Long-expected breakup with Glendale may be at hand: Where do Coyotes go from here?

City informs team that it won't renew operating agreement beyond 2021-22 season

If you are a Coyotes fan, you have been waiting for some form of this news to drop for the past nine years. The Coyotes and Glendale have had a mercurial relationship at least since the IceArizona ownership group negotiated an 11th-hour arena lease agreement in the summer of 2013 to keep the team in Arizona — an agreement that the city broke two years later.

On Thursday, the city sent out a news release, signaling that the end of this stormy affair finally may be at hand.

With an increased focus on larger, more impactful events and uses of the city-owned arena, the city of Glendale has chosen to not renew the operating agreement for the Arizona Coyotes beyond the coming 2021-22 season.

The City has informed the National Hockey League’s (NHL) Arizona Coyotes that the upcoming season will be the team’s last in Gila River Arena. The parties have been operating under a year-to-year agreement for several years. The agreement provides that either party can decide not to renew the agreement for an additional year by providing written notice each year on or before Dec. 31. 

Many skeptics, including NHL Commissioner Gary Bettman, viewed this release as little more than a negotiating ploy, but Glendale City Manager Kevin Phelps rebuffed that notion.

“This absolutely is not a leveraging play where I'm trying to get the upper hand on them in negotiations — that I'm trying to be in a stronger position,” Phelps said by phone on Thursday. “I made my recommendation and told the (city) council what I was going to do, and I've got full support of our city council. We’re really doing this because we, to the bottom of our heart, believe this is in the best interest of the entertainment district, and in the best interest of the City of Glendale.”

When news broke in July that the Coyotes were exploring a Tempe location for their new arena, an NHL source told me that the Coyotes had held several discussions with Glendale and ASM Global, which manages the arena, but the city had not been willing to provide the team with a multi-year lease extension.

Chuck Steedman, ASM Global’s executive vice president of strategy and development, emphatically denied that assertion. Phelps provided more details on Thursday.

“This started back in September when I asked ASM and the Coyotes to look at a long-term agreement,” said Phelps, who agreed with the Coyotes’ assessment that Gila River Arena needed significant renovations and upgrades. “We tried to be really clear that we didn't feel like it was in anybody's interest to continue the year to year, and that the way we defined a long-term agreement in the letter was a minimum of 12 to 15 years, but more likely 18-plus years, because if we're going to make a sizable capital investment, and if we were expecting the team to make a sizable match of that capital investment, you can't amortize that out over three or four years.

“They have been very consistent with saying that they were interested in either a three-plus-one or a three-plus-two; so a three-year lease with two one-year renewal (options), or three, plus (a) two (year-renewal option). That's what we were told by ASM because they've been the one directly in discussion with the Coyotes, but at no time — and I don't want to speak on behalf of ASM — but I don't think at any time did it become clear to me that they really were serious about a long-term agreement.”

A month ago in a story, I wondered how long Glendale would remain patient with the Coyotes’ year-to-year approach, especially when the team and league have made it abundantly clear that they want to leave. There has been an underlying assumption in this agreement that Gila River Arena could not survive without the Coyotes as an anchor tenant. In fact, ASM Global has an out clause in its contract if the Coyotes depart, but with the team repeatedly saying it intends to leave, Phelps said the city had no other choice than to explore Plan B.

“I've been here for almost six years and the NHL and the various team owners have been pretty consistent in saying that they’ll need to leave Glendale and that really forced us to start looking into the future to contemplate what the future would look like if the Coyotes weren't here,” he said. “As the sports entertainment district has continued to grow — it's just exploding right now — and as we started doing our analysis, we saw that not only could we survive the Coyotes not being here, but the future actually looked incredibly bright. 

“One of the things we did is we hired an economist to look at the economic impact to the entertainment district. The report was finalized earlier this week, but I saw a draft of it several weeks ago. It said that the city would basically have to replace approximately 20 events of 10,000 (fans) or more, to match the economic impact of losing the 43 games that typically are associated with the Coyotes — two preseason games, and an assurance of 41 home games.” 

Without rehashing the entire sordid history between the Coyotes and Glendale, the team and city began operating on a year-to-year basis after the city broke the 2013 lease agreement in 2015. In the six years since then, the Coyotes have undergone two majority ownership changes and there has been little to no headway on a new agreement.

Bettman has repeatedly made it clear that the Coyotes cannot and will not stay in Glendale because the finances do not work for the team. The team has been content to operate on a year-to-year basis while it explores arena options in more advantageous locations, closer to the majority of its premium season-ticket holders on the east side of town.

The Athletic’s Katie Strang published a report on Thursday detailing some other sources of strife between the sides, including this from a letter that Phelps sent to Steedman and Gila River Arena GM Dale Adams:

The Coyotes owed $1,462,792 to the arena as of July 17. In the letter, obtained via a public-records request filed earlier this month, Phelps said that more than $300,000 of that amount is “over four months delinquent,” The letter also communicated previous late payments and forgiven debts from the prior season.

In response to Glendale’s decision on Thursday, the Coyotes issued this statement via team president and CEO Xavier Gutierrez.

We are disappointed by today's unilateral decision by the City of Glendale to break off negotiations on a multi-year lease extension agreement. We are hopeful that they will reconsider a move that would primarily damage the small businesses and hard-working citizens of Glendale. We remain open to restarting good-faith negotiations with the City.

Most importantly, the Coyotes are one hundred percent committed to finding a long-term arena solution here in Arizona, and nothing will shake our determination to do what is right for our organization, residents of the entire Valley and, most important, our fans.

Attempts to solicit further comment from the Coyotes were declined, but I did reach Bettman for some thoughts, via text message.

“First, the Coyotes, as everyone knows, are working on a new arena that is more fan friendly,” he wrote. “Second, this is obviously a negotiating ploy by Glendale, which is insisting on a 20-year lease. Third, the Coyotes are committed to Arizona.”

The latter comment was one that Bettman also made in an interview on WFAN 660 AM in New York on Thursday. "I'm not worried about the Coyotes,” he said. "I think their future stays in the greater Phoenix area."

I asked Bettman if the NHL was also committed to keeping the Coyotes in Arizona, given all of the difficulties that the team has created for the league over the years.

“Of course,” he wrote.

When I asked Phelps if he could foresee any situation in which the Coyotes are playing and operating in Gila River Arena past the 2021-22 season, which officially expires on June 30, here is what he said.

“If you ask me, can I envision a scenario, I would say ‘no,’” he said. “My parents always told me, you never say never, but at this point, I cannot envision a single scenario where the paradigm would shift to where it's in our best interest of getting into a longer-term agreement.”

Phelps reiterated that this decision was made with input from multiple stakeholders.

“We also were receiving a lot of feedback and input from the owner of Westgate entertainment district, because obviously Bob Parsons has a significant investment there,” Phelps said. “And so we just studied everything. We looked at what the options were for attracting more, larger, impactful kinds of events and we came to the conclusion that it was in our best interest to move forward. 

“The other thing that kind of helped kickstart this was we asked last fall, our arena manager to start going through a process of seeing how we could bring an architectural firm on board so that we can invest back into the arena to do an update because it’s 18 years old; it's ready for refreshing. I was on vacation the week (the Coyotes) made the Tempe announcement, but I had already scheduled to meet with the folks from ASM. They showed me some concepts that five of the six firms presented, and it got us even that much more excited that we can really repurpose the arena into something that we think will have a greater impact for the district and for our city.”

Whether Glendale can actually fill 20 dates with events of 10,000-plus fans is open for debate, given the fact that the arena competes with Footprint Center (the Suns arena) and other attractive venues such as Ak-Chin Pavilion, all of which enjoy more advantageous locations. There is a finite number of events available for booking. We also haven’t heard from the store/restaurant/bar owners at Westgate to know if they are actually in lockstep with the city. They have not been in the past.

Maybe the arena and Westgate could benefit from a lack of conflict with Coyotes games, which generally took precedent, but there is also this to consider: If the Coyotes succeed in building their Tempe arena, Gila River Arena would fall farther down the pecking order of desirable venues. Think about it: Where would you rather be as a promoter: In downtown Phoenix? In downtown Tempe near ASU and Old Town Scottsdale? Or in Glendale? A Tempe arena would create far more woes for Gila River Arena.

Even if the Coyotes’ attempts to secure a location in Tempe are successful, however, there is no way that the new arena would be ready for the team in time for the 2022-23 NHL season. Footprint Center housed the Coyotes from the time of their move to the Valley in 1996 until 2003 when they moved west to Glendale, but it may lack the proper ice plant to service an NHL team (it has some infrastructure for Disney on Ice), and it is highly unlikely that owner Robert Sarver would take the Coyotes in. He has rebuffed previous attempts by the team to strike a deal in the building, and he won’t likely be anxious to help a team that wants to build an arena that would compete with his venue for events.

Arizona Veterans Memorial Coliseum also lacks an ice plant, luxury boxes, the requisite fan capacity (listed at 13,730) and numerous other amenities. It would require a significant investment just to make the arena operable, and the team would lose a lot of money playing there.

If the Coyotes are forced out of Gila River Arena, it would create a difficult predicament for the team and the league, and it would give rise to another in the endless rounds of relocation speculation that have dogged this team at least since 2009.

“If there's one thing that we struggled with the most in the decision was we really are saddened by the impact to the faithful Arizona Coyotes fans, and the impact this could have on the fans and we’re very grateful for their support over the years,” Phelps said. “But as I said earlier, my job as the city manager is really to represent the interests of the businesses that have invested in the area, and our residents who've invested in the arena.

“Our city has made an incredible investment in NHL hockey. I think that gets lost sometimes in the narrative. I asked our budget and finance team to give me a number of what we've invested. Over the 18 years that we've had the arena open in a city of less than 220,000, we have invested to date, almost $307 million, and we still owe money on the arena. I don't think there's an example of a city anywhere in the country, especially of our size, that has made as big an investment of public dollars.

“We didn't get a single dollar from the state of Arizona. We have not received any money from Maricopa County. We didn't establish a special taxing district. We really stepped up and did this. And so I hope the narrative isn't that the city of Glendale is wrong in this situation. We have, I think, gone way beyond in terms of supporting hockey. We just reached the point with all the growth that we have happening in the district that we felt we needed to move it now towards remodeling and pivoting our strategy. We couldn't wait three to five years for that to happen.”