Goldwater sued and won, it could mean that the bond holders don't get any of their money back. It could mean that the judge orders the money to be returned to the bond holders and then how does Glendale get it back from Hulsizer, who knows? It's really unclear right now.
Ted Simons: We should mention the Goldwater institute's position, this is an illegal subsidy, correct?
Rebekah Sanders: Correct. But they haven't taken any formal legal action, and the city is confident that they've structured the deal to show they're not overpaying for the value they're getting from the lease, and they think Goldwater won't have a case.
Ted Simons: As far as I know a lot of city council meetings on this and a lot of discussion, what are the major concerns? What are folks out there who are against this deal, what is their biggest concern?
Rebekah Sanders: The opposition, which is mainly Glendale taxpayers, residents who -- they think we have already spent so much to build the arena, our baseball stadium, etc., our debt levels are getting too high, we can't afford to spend any more, and we'll be OK even if the team leaves. There's another faction which is more in Canada, which is against this deal because they want the team to return to Canada and say, hockey in the desert doesn't work.
Ted Simons: That's -- we'll be talking about Canada in a different respect shortly. I would imagine that taxpayers in Glendale would have the stronger say there, and it just seems to me that's their side, but the city is basically saying, if the coyotes leave, that thing sits there and there's no hockey.
Rebekah Sanders: An empty, hulking beautiful arena without a main tenant is how the city says it. Perhaps they could fill it with other concerts or a minor league team or something, but Glendale makes the point, nothing will equal what a professional hockey team brings as far as fans, business, prestige, all of that.
Ted Simons: Last question, what kind of timetable are we looking at here as far as selling of the bonds, and getting the owner to get that money and move ahead -- in general terms, what kind of timetable?
Rebekah Sanders: The hope is within a week perhaps two weeks if interest is reasonably high from investors. But that all depends, it really all depends on whether they can get enough bids for the bonds.
Ted Simons: Yeah. Well, great work covering this. It's a complicated story. Thanks for joining us we appreciate it.
Rebekah Sanders: Thank you.