Hulsizer, Glendale May Face Legal Challenge in Coyotes Deal

Mark BrownContributor IDecember 18, 2010

Defenseman Ed Jovanovski and teammates could have a new owner in a matter of a few weeks.
Defenseman Ed Jovanovski and teammates could have a new owner in a matter of a few weeks.Paul Bereswill/Getty Images

If the deal between Matthew Hulsizer and the city of Glendale for possession of the Phoenix Coyotes seems too good to be true, perhaps it may be.

That's the feeling of the Phoenix based Goldwater Institute, a conservative think tank, ready to challenge the legality of the measure passed this past Tuesday night by the Glendale, Ariz. city council.

By a vote of 5-2, the council agreed to restructure its lease with Arena, the Coyotes home rink. Part of the measure calls for the city of Glendale to borrow $100 million in revenue bonds and give the money to Hulsizer.

In exchange, Hulsizer will hand over parking revenue rights to the city. In turn, the city hopes to regroup the money and gain additional revenue by charging for parking and selling naming rights to the parking lot and areas surrounding the arena.

In addition, the city of Glendale will allocate another $97 million to Hulsizer over the next five and a half years. That is considered a management fee for Hulsizer, who will now control all arena events. That includes the Coyotes. Acquiring the hockey team for Hulsizer is considered the crown jewel of the overall deal.

The Goldwater Institute called this action a violation of the Gift Clause of the Arizona State Constitution and is considering legal action to stop the transaction.

The Arizona constitution states: "Neither state, nor any county, city, town, municipality or other subdivision of the state shall ever give or loan its credit in the aid of, or make any donation or grant by subsidy or otherwise to any individual, association or corporation..."

Responding, Craig Tindale, city attorney for Glendale, indicated the Goldwater Institute's reaction is groundless, and the measure passed by the council is legal. Tindale and Goldwater lawyers were scheduled to meet several days after the measure passed the city council to discuss their respective positions on the issue.

This is not the first time the Goldwater Institute has challenged municipalities in what Goldwater considers a violation of the Gift Clause.

In October of 2007, the Goldwater Institute sued Phoenix mayor Phil Gordon in an effort to block the city of Phoenix from awarding $97.4 million to Meyer Turken, a Chicago developer. Turken wanted to build a mall in fashionable north Phoenix and fill the structure with upscale stores.

In a January 2010 decision, the Arizona Supreme Court agreed with the Goldwater Institute and indicated the $97 million to Turken violated the Gift Clause. In effect, the court said any economic development agreement must produce tangible benefits and fair market value for the taxpayer.

During the council meeting, Tindale would not disclose any legal position that Glendale, if challenged, would take. He merely told the council the Goldwater response was essentially without merit.

In the meantime, Hulsizer is awaiting confirmation from the NHL for ownership of the Coyotes. Earlier this month, the NHL Board of Governors unanimously approved his application, and now the 40-year-old Chicago investment banker waits for the league's final decision. 

After the council meeting, Hulsizer said he expects to take ownership of the Coyotes in a few weeks.