Mar 15, 2011, 8:47 PM EST
The threats and rumors are no more in Glendale, Arizona. The Goldwater Institute has been investigating and threatening litigation against the City of Glendale over their proposed deal with prospective Coyotes buyer Matthew Hulsizer. Goldwater appears ready to follow through with their plans to file a law suit against the city because they feel the deal violates the Arizona Constitution.
Illegal Curve has a copy of the letter filed by Goldwater Institute and with the way they’ve got their case laid out, their take on the deal that Hulsizer and the City of Glendale are working on is damning. Their contention with the $100 million dollar payout to Hulsizer is pointed.
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.
Rebekah Sanders of The Arizona Republic points out that Goldwater is waiting on Hulsizer to make the deal with the City of Glendale before proceeding with litigation. It’s as it always has been in this situation: A high-stakes staring contest.
The Glendale deal with Hulsizer hinges upon the sale of $100 million in bonds which will be paid back through parking revenue. Of course, the amount of parking revenue you get also hinges upon the number of people driving to the game and the Coyotes attendance hasn’t exactly been stellar. Sales and excise taxes will also help generate revenue in which to pay back those bonds, but it’s difficult to see how it works out cleanly.
Goldwater Institute has been staunch in their beliefs that it won’t work out well and that the City of Glendale is being taken for a ride on the deal. After all, why should a city fork over millions of dollars to help a millionaire buy the team in the first place? We realize that the leverage is in Hulsizer’s favor as he’s doing Glendale a “favor” by buying the team and keeping an anchor tenant in Jobing.com Arena, but the City of Glendale bending the rules to give him more money to buy the team seems like quite the shady deal. Goldwater’s contention that the city would essentially be selling the parking revenue money back to itself also seems accurate.
Fuzzy math and curious wording sometimes works in deals with the government, but not every government has a dogged group looking over every piece of information to make sure their city doesn’t go broke in the process. Goldwater is either a fantastic governmental watchdog or the biggest bunch of spoil sports around. Coyotes fans are clearly in belief that they’re the latter. All that aside, it’s tough to see how Goldwater’s case isn’t flawed here.
If you’re thinking this will be the end game of all this, you’re wrong. Glendale has threatened to counter Goldwater’s lawsuit with one of their own against them for hindering the progress of the sale of the Coyotes. If Glendale does counter-sue and both sides cases being log jammed in the courts would likely point towards the NHL looking to sell the team to be rid of the headache. David Thomson and his True North group based out of Winnipeg, Manitoba is waiting in the wings patiently ready to purchase the team should the NHL look to move from Hulsizer and Glendale, Arizona.
Time is running out in Arizona for the Coyotes.
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