The Goldwater Institute announced on Tuesday that it will file a legal challenge to the agreement between the City of Glendale and prospective owner Matthew Hulsizer to subsidize the purchase of the Phoenix Coyotes, once that agreement is closed. In a statement released by the institute on Tuesday, Goldwater announced that the challenge comes after the Goldwater Institute examined more than 1,000 pages of documents provided by the City of Glendale under court order.
The deal Goldwater is challenging has not yet been signed by the parties, but is expected to close soon. Under the deal, the City of Glendale plans to help Hulsizer purchase the Coyotes by borrowing $100 million. The loan would mostly be repaid from parking revenues, but the city has also pledged sales and excise taxes. As part of the deal, the city would also pay Hulsizer $97 million to manage Jobing.com arena - home of the Coyotes - over the next five-and-a-half years.
The Goldwater Institute, which prevailed in a similar case against corporate subsidies last year, states they plan to take action because it determined the agreement violates two prohibitions of the Arizona Constitution. The Constitution requires no Arizona government "shall ever give or loan its credit in aid of, or make any donation or grant, by subsidy or otherwise, to any individual, association, or corporation."
The first violation is Glendale's decision to provide its credit to make a payment to Hulsizer, who will use the proceeds to buy the Coyotes. The second violation stems from an Arizona Supreme Court decision in Turken v. Gordon. The prohibition is violated because under the deal, Hulsizer isn't providing roughly proportionate value for the money he will receive from the City of Glendale.
In light of the recent sale of the Buffalo Sabres, Goldwater Institute President and CEO Darcy Olsen stated that "deals of this size and scope happen all the time in the private marketplace without putting taxpayers on the line."
"Mr. Hulsizer certainly appears better equipped to buy this team with his own funds than the taxpayers of Glendale," said Olsen.
Goldwater argues that the deal poses large risks to taxpayers in Glendale because the Coyotes franchise perennially loses money and because taxpayers will have to repay the city's loan if the team falters again or if parking revenue proves insufficient in repaying the loan. The Coyotes have posted losses between $25 million and $40 million each year.
Goldwater's decision to file the lawsuit comes after a two-year legal battle to obtain public records from the City of Glendale. Goldwater states that it will file its lawsuit when the deal with Hulsizer closes because the city has changed the parameters several times, and continues disclosing previously withheld documents - including 391 on Monday - according to Goldwater.
Goldwater's Scharf-Norton Center for Constitutional Litigation will represent Glendale taxpayers.