Monday, June 15, 2009

Hamilton Loses Again Hamilton Loses Again

By Evan Weiner

June 15, 2009

11:00 PM EDT

(New York, N. Y.) – Hamilton, Ontario taxpayers, United States Bankruptcy Judge Redfield T. Baum saved you millions of dollars but for the tens of thousands of people shut out of Toronto Maple Leafs tickets in an area that is suddenly known as “South Ontario” which really isn’t south Ontario, it is more hurry up and wait for Hamilton to get an NHL team. While some Canadians and a sizeable portion of the Toronto media will probably ratchet up the scorn and competent they have for National Hockey League Commissioner, Gary Bettman, it may have been Jim Balsillie who killed the deal that could have resulted in Hamilton or South Ontario getting an NHL franchise by insisting that his purchase of the financially distressed Phoenix Coyotes hockey team from Jerry Moyes hockey team be done by June 29 or he would walk away.

Judge Baum ruled that there wasn't enough time to resolve all of the issues surround the sale which included whether the NHL could charge a relocation fee and there are others issues surrounding including whether the NHL had the right to block a move from Glendale to Hamilton and if NHL franchises in Toronto and Buffalo, New York should get compensation money if Balsillie “invaded” their territories by placing a team in Hamilton.

That was the 10,000 pound gorilla hanging over the courtroom according to Judge Baum, not to mention that New York’s two United States Senators suggested to the judge that the NHL bylaws and wishes should be considered.

Hamilton's city and elected officials were ready to greet Balsillie as a liberator with open arms and with many millions of dollars to upgrade the city's arena, welcoming him as a conquering hero for getting the city a hockey team. The Toronto media was ready to give him the highest honor that Canada could bestow on one of their own.

Hamilton was ready to spend lavishly as the city has to renovate the city’s arena as it is not up to NHL standards as it lacks high price seating. It was one of the reasons that the NHL bypassed it during various expansions in the 1990s.

So Bettman wins one although not much was resolved by the court because the clock was running out on Basillie's bid to buy the financially insolvent Phoenix Coyotes franchise. The franchise is in financial ruin and hanging over the fate of the franchise is Glendale, Arizona's instance that the franchise stays in the city's new arena for another 26 years or someone will have to pay a huge sum for breaking the lease between the team and the municipality.

National Hockey League Players Association Executive Director Paul Kelly was a loser in Judge Baum's decision. Kelly stuck his neck out saying it was time to pull the plug on the Phoenix franchise although he said he was not advocating a sale of the team to Balsillie or a move to Hamilton. Kelly's reasoning was that someone should come to the realization that the NHL could not succeed with an owner, Jerry Moyes, losing millions upon millions of dollars annually. Not even the father of the modern era of executive directors of players association, Marvin Miller, the long time Executive Director of the Major League Baseball Players Association would ever have told owners publicly in either a newspaper interview or on a sports talks radio station to move a franchise. That is an owners decision although from Kelly's standpoint, he probably looked at it as an opportunity to bring more money into the NHL's coffers that would trickle down to the players.

The financial failure of the Phoenix Coyotes really started with a stupid arena design decision by Phoenix elected officials around 1987 when they decided to built a venue for Jerry Coangelo's Phoenix Suns National Basketball Association franchise. The basketball team was the only major league team in the Valley of the Sun at the time and to make sure that Coangelo was content, happy and treated as a deity, they approved a design that was perfect for basketball and terrible for hockey or arena football or other events in the building. The floor of the building was hardly big enough to support a hockey rink or an indoor football league layout.

Coangelo was the big winner in getting the building, his franchise valued soared and most of the rent payments due for the building occur in years 36-40 on the lease. Coangelo eventually cashed in 2004 when he and his group sold the franchise to Robert Sarver for a reported $401 million US. Given how long arenas last in the NBA, it is doubtful that the team will still be playing in the building in 2027 or 2028.

The Phoenix arena opened in 1992. About two years after the arena opened, Coangelo mentioned to this reporter that the NHL needed and wanted to get teams in the Mountain Time zone in both Denver, Colorado and in Phoenix for a number of reasons including grabbing two much needed TV markets. Coangelo was all for the NHL to move to his arena even though the city owned the building and the building had 4,000 obstructed seats. The Phoenix-Scottsdale-Mesa area was growing by leaps and bounds and a lot of western Canadians spent a good chunk of the winter months in the area. It made a lot of sense that the NHL move into the market to that Coangelo and others including Steven Gluckstern and Richard Burke who bought the financially struggling Winnipeg Jets, a franchise that was in desperate need for a new arena, from Barry Shenkarow in the spring of 1996, felt was ripe for an NHL team.

The relocated franchise moved to Phoenix in the summer of 1996 and it wasn't long before Gluckstern and Burke discovered that Coangelo's sports facility, the municipally-owned building, was totally unsuitable for hockey and there was a need for a new barn.

Gluckstern then decided that he wanted to be a co-owner of the New York Islanders in 1998 and sold his share of the franchise to Burke. Burke held onto the money losing franchise in a bad building until 2001 when Steve Ellman bought the team. One of Ellman's partners was Jerry Moyes, a trucking executive. Because sports franchises are no longer stand alone businesses, beginning in 1998, Ellman and Burke wanted to develop a plot of land that Ellman owned at an old shopping center in Scottsdale into an arena with some shopping around it. That never came to be but Ellman took the team off of Burke's hands.

Glendale came up with an arena plan and Ellman was able to get the team out of Phoenix in 2003. Ellman got a $160 million arena west of Phoenix from Glendale taxpayers but promised something in return. Ellman would build an arena-village complete with shopping, housing and other commercial ventures and sales tax raised within the Ellman arena-village would go back to Glendale to help pay off the city's debt obligation on the arena.

Ellman's Westgate project was floundering in 2006 along with the hockey team. Ellman and Moyes split in 2006, Ellman stayed with the real estate project and Moyes became the owner of the Coyotes. Ellman's real estate project has never been fully developed. By November 2008, Moyes no longer wanted to subsidize the hockey team anymore and the NHL started picking up the bills. Moyes filed for bankruptcy protection in May and agreed to sell the franchise to Balsillie which infuriated the NHL which was trying to sell the team to baseball's Chicago White Sox and basketball's Chicago Bulls owner Jerry Reinsdorf.

Reinsdorf does business in Glendale. The city built a spring training facility which is shared by Frank Mc Court's Los Angeles Dodgers and Reinsdorf's White Sox.

The decision by the Phoenix elected officials back in the late 1980s has had an impact over two decades. The original thinking by urban planners in Phoenix was to build a downtown with the arena as the anchor. A number of years later, the urban planners added a plan to build a baseball park near the arena which would make the downtown a destination place for workers in the area and for those who wanted to spend a night or a weekend downtown. It hasn't really worked out all that well for downtown Phoenix or Glendale.

What happens next in the saga of the Coyotes is anybody's guess. But based on sports league's histories, it can be assumed that the NHL will try and find a local buyer who will cut a new deal with Glendale freeing up arena revenues that would go to the new owner. Balsillie might sue the NHL charging the league with an antitrust violation and that would take a while as lawyers would have to go through a discovery period and then the case would finally be heard.

Balsillie has now had three cracks at buying an NHL franchise. He withdrew an offer to buy the Pittsburgh Penguins franchise on December 15, 2006 after Bettman told him that he could not buy the franchise unless he agreed to keep the team in Pittsburgh. Balsillie's attempt to buy the Nashville Predators in May 2007 was perhaps the most awkward attempted purchase of a major league sports franchise in modern memory. Balsillie bought the team from owner Craig Leipold and almost immediately set up shop in Hamilton in anticipation of moving the team there, selling season tickets for the Hamilton Predators. By the end of June, Balsillie was on the outside again looking in. Leipold decided to look elsewhere for a buyer.

Balsillie's lack of playing by the rules that owners have established in their business will not help him in anyway in trying to land an NHL team. Membership has its privileges; Balsillie wants to get into a closed club that has its own rules and regulations. Suing to enter the club will not win him any friends in the NHL or in Major League Baseball, the National Football League or the National Basketball Association as Balsillie's actions of just buying a team and moving them to wherever he chooses has to go through a process not a whim. That doesn't fly as there is a list of potential suitors who tried to buy teams and failed throughout the years in sports.

The NHL's constitution goes back into mothballs for the time being. Balsillie is without a team and Glendale still has an anchor tenant in its municipally owned building. The Coyotes saga isn't over by a long shot but it might have all been different if Phoenix elected officials were paying attention to what they signed off on in building an arena back in 1987 and 1988.

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