Senior elected city officials in Glendale, Arizona, say they are exploring whether legal grounds exist for them to void an arena management contract with the Arizona Coyotes, an agreement that calls for taxpayers to contribute $15 million per year over 15 years to the flagging NHL club.
When the city council in Glendale voted to give the owners of the Coyotes $225 million (all U.S. dollars) over 15 years, the money was supposed to be used by the team to manage the 12-year-old Gila River Arena, where the Coyotes play their home games.
The deal helped narrow the losses of a club that sports investment bankers say is a perpetual money loser, bleeding some $50 million or more per year.
But nearly two years after council approved the controversial pact, city officials claim the money that cash-strapped Glendale is paying to the team's owner IceArizona is instead going directly to Fortress Investment Group, the New York-based asset manager which financed holding company IceArizona's purchase of the Coyotes.
Glendale vice mayor Ian Hughes says using taxpayer dollars to pay down the team's debt rather than for direct arena management expenses amounts to a breach of contract. Hughes says he hopes in coming weeks to rally support on Glendale's seven-member city council to direct the city's attorney to explore whether the Phoenix suburb can get out of its contract with the Coyotes, a potential legal battle that could finally herald the Coyotes' exodus from the desert.
"The taxpayer got the short end of the stick," Hughes said in an interview. "If they call this an investment, you'd think there would be a possible return. I'm hard pressed to see the benefits to the city of Glendale."