Arizona's terrible NHL team is begging voters for $200 million to build a permanent home, but stadiums are consistently huge money pits

  • Arizona's terrible NHL team is stuck using a college arena for its games as it awaits a public vote.

  • In May, voters are set to decide the fate of a $2.1 billion plan that includes a new Coyotes arena.

  • It's the latest example of taxpayers being asked to pay for stadiums with little chance of ROI.

The American sports world will soon turn its attention to Arizona. Glendale is ready to roll out its welcome to the nation's new national pastime as the Super Bowl comes to town.

Less than an hour from State Farm Stadium, a far less glitzy scene continues to unfold in Tempe. The NHL's Arizona Coyotes are for the moment stuck in an arena that is three times smaller than any other in the league. The professional team may need the facility for a few more years, but their logo doesn't cover the entirety of center ice. That's because the top-level franchise actually shares the space with Arizona State's college hockey team.

The hope is that this franchise, which was once in bankruptcy protection and more recently was unceremoniously evicted from its previous home in Glendale, can find a way out of this morass with a $2.1 billion plan to turn 1.5 million tons of garbage and surrounding area into a new arena with two hotels, a music venue, and housing.

At its core, though, is a question that has long plagued cities and sports teams' loyal fans: How much money should taxpayers spend or forgo to support professional teams?

A struggling franchise hopes voters will give it a glistening home

This won't be a rhetorical question in Tempe.

"I'm mostly chuckling that we're sitting here talking about the Arizona Coyotes in the year of our lord 2023, because it's been such a joke for so long that this silly team in a silly place is trying to get a publicly funded arena," Pat Garofalo, the director of state and local policy at the American Economic Liberties Project, told Insider.

An Arizona Coyotes jersey with a mullet.
The Arizona Coyotes have tried to embrace their temporary home they share with Arizona State's hockey team, including when they gave fans a blond mullet wig in October as a nod to Mullett Arena's name.Christian Petersen/Getty Images

In May, voters will get to weigh in on the project. As Defector's Lauren Theisen wrote, this is also a de facto referendum on their allegiance to a franchise that is pretty close to garbage itself. Including their previous stint in Canada as the Winnipeg Jets, the Coyotes are the oldest NHL team to have never even appeared in the Stanley Cup Final. It's also been over a decade since they qualified for a playoff appearance outside the COVID-19 season where all but seven teams were allowed to compete in a modified playoff.

Alex Meruelo, a billionaire, who owns everything from the Sahara casino in Las Vegas to a sushi company, has nicknamed the deal "landfill to landmark."

He and his allies tout that the project isn't publicly financed, which is technically true. Arizona taxpayers are not directly funding the construction of the stadium. But like many large developments, it is being seeded by hundreds of millions in tax breaks. Neil deMause, a journalist who wrote a book on why stadium-financing deals don't pay off, pegged the total price tag at $500 million in tax breaks. Of that money, Tempe would sell $220 million in bonds that would be paid off with future tax revenue.

The NHL has also made clear it stands behind the plan. Commissioner Gary Bettman personally flew down to address the city council before it unanimously voted to move the proposal toward public approval. Bettman even guaranteed that the league would lavish a future arena with either an All-Star Game or the draft.

Economists don't understand why cities keep doing this

The Coyotes are far from the only team to rely on taxpayers. The exception is voters themselves rarely get to weigh in. When they do, it's not a guaranteed success, as the San Diego Chargers found out in 2016 when voters rejected raising a hotel tax to pay for a new stadium. The Chargers soon left for Los Angeles. Threatening relocation is one of the major tools owners have historically used to squeeze more money out of officials.

Last year saw lawmakers promise to fork over billions in taxpayer funding for stadium projects. The Buffalo Bills, courtesy of Gov. Kathy Hochul of New York, will receive $850 million in taxpayer funding for a new stadium. As deMause pointed out, just a day later Maryland committed $1.2 billion to improve the sports complex shared by the MLB's Baltimore Orioles and the NFL's Ravens.

The Buffalo Bills' stadium
Buffalo Bills fans leaving the team's stadium after a 2021 NFL playoff game.Adrian Kraus/File/AP

Economists who have researched this topic for decades have found that the rosy economic impacts teams promise rarely pan out.

"Though findings have become more nuanced, recent analyses continue to confirm the decades-old consensus of very limited economic impacts of professional sports teams and stadiums," the Kennesaw State University professor J.C. Bradbury and his coauthors concluded in a February 2022 review of more than three decades of studies on economic impacts of stadiums. Even when adding in social benefits from stadium investments, welfare improvements from hosting teams tend to fall well short of how much the government spent to obtain it.

Put simply, the authors found, "the large subsidies commonly devoted to constructing professional sports venues are not justified as worthwhile public investments."

Glendale is doing just fine without the Coyotes

The Coyotes themselves are also an interesting case study. Glendale soured on the team, which at one point it threatened to lock out over $1.3 million in then-unpaid bills. The city, per The Athletic, guessed it could make more money off of concerts and other events than professional hockey.

Sure enough, the arena saw record revenue in its first year without the team.

Garofalo, who wrote a book on public support for billionaires and corporate America, first wrote in 2012 about the Coyotes' struggles to secure an arena. At the time, Glendale was still hoping the team would stay. The city also paid $50 million to the NHL to keep the team in the city while the franchise navigated bankruptcy.

"On some level, it's just sad that we are still here talking about the Arizona Coyotes trying to get taxpayer dollars for an arena when they are sort of the poster child for why cities do not have to spend money on professional sports teams," he said. "Glendale is fine. At the time, it was, 'Oh, my goddess, the Coyotes are going to leave. Glendale is going to fall into a crater. What are we going to do?'

"Then after years and years of paying money into this sad-sack franchise, they said, 'We're done and we can't do this anymore.' And Glendale is fine."

Better than fine. Glendale will soon be hosting the Super Bowl for the third time at State Farm Stadium. Just don't ask how that was funded.

Correction: February 6, 2023 — An earlier version of this story misstated the rules about where the Coyotes could place their logo in Arizona State's arena. They were allowed to paint the logo on half of center ice, split with the university. The story also incorrectly described how the playoffs worked in the abbreviated 2020 NHL season; 24 teams made the playoffs, not every team.

Read the original article on Business Insider