Getting taxpayers off a dangerous hook

by Clint Bolick
Goldwater Institute

The City of Glendale, Ariz. is planning to borrow $100 million so it can send a check for that amount to Chicago businessman Matthew Hulsizer to help him buy the Phoenix Coyotes. That type of transaction is exactly what the Gift Clause of the Arizona Constitution was designed to prevent: furnishing public debt or providing public funds to a private individual or corporation for personal gain.

The deal has the team selling parking rights to the City, which the dealmakers say will provide sufficient revenues to repay the bonds. But there are two problems with that. First, the City may already own some or all of the parking rights. Second, it’s quite clear the revenues will not come close to repaying the bonds.

So the City pledged sales and excise taxes as collateral for the loan. That means if the team goes bankrupt again, or if parking revenues fall short, taxpayers are on the hook for potentially hundreds of millions of dollars–on top of the $180 million the City borrowed to build the hockey arena in the first place.

The solution is simple: take the taxpayers off the hook, and place responsibility where it belongs: with the new owner.

The City and Hulsizer share two dubious beliefs. First, although the Coyotes have lost $25-$40 million every year and already have plunged into bankruptcy, they think Hulsizer can make the team profitable with “a few tweaks”. Second, they say parking revenues will suffice to repay the bonds.

If they truly believe those things, then there should be no problem with Hulsizer, rather than the taxpayers, borrowing the money. That way, if the shaky premises on which the deal depends prove faulty, Glendale taxpayers will not have to pay for another costly blunder by the City of Glendale.

If the City truly wants to keep the Coyotes, it should act within the law and stop playing Russian roulette with taxpayer money. If Hulsizer is willing to skate up to the puck, the Coyotes’ endearing mascot Howler need not be an endangered species.

Clint Bolick is director of the Goldwater Institute’s Scharf-Norton Center for Constitutional Litigation.

Learn More:

Goldwater Institute: Glendale, the Phoenix Coyotes, and the Hulsizer Deal

Goldwater Institute: Goldwater Institute v. City of Glendale (public records in Coyotes negotiations case)


Comments

  1. Steve Calabrese says

    Clint Bolick is a great fighter for conservatism, and writes well-reasoned essays when the situation calls for it. However, in this case, one sentence says all:

    “Glendale wants to do something illegal as hell that is also throwing good money after bad.”

    Come to think of it, I guess that’s what Bolick is saying after all.

  2. MrsBillyBob says

    It would be interesting to know who donates to Goldwater Institute. Secy of State Ken Bennett is right – they need to register as a lobbyist so we can see who is paying for all this – what out of state interests are influencing our laws in Arizona.

  3. It’d be interesting to know WHO thinks giving $100 million of taxpayer money to some dude who is promising a business miracle akin to what the inticingly elusive cold fusion is to the environmental movement. Lots of promises and never delivered. Glendale could do better at the nearest casino, and get free meals and drinks probably, too.

    Think of the economic miracle of not forcibly removing $100 million from the pockets of taxpayers and see what they’d rather do with their own, hard-earned money.

  4. Glendale bet heavily on sports facilities and lost. The fact is, the Coyotes are not a money-maker in AZ. This has been demonstrated since they came here from Canada back in the 90s. Instead of the taxpayers subsidizing a non-viable business model, let the Coyotes leave town and find a home where some owner can make money from the franchise. Its time for the City of Glendale to cut its losses and future exposure, oh and adhere to the State Constitution.

    …but it won’t happen without a fight and a lot of money. The stakes are high and the future implications for other professional sports franchises across the US is great. This could be a watershed moment, I hope the Goldwater Institute has some smart people in their corner, they are going to need them.

  5. Patriotsunited says

    Hear, hear for the Goldwater Institute. Too bad more people in Arizona don’t think like the Goldwater crowd. GI doesn’t lobby. Why should they register as lobbyists? Pretty soon SOS Bennett is going to need to find a new job. He is not a conservative and he has no chance of becoming Brewer’s successor as there are too many other better choices waiting in the shadows.

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