The Lesson of the Arizona Coyotes

Glendale stopped throwing millions of dollars at a hockey team. Nothing bad happened.

Things are looking up for fans of the Arizona Coyotes. The team is fighting for first place in the National Hockey League’s Pacific Division, and just made a trade with the New Jersey Devils for want-away superstar Taylor Hall, who is only a year and a half removed from an MVP-winning campaign.

Plus, Coyotes’ fans are guaranteed to have their team around at least through next season, which isn’t always a foregone conclusion for the franchise most often cited when potential relocations are discussed — and in that, there’s a lesson for all stadium subsidy debates going forward.

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The Coyotes have been in, at best, a tenuous financial position ever since the team moved to Arizona from Winnipeg, first to Phoenix and then out to Glendale, as I covered in my book. Here’s the backstory:

The Coyotes are perhaps the second-best example of the National Hockey League’s push into the southern United States going awry. (The best would be the short-lived Atlanta Thrashers, who after a decade of futility, decamped to Canada and became the second coming of the Winnipeg Jets, who had moved from Winnipeg to, you guessed it, Arizona.) Management was a mess and results on the ice were bad, matched only by the sorry state of the team’s finances. In 2009, the Coyotes declared bankruptcy and were taken into league custody. Through it all, the city of Glendale made one disastrous decision after another to plow more and more money into trying to coax a hockey team to life in the desert that few wanted to pay to see.

In 2003, Glendale offered up more than $100 million toward a new arena in order to entice the Coyotes to move out to the burbs from their home in downtown Phoenix (which was also a taxpayer-financed arena). By 2012, after the team was already a ward of the league, the city offered another $300 million to any prospective owner. Once the team had a new owner, the city paid it $15 million per season in order to manage its own franchise. And through it all, the Coyotes were hemorrhaging money. Estimates were that the Coyotes franchise would lose millions of dollars every single season even if the team made an unprecedented number of consecutive runs to the Stanley Cup finals. That’s some bleak, bad business.

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At the same time, the city faced budget gap after budget gap thanks to the lingering aftereffects of the Great Recession. It cut public jobs, and even considered putting its public buildings up as collateral against the loans it received to pay for a hockey team. So the consequences stemming from the decision to subsidize sports were real. Money that could have been plowed into actual services, public safety or even just fixing potholes instead went to ensuring that one of the least popular hockey teams in the country didn’t fly the coop.

This is exactly what it means to say that the decisions cities make have opportunity costs. As one Glendale council member told me back in 2012, "I can use that $15 million [annual payment] for good things for Glendale. … Open our libraries up again. ... Replace the 55 cops that we're short right now." Yet the city kept throwing good money after bad, even when it was apparent to most observers that the smartest thing for everyone involved to do was probably to cut their losses.

Finally, in 2015, Glendale wised up and severed its agreement with the Coyotes. Now the team is on what is essentially a year-to-year lease, threatening to move every season unless if gets a new publicly financed arena and then re-upping for a new season once said arena doesn’t materialize.

That bring us to the current day, where Arizona has once again renewed its lease after making some veiled threats about leaving for another city. Despite pulling this same trick for five years, the team hasn’t left yet.

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So what does this tell us about debates over public financing for stadiums? That sometimes team owners are just bluffing and cities don’t have to pay up.

It’s not that the Coyotes’ owner can’t possibly take the team elsewhere, of course. NHL teams sometimes relocate; the Coyotes wouldn’t exist if they didn’t. But it’s not oh-so-easy for the owner to move either, because the candidates for an NHL relocation just aren’t that numerous. Las Vegas and Seattle have already been awarded expansion teams, which leaves … Houston maybe? Putting a second team in Toronto?

If you’re underwhelmed by that, join the club. With no credible alternative, the Coyotes’ owner doesn’t have a whole lot of power over city officials hesitant to pay more for the privilege of hosting a private business within their borders.

Too often, city officials either cave to an owner’s threats the instant they’re made, or feel like they can’t pull out of a disastrous deal with a pro sports team because they’re already in too deep, and thus wind up throwing lots of good money after bad. They don’t admit that they have leverage for fear of fans — i.e. voters — turning against them.

But Glendale finally pulled the plug, and managed to keep its team too. There’s a lesson there for other cities: When an owner makes a threat, don’t panic. It’s not always the case that the team in question is serious about leaving.


FYI: I’ve written before about how Foxconn’s deal with Wisconsin is the grift that keeps on grifting. Now, a new audit shows Foxconn could receive in-state tax credits for hiring workers in other states, and The Verge reveals how the company has stonewalled efforts to hold it to its promises.


Shameless self-promotion: I hear my book would make a great gift for the holidays. Order a copy or three here!


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— Pat Garofalo