The Arizona Coyotes are negotiating a deal with the City of Tempe, in which the team would invest “$1.7 billion into transforming 46-acres of public property from a trash landfill site into a landmark for millions of visitors to enjoy,” according to documents about the project viewed by Sportico.
As part of the plan, the team would buy the land and finance the construction while the city would provide a permanent property tax abatement and $250 million in bonds for infrastructure that would be paid for by a user fee on purchases and sales taxes generated at the site.
The proposed entertainment district, just east of Sky Harbor Airport, about 10 miles from downtown Phoenix, would include a new arena, a practice facility, several hotels and office buildings, a 4,000-seat amphitheater, parking garages for 2,400 cars, 300,000 square feet of restaurants and retail outlets, and 3,600 sound-proofed housing units, all constructed in two phases.
The arena, practice facilities and corporate offices for the team are budgeted at $700 million and will be part of the first phase. If negotiations proceed smoothly, the new arena could open for the 2025-26 NHL season, team president Xavier Gutierrez said in an exclusive interview.
“We’ve made it clear that we’d like to get this done as expeditiously as possible,” Gutierrez said. “We’d like a decision on a final deal by the fall and certainly no later than the end of the year.”
Negotiations began in earnest earlier this month when the Tempe City Council closed a day-long meeting by approving a 74-page Request for Proposals [RFP] the Coyotes filed under the auspices of Bluebird Development LLP last September. The vote was 5-2 in favor and the negotiated deal must come back to the Council again for final approval.
Tempe Mayor Corey Woods concurred with the hockey club’s timeframe.
“I would really like to have this wrapped up by the fall; really by the end of 2022 at the absolute latest,” he told the website PHNX Sports. “The reality is, this is obviously a very big project, potentially a game-changing project for the City of Tempe and, I frankly think, the region.”
Coyotes’ owner Alex Meruelo, whose net worth is over $2 billion, will finance part of the project directly and some of it will be borrowed, although that ratio has yet to be determined.
According to the RFP, the Coyotes are asking the Tempe to underwrite $250 million worth of public bonds for infrastructure costs, including remediation of the land, clearing of public title, sewage, and moving power lines to prepare the land for development. Municipalities can typically secure lower interest rates than private developers.
In the RFP, and confirmed by Gutierrez, the Coyotes are suggesting that the bonds be paid back by user fees as high as 6% on any item, meal or ticket sold at the arena or in the entertainment district. And if that’s not enough, they’ll also seek to recoup 1.2% of the sales tax that will be generated within the entire complex. The city is projected to earn $225.4 million in sales tax over the course of 30 years, according to the document.
“It’s currently a landfill where there’s no economic activity right now,” Gutierrez said. “We’re simply asking for some of the sales taxes that we’ll be creating to be directed to the payments of that public infrastructure. We put forth that the taxpayers of Tempe will have no obligation and they do not.”
Finally, the Coyotes want to buy the land for $48.4 million and are asking for a property tax abatement, “just like has been done with every other arena and stadium in Arizona. They all have abatement in perpetuity,” Gutierrez added.
In exchange, the Coyotes will commit to at least 30 years in the arena, with a series of 10-year extensions after that. At the same time, the Coyotes will also make application to the Federal Aviation Administration (FAA) to meet height restrictions – the arena is engineered to be dug 30 feet below ground level.
Gutierrez said he’s “very confident” the application to the FAA will be approved.
“Obviously, there’s a lot of work to be done before we can get a shovel into the ground,” NHL commissioner Gary Bettman said last week in Denver at the Stanley Cup Final. “But from all the reports I’m getting, everybody is doing what needs to be done as efficiently as possible.”
Environmental mediation next year could take as long as nine months, Gutierrez said, with construction ready to begin by early 2024.
Meanwhile, the Coyotes are in the process of moving their entire hockey and business operations from Gila River Arena in Glendale across the valley to Scottsdale.
They will play their games for the next three seasons in a new 5,000-seat hockey building on the campus of Arizona State University in Tempe, which is expected to be ready for Coyotes games when the 2022-23 NHL season begins in October, Gutierrez said.
They are building out locker room and training facilities at the Ice Den in Scottsdale where the team will practice, building an annex for the same at ASU, which will be donated to the school when the Coyotes leave, and are upgrading that arena to meet NHL standards.
All of this will cost in the neighborhood of $30 million as a “temporary solution” to their arena and financial issues before the new Tempe arena deal is even finalized “because [Meruelo] is so committed to staying in Arizona and because he wants to spend over $2 billion on a permanent solution,” Gutierrez said.
Playing temporarily in a smaller facility is not unprecedented, Bettman said.
In the NHL, Calgary, Tampa Bay, and San Jose played in smaller arenas before permanent facilities were built, he pointed out. Even the Chargers of the National Football League played in a 20,000-seat soccer stadium upon moving to Los Angeles until SoFi Stadium was built.
“You do what you have to do if you believe in a market for the long term,” Bettman said.
He has always believed in the Phoenix market, even though the Coyotes have been a money-losing proposition since they moved to Phoenix from Winnipeg in 1996.
Meruelo purchased the Coyotes in 2019 for $300 million, and according to Sportico’s most recent valuation of NHL franchises, the team is worth $410 million, the lowest of any franchise in the four North American major professional sports leagues.
Gutierrez said Meruelo has underwritten millions of dollars in losses through the pandemic while playing in an arena where the average ticket price was around $40. At ASU, the Coyotes are at the league average of $160 and all of the premium seats along the glass are already sold out. Full season seats in the front row are $14,350, $350 a game.
At those prices, Gutierrez said the goal this season is break even or even make a little money. In three more seasons, the Coyotes long-term future in Arizona could be secure.
“We set out a vision, we set out a strategy and we’re executing it,” Gutierrez said. “And you have an owner who has the resources and is capable of doing it.”