Phoenix’s NHL Future on Ice: Can Meruelo Reactivate the Coyotes?

Former Coyotes owner Alex Meruelo is now officially on the clock to develop a new arena in the Phoenix area and revive the franchise rendered “inactive” by the NHL. But more local roadblocks could be impeding his progress toward that goal. 

In the wake of the Coyotes’ move to Utah, Meruelo and NHL commissioner Gary Bettman met last week with local Phoenix media. There, Bettman conveyed his long-held desire to succeed in what remains the No. 11 media market in the U.S. But the commissioner acknowledged there could be a repeat of the political opposition in Arizona that already has seen the Coyotes rejected in both Glendale and by voters last year in Tempe. 

“If there’s outright hostility to another arena, and there are forces at bay that are going to do everything to prevent it, that’ll be a problem,” Bettman said. “But I don’t doubt Alex’s commitment to try and deal with all of those head on.”

The complex, two-stage transaction in which Ryan Smith, owner of the NBA’s Jazz and two pro soccer teams, acquired the franchise contains a defined, five-year window during which Meruelo will have a chance to develop an arena and revive the Coyotes as an expansion team. Rather than stripping the Coyotes from Meruelo in totality, he gets a clear opportunity to “reactivate the franchise.” Bettman lauded the deal as a “scenario that I don’t think anybody’s ever done before.”

The Clock Is Ticking

But the answer on whether that will happen will almost certainly arrive much sooner. Meruelo must provide the NHL a minimum of 18 months’ notice to revive the franchise. More substantively, Meruelo said much of the franchise’s hopes are tied into a June 27 land auction, where he intends to secure a 110-acre parcel of state-owned land in north Phoenix, initially appraised at $68.5 million.

“The most important and critical thing we have to do now is win that land auction,” Meruelo said.

That land is designed to be part of a $3 billion arena and mixed-use development. A component of the project is premised on using the city’s credit rating to help finance the development, and imposing a sales tax on anything sold within the arena district, using a state law to create a special theme park district with taxing authority within it. As has been the case since the Tempe defeat last year, both the NHL and Meruelo are planning on proceeding without putting the project back in front of voters as a referendum.

“Referendums in sports are kind of tough,” Bettman said. “They generally don’t pass, we’ve learned. Kansas City, with the Super Bowl champions, just had a referendum fail. This project as currently outlined doesn’t require a referendum.”

Financial Matters

Meruelo spent $300 million for the Coyotes in 2019, but with the NHL paying $1 billion for the franchise in the transfer to Smith, that would suggest a $700 million profit, a tidy sum for the less than five years of ownership.

But industry sources tell Front Office Sports his true profit number is closer to $400 million when accounting for annual losses of at least $30 million, $20 million in improvements to Mullett Arena, and roughly $100 million in debt that was repaid as part of the recent transaction. Meruelo will be responsible for paying back $1 billion to the league as essentially an expansion fee should he succeed in reactivating the franchise.