Vacation Beckons . . .

I had been hoping to have installment two of the Arena Saga up by now, but the draft, free agency, and the Rick Nash brouhaha got in my way, and that darn work stuff did the same.

So, I am off for 8 days of vacation with the family, heading to Ft. Lauderdale, Cozumel, Costa Rica and Panama. Probably no hockey games to watch there, but we will get more than our share of sunshine.

Back online next Sunday night. In the meantime, I will Twitter any news I come across on Nash or other events.

Cheers & Happy 4th of July!!!!

Progress Reported

Per Aaron Portzline on Twitter:

"CBJ makes progress toward contract extension with Rick Nash, but no deal likely tonight"

Good to hear!! I am still sticking with my prediction for a deal by the time of the Red, White & Boom parade tomorrow.

Step Away From The Ledge People . . .

The key signings of Sammy Pahlsson and Mathieu Garon were unfortunately overshadowed last night with the dislcosure that Rick Nash was "disappointed" with the package the Blue Jackets put out as their initial offer. The responses have ranged from disdain for Nash's comments and severely taking him to taks, to roasting Howson over the coals for insulting our captain and not doing what is necessary to close out a deal. Both reactions are off base here, so before we get to the signings, let's look at the Nash situation more closely.

Up to now, the Nash courtship had been a pure love fest. Nash, his agent and Howson were all making wonderfully upbeat comments and indicating how much they all respected and loved each other, the team, the coaches, the fans and anybody else in the neighborhood. They were one step short of sending out a communique calling for World Peace . . . That is great, and is probably an indication of where everybody is in their hearts, but until yesterday, it was all theoretical. Now, numbers and years have to be matched with team goals, individual aspirations and economic realities. That, folks, is an entirely different reality. Not necessarily a bad one, but a reality nonetheless.

First, we do not know what offer the CBJ put out there, other than the reports that it was 5 years. Nash probably sees himself as an $8 million player, aso anything short of $40 million over the 5 years was probably a disappointment, particularly when he sees the Rangers paying Gaborik an average of $7.5 million. (Rick, it's the Rangers, OK? You can't use the Rangers or the Knicks as a standard here) The CBJ were probably closer to $35 million, looking at the Sedins signing for $6.1, Hossa for an average of $5.23 and Iginla making about $7 million right now. Sure, Hossa's contract is front-loaded, but overall something between $7 mill and $7.5 mill would appear to be in the ballpark.

The essential problem here is that there are too many options, and presenting any one option makes it look like you have excluded others. Nash is 25, so would appear to be ripe for a 10 year deal. However, if you present that, Nash might feel you are trying to pin him down for too long. It's not only about salary, it is all about cap space. The cap will go down significantly next year, in all likelihood, so the Jackets are trying to stay close now. The might well be thinking about going lower now, and balooning toward the end. Going longer also creates flexibility. Ohlund's contract with Tampa is 7 years, $24.5 million. However, $22.5 million gets paid in the first 5 years. So, for that period, even though he will receive $4.5 million, the cap hit is only $3.5 million. That extra million can get you a third or fourth line player. So, don't let any perceived gap in numbers stress you out. I suspect that the sides are far closer than we think -- they just need to agree on the length and the cap hit features.

Turning to the intangibles, keep in mind that these types of negotiations are as ritualistic as you can get. The language of contract negotiation is almost as formalistic as diplomacy. When the local ambassador says that "We object to the actions of in the strongest possible terms", they are basically saying that the missles are on the way. Same thing applies here.

Look closely at what Nash said. Virtually everything was couched in an "if" statement, and he used "we" a lot. Example:

"If this doesn’t happen in the next week, and we can’t hit a number where we’re both satisfied and we both feel it’s fair … if they want me that bad, they’ll get it done"

He said that things did not line up as he expected, and that if a deal isn't done, he wouldn't have a problem getting signed next summer. Well, duhhh . . . hardly a threat folks, just a statement of fact.

Nash had to say something in this ritualistic dance, just as a reminder to the Blue Jackets that he might provide a loyalty discount, but still wants market value. Portzline is right -- Nash holds the cards here -- and he needed to publicly remind the Jackets of that fact. However, this was as gentle a reminder a possible. Look at what he did not say -- he did not throw out ultimatums, call the offer insulting or otherwise throw gas on the fire. To the contrary, his language was soft, direct and he even threw some tidbits out there to indicate where they are. ". . .in the next week" is a pretty clear indication that he wants to get something done soon, and get back to playing hockey. He is not taking his toys and going home.

Look at what his agent said last night, if you need any further confirmation:

“This is part of the process. . . We’ve begun, and we’ll continue to work through and reach an agreement.”

Doesn't sound threatening to me . . . Remember, it is difficult to throw the first offer out in any negotiation, particularly when options abound. Resnick will be providing a counter-offer today, and then we will have the boundaries of the playing field. Barring a demand for an $11 million dollar contract, things are likely to move fairly quickly at that point. All a part of the game, folks.

By the way, Howson gets an A- for the Pahlsson and Garon signings yesterday. They obviously had Pahlsson targeted, and got their man. Garon is a better goalie in the clutch than his numbers would indicate, and I have had him as my backup goalie for the Jackets on NHL '09 for awhile now. ;-) Seriously, though -- these are good solid moves, and the minus comes for possibly overpaying for Pahlsson a bit. A very good start to the off-season however, with the draft and Day 1 of free agency. More to come tonight.

Free Agency, Rich Nash, Phoenix & Other Musings

July 1, and a young man's heart turns to thoughts of . . . lots and lots of cash.

2 hours and 13 minutes until the annual feeding frenzy known as free agency formally begins, but indications are that this will be a much leaner meal than in years past. Economic conditions, the prospect of a drastically reduced salary cap next year, and several teams with substantial cap difficulties all point to a measured and muted free agency season.

Need confirmation? First, the NBA Free Agent season started at midnight, and you can hear the crickets chirping in the silence. Second, Calgary successfully inked a deal with Jay Bouwmeester for 5 years, $33.4 million. While not chump change, this was not the stratospheric number that many were expecting/fearing. Compare it to Brian Campbell's 8 year, $56.8 million deal with Chicago, and it seems downright reasonable. He is signing for just about what Wayne Redden signed for with the Rangers last year (and ask NY fans how that turned out . . . ) While you can debate (with some justification) whether the talent for Jay Bo equals the hype, he was the #2 overall draft choice behind our own Rick Nash, and has the perception of being a premier player. When it comes to contracts, perception is reality. The fact that this one came in within the bounds of reason is a sign that the dollars will not be flowing large come Noon.

This climate is perfect for our own Scott Howson, who is the epitome of patience. Make no mistake, this free agent season will be frustrating for the fans, as we may not see much early action. However, the opportunities abound for some bargains from the teams that have overspent. When all is said and done, either via free agency or trade, I expect that we will see five new faces in the lineup come the start of the season -- 2 defenseman, 1 center, 1 winger and a new backup goalie. My gut tells me that Manny is gone, as the perception gap is just too great, and another club will be enticed by his faceoff record. I have a hunch that Jason Williams might find his way back into the fold, however. He is a good shooter (which we need), and his stock is not sufficiently high, compared to the other forwards available, to attract a huge dollar deal. I think we may see two existing faces move on via trade, but I am now way out on a limb. Expect a backup goalie early in the process.

The Nash Watch -- Contrary to the aspirations of every Toronto Maple Leafs fan, the early indications are that Rick will be staying put. Howson was in Toronto yesterday, doing a big presentation for Nash and his agent on the direction of the club and his role going forward. Everyone is saying all of the right things, and the Jay Boumeester deal did not launch the price out of the ballpark. Nash likely has two offers sitting on his table right now, one shorter term (3 -5 year) one long term (10 year or so). Howson seems willing to pony up the cash, and Rick loves being the big fish in the relatively small pond. Nash is not a glitzy, grab the limelight guy, and the microscope of Toronto has little lure for him. Besides, the organization in Toronto is a train wreck right now. Not the situation you want to dive into. Number 61 stays.

Phoenix Phollies -- Jerry Reinsdorf, owner of both the Chicago Bulls and Chicago White Sox, has put up a $148 million offer to buy the Phoenix Coyotes and keep them in Glendale. Gary Bettman and the NHL are backing this play, and are falling all over themselves in praising Reinsdorf and his ability to turn the franchise around. Not so fast . . . First, Reinsdorf is banking on Glendale renegotiating the lease -- something they have refused to do thus far, even after the NHL put big pressure on them. Secondly, and most importantly, Jerry's offer is $64.5 million short of the Balsillie offer. Keep in mind that whatever the NHL likes, this is a bankruptcy court proceeding, and Judge Baum's primary duty is to look after the best interests of the creditors. Sure, the City of Glendale is a prime creditor, but the Reinsdorf offer is taking a lot of cash off the table. Expect pressure to up the ante significantly to get court approval.

Draft Overview -- Scott Howson showed his acument and flexibility during this one, ultimately gaining a defenseman that nobody figured would be available to the CBJ without them trading up substantially from their original slot at number 16. Who knows how things will ultimately turn out, but the crop he brought in looks solid. The pundits give him full marks for the draft, and I have no reason to disagree.

The Draft Party at Nationwide was well attended and fun. Great job in having Umberger, Boll and Mason around and so accessible. The formal autograph lines were massive, but that is to be expected. Mike Todd did a nice job keeping things flowing, and the locker room tours, etc. were a nice touch. A few irritations to note for future events: 1) Put in at least one more food area on the floor, or open up a couple of the concession stands. Lines were ridiculous until late in the game, and many folks left early for that reason. 2) The broadcast coordination was reallly poor. The broadcasters did a great job, but the cutting back and forth to the live feed from Montreal was awful, and folks missed some key moments. 3)Why did we show the first period of Game 4 vs. Detroit on the big screen over and over? It looped back at least twice. Why not show the third period, which was the most exciting period in Blue Jackets history?

USA Hockey -- Thumbs down for snubbing R.J. Umberger, who has shown that he is a big game player over the past two years. He may yet get invited, as injury or lack of interest dwindle the ranks, but this was a bad miss for USA Hockey.

Stay tuned, more to come.

Draft Day Guesses. . . . I Mean, Prognostication

Draft Day has arrived, and there are enough Mock Drafts and draft predictions out there to choke even the most ardent, Mullett-wearing hockey analyst. Puck Rakers alone has Mock Drafts from everyone except the copy boy, and even he may be in on the action under an assumed name.

This is a different draft experience for the Blue Jackets this year. First, Howson & Company will actually have to get up and walk some distance to the stage, thanks to the debut in the playoffs last season. In past years, Bettman had to step over the CBJ staff to get to the microphone. That same benefit, however, takes some of the luster out of the proceedings, as there are no "Wow!" names after the first 3 or 4 slots. Lots of good players, but nobody the average hockey fan is going to jump up and down over.

That being said, I am not going to even attempt a mock draft here. Instead, I offer some humble predictions about where the CBJ are likely to go, or at least where I think they should go, including some preliminary ideas on how free agency may impact what we do.

Of course, all of this is largely guesswork. I have done a ton of reading and listening to various commentators on NHL Network, TSN.com, NHL.com, etc. I have only seen highlights from a few of the draftees, so my opinions are largely based upon the observations of others. Further, as we have all learned by now, Mr. Howson prides himself on not being predictable. If we can't figure out what he is up to, neither can the opposition, and that is a good thing.

Now that I have all of the legal caveats made, here are my less-than-bold projections for the upcoming draft and beyond:

Round 1 Picks (my top 5 favorites, in order of precedence, factoring in likely availability)

• David Runblad, D, Sweden -- Runblad has good size at 6'2" 189, is supposedly a magician with the puck, and solid in all zones. He has power play eperience. TSN has him ranked 21, but THN has him at 10. He works on the power play in the Swedish Elite League, which is amazing for someone so young. Besides, why should Detroit have all the Swedes? A lot of upside here.
• Dmitri Kulikov, D, Drummondville -- Perhaps a reach in terms of still being available at 16, Kulikov is the real deal. Decent size at 6'1" 180, he netted 12-50-62 in 57 games for Drummondville, and many believe he could play in the NHL right now. Again, unsure if he will be around. It could come down to whether Scott Niedermeyer makes up his mind about returning prior to the draft. Anaheim has the 15 pick right before the CBJ.
• Ryan Ellis, D, Windsor -- another Kris Russell in size, at 5'9", 173 pounds, but impossible to ignore his skating and puck handling. 89 points in 57 games for Windsor in their championship run this year, and ranked in the top 20 by every ranking service. Only issue is whether he has the ability to do the same at the NHL level, and hold up over 82 games of major league pummelling.
• John Moore, D, Chicago - This is a solid, all-around defenseman who can compete with anybody at 6' 2", 189. A world class skater, he has the ability to get shots through from the point, and has good instincts for the puck. Only 14-25-39 for Chicago, but many believe he has much more offensive upside.
• Simon Despres , D, St. John -- At 6'4" and 205 pounds, this guy can BRING it. At 2-30-32 over 66 games for St. Johns, he is not Bobby Orr, but plays mistake free, shut down defense and can shut opponents down.

So, there is my list. If Howson pulls the rug out and takes a forward, I look like an idiot, but hey, I do that frequently, so no big deal.

X-Factor Pick -- Here is a sleeper to watch for, either by the Blue Jackets or somebody else. Jeremy Morin from the U-18 development league is reputed to be one of the best pure shooters and goal scorers in the draft. He was 26-22-48 in 46 games this season, and apparently plays with an edge to his game, as he amassed 99 penalty minutes in those same 46 games. It is perhaps that temper that is keeping him from a sure 1st Round slot, but if the Top 5 above are gone, and he is around, don't be surprised to see Howson take a shot here. Alternatively, Howson might package a player and picks to get a high 2nd round slot if Morin is still around.

Overall Picture -- With the free-agent situation being what it is, Howson has a lot of dollars, and several bodies, to play with between the draft and free agency. I strongly suspect that some combination of bodies or picks moves to get that 2nd Round pick we used in the Vermette/LeClaire deal.

With no movement on the Manny front, he will likely join the ranks of Jason Chimera, Frederik Modin, Jared Boll, and possibly others, as being available for the right player, picks or to clear room for a bigger free agent deal. There is still concrete interest in Bouwmeister, I am told, so who knows?

Draft On Twitter -- I will be on Twitter from Nationwide tonight, so stay tuned.

Preview of Coming Attractions: Coming soon to a blog near you -- Chapter 2 of the 3-part series on the Arena situation, more free agency speculation, and other goodies.

Go Jackets!!!

This Phoenix May Not Rise From The Ashes . . .

In my first piece on the Phoenix court case, I noted that the recent ruling appeared to be a "tenuous" victory for the NHL, Glendale and some of the Coyotes' creditors. I then embarked on a quest to find a copy Judge Baum's actual ruling, as I was curious why he devoted 21 pages to simply conclude that there wasn't enough time to get everything done. My legal background led me to believe that there was more to it, and after reading the opinion, I was correct.

First, understand who the key players are in this drama. Obviously, theres is the NHL, who wants to maintain control over its franchises, both in terms of ownership and location. Second is the City of Glendale, who has a lease with the Coyotes that extends through 2035, and has additional infrastructure and other investment in the Arena itself and the surrounding Westgate City Development. Third, is Aramark, Inc. , the concessions vendor for Jobing.com Arena, who paid $8 million for the concession rights. All of those groups oppose the sale and the contemplated move to Hamilton.

On the other side are Jim Balsillie, the interested parties in Hamilton, Jerry Moyes (Coyotes' owner), and the remaining Coyotes' creditors. These groups support the sale, thought the creditors don't care one way or the other about the move.

Here are some basic facts for you to consider, all taken from Judge Baum's opinion, unless otherwise noted:

• Balsillie & friends are agreeing to pay $212.5 million for the Coyotes, of which up to $22.5 million goes to Gretzky, as part owner
• Balsilllie set the deadline of 6/29/2009 for sale to be approved
• City of Glendale built Jobing.com Arena for $183 million, using bonds to fiance $155 million
• Lease with Coyotes runs through 2035, and has extraordinarily strict and penal provisions in the event of breach, with damages as high as $795 million, depending when breach occurs.
• Aramark contract includes a requirement that Coyotes pay $5.1 million in damages if they move.
• In 2006, Moyes assumed control of Coyotes from Ellman (who is also prime developer of Westgate City) in deal brokered by NHL.
• Moyes invested $300 million between 2001 and 2008. Team lost $36 million plus per year in 2006, 2007 and 2008. Moyes holds $100 million plus in claims as an unsecured creditor.
• NHL tried to broker deal with Coyotes, Glendale etc. in the Fall 2008. Glendale refused to make concessions. NHL advanced operating funds, to be repaid from profit sharing revenue.
• April 2009 -- Moyes goes to NHL and advises that he has buyer who wants to move the team to Ontario. This was not an official request, just a conversation. Bettman says no -- NHL owns the right in Southern Ontario.
• May 5, 2009 -- Bettman and staff fly to Phoenix with offer to buy the Coyotes in hand, subject to modifications in lease deal. Phoenix files for bankruptcy that day, signs the sales agreement with Balsillie, and the motion to approve the sale and move is filed. (Busy day . . . )
• June 15, 2009 -- Judge Baum issues his ruling.

While I don't want to bore you with legal technicalities, there are a few things that are notable about the Judge's ruling. First, remember that this is a bankruptcy case, not a lawsuit directly between the NHL and the Coyotes, or Balsillie and the NHL. There is a big difference. In a bankruptcy, the overriding interest of the court is in protecting the rights of the creditors of the bankrupt entity. While a lot of factors come into play, all other things being equal, the course of action that will enhance the payment to the creditors will be chosen. Here, Balsillie is agreeing to pay $212.5 million for the team. Consider that entering the season, Forbes valued the franchise at $142 million, last in the NHL. Given that the team's economic fortunes went nowhere but south during the 2008-2009 season, Balsillie is paying a premium of 80% or more. Hold that thought.

Next, as I alluded to above, he goes to great lengths to issue lengthy opinion, when he really didn't need to. He could have issued an order simply saying "Motion Denied." So, there has to be a purpose behind his ruling. There is, and we shall get there momentarily.

Additionally, the motion was denied "without prejudice", meaning that Balsillie and his team could refile it at any time, and the judge could look at it anew. Intriguing, but not alarming, by itself.

Now let's return to Judge Baum's motive for issuing a fairly lengthy, detailed ruling, when he really did not need to do it. The answer is one word -- Leverage. Each of the parties brought a number of arguments to the table, and Judge Baum spent 21 pages giving each party cause for concern. As for the NHL, he noted that they had previously approved Balsillie as an owner in 2006, and could not in good faith turn around and deny the sale based upon the identity or qualifications of Balsillie and his group. As for Balsillie, he observed that the NHL does own the rights to geographical expansion, and that his motion made no provision for compensating the NHL for the loss of that right in Southern Ontario. For Glendale, he strongly suggested that some of there legal arguments supporting their alleged right to block a move or get huge damages might not hold much water in bankruptcy court.

Judge Baum is using this opinion to send a message to the litigants -- "Don't be too comfortable in your position". The more confident a litigant is in a position , the more entrenched they become. Conversely, the more doubt that creeps in, the more flexible parties become. Judge Baum wants the parties to come to their own agreement, and is using his legal analysis to force a compromise. In a footnote to the decision, he writes:

It was suggested by some parties at the hearing that the parties should attempt to resolve the relocation issue by mediation; if the parties are willing to mediate this and the related issues, the court encourages, as strongly as it can, to do so; sooner rather than later.

That is a clear, but diplomatic, way of saying -- "Fix it, or I will fix it for you."

Reading the whole opinion, the tone is one that says to Balsillie "OK, I like the sale, but we have to address the damage to the NHL, and show me that you can jump the few legal hurdles to get out of the Glendale lease. Since they refused to compromise, they are in trouble. You picked the time frame, so either extend the deadline or go home."

Balsillie's lawyers are no dummies. Within the past two days, they have notified the parties that they are willing to extend the deadline to September 15. The heat is on.

Let's face it. Phoenix wont draw flies this year if they stay in Phoenix, as everyone knows by now that it just is not working, and too much money has already been thrown down the drain trying to fix it. The Balsillie offer makes a lot of $$$ available to the creditors, which is what the court is looking for. The only way to block it is for the NHL to come up with a sweeter offer, but then still be in a bad market with a bad lease.

Prediction: The motion to approve a sale will be refiled within two weeks. Around the same time, serious discussions will be underway. The net result is that the NHL gets some cash and a face-saving arrangement with Balsillie to preserve its territorial rights. Glendale gets a token payment. The price may go up or down a bit, but Balsillie gets the team and goes to Hamilton. Realignment occurs, moving Hamilton into the Central Division of the West with Columbus, Chicago, Detroit and Nashville, while St. Louis moves into one of the other two divsions, and the other appropriate changes are made.

Stay tune for more . . .

The Arena Chronicles -- Part I -- The Present

Well, at long last my fingers have made it to the keyboard, and my take on the Blue Jackets/Arena situation is underway. While my tardiness has been due in part to work commitments, I have also spent a lot of time digging into the details and background, to the extent possible, in order to paint the most factual picture possible. Here are some of the things I have pursed in preparing for this blog series, as well as the series I am presenting at Inside Hockey:

• Interviewed Blue Jackets Sr. VP/General Counsel Greg Kirstein
• Spoke with Blue Jackets Public Relations VP Todd Sharrock and obtained some background information from him
• Interviewed Franklin County Commissioner John O'Grady
• Researched and reviewed background material on the Nationwide Arena deal and the Arena District in general
• Researched information concerning other cities, and how arenas/stadiums have fared there.
• Reviewed court filings and orders in the Phoenix Coyotes bankruptcy case to glean information from that situation.
• Researched other development projects with which the County has become involved.

The major notable gap in my efforts so far is the lack of a Nationwide representative in the mix. I will continue to work on that angle, and will hopefully be able to contribute more from their perspective later.

I have split this whole topic up into three segments -- roughly devoted to The Present, The Past and The Future, in that order. Why not start with the past? To be honest, I thought it was more important to focus on the here and now first -- firmly framing what the issues are (and what they aren't), addressing some of the misperceptions that have emerged since this issue came to light, and in general moving the debate from emotion to fact. As noted in one of my previous posts, I have seen several of these scenarios play out over the years. The one common denominator among all of them is that the sooner the debate began to focus on fact, rather than conjecture or emotion, the more progress was made.

Now that the preliminaries are out of the way, let's get down to the substance, one topic at a time (sources/quotes are attributed within each topic, and I will endeavor to make it clear when my own opinion comes into play):

Prevailing Attitude

I think it is really important to understand the attitude that the Blue Jackets are bringing to the table in this entire scenario. Greg Kirstein went to great lengths to point out that "there are no bad guys" in this story. Todd Sharrock echoed those sentiments. While it is easy to immediately look for blame to assign when issues arise, you won't find that coming from the CBJ camp. Whether they are talking about Nationwide, Franklin County, Ohio State, the City of Columbus or state legislators, the CBJ are taking the high road. While cynics might argue that it is in the Blue Jackets' best interest to take that approach, that is almost always the case, yet few organizations actually do it. I am not so naive to think that public pronouncements correspond completely with private sentiment, but the CBJ deserve credit for attempting to start off with a non-confrontational atmosphere.

It's An Arena Issue --Economics Lesson

Another point Kirstein made, is that this is truly an Arena issue, not a Blue Jackets issue. A lot of internet postings and angry rumblings were referring to the "sin tax" proposal as a "Blue Jackets bailout", which is fundamentally incorrect. The Blue Jackets had their operations extensively reviewed by one of the top sports franchise operations consulting groups in the country, and undoubtedly the top group for hockey. The NHL also took a look at things. Their unanimous opinion, is that the Blue Jackets are fine, the market is good, the facility is good . . . but the lease sucks. The consultants calculated that the Jackets are upside down to the tune of about $12.1 million per year on the lease, compared with other teams in the NHL.

It all comes down to revenue that other teams enjoy, but the Blue Jackets cannot access. We will discuss all of the reasons for that in the next installment, but suffice it to say that this is one of the perils of a privately owned arena. Keep in mind that Nationwide is one of only two professional sports facilities in the country that were privately financed. The other is AT&T Park in San Francisco, home of the Giants. That is not a good comparison, however, as over half of the $260 million construction price tag was paid for by naming rights. The Giants took out loans for the balance, and, as owners of the facility, receive all of the revenue. I could not find numbers on the economic performance of AT & T Park.

The Jackets have documented losses of $80 million since 2002. A big chunk of that came during the lockout year, when the late Mr. Mac refused to implement large-scale layoffs. Former President/GM Doug MacLean has been quoted as pegging the losses for that year alone at $17 million. Kirstein could not confirm or deny that number, but it is in keeping with the attitude Mr. Mac brought to the table. If we take that number out, that leaves $63 milion in losses for the remaining 6 operating years, or $10 million per year, in round numbers. That is less than the lease revenue deficit identified by the consultants, supporting the idea that the core operations are financially sound. This is particularly impressive, given that payroll has increased from $22 million in Year 1 to $50.8 million last year, and attendance was in a decline prior to the playoff run of last season.

Although I have not spoken to a Nationwide representative, it is clear that Nationwide Arena, on a cash basis, is not making money. It is certainly holding its own in terms of attracting local events, as a review of the bookings at the Schottenstein Center and Nationwide indicates, but as one events promoter was quoted as saying "You have two "A" class facilities in a "B" class market." True enough -- Columbus is not in the same stratosphere as New York, Chicago, San Francisco, Los Angeles, etc. in attracting top shows or first run events. Obviously, this is one of the reasons that Nationwide is willing to part with the Arena to the County for a substantial discount. However, this simply reinforces the point that the real issue is the Arena, although the Blue Jackets are certainly impacted.

Look at it this way -- the Jackets could (theoretically) negotiate a deal with Nationwide to assume the revenue streams that they do not have access to right now, and be made whole in the short term. However, it would then be Nationwide looking for help from the County and others. If the essential operations of the Blue Jackets were in question, there is no way on Earth that the Jackets could transfer that monetary risk to Nationwide, or anybody else, for that matter.

It's The Arena Distric as well -- Economics Lesson II

While the whole genesis of the Arena District as we now know it will be addressed more fully in the next installment, it bears mention here. The John Glenn School of Public Affairs conducted economic impact analyses of the Blue Jackets, the Arena, and the Arena District on the local economy, underwritten by the CBJ, Nationwide and the Franklin County Convention Facilities Authority. While the details of these studies are available on the CBJ website, the essential points are that billions of dollars in new investment, jobs, sales and property values have been created since Nationwide Arena was constructed. These studies support the fact that the Arena drives the development of the District, and the Blue Jackets drive the Arena.

In my interview with him, County Commissioner John O"Grady acknowledged these essential facts, stating:"To me it's pretty simple -- they (the Blue Jackets) drive the Arena, which in turn energizes the Arena District, which permits things like devleopment of the new 500 room hotel for the Convention Center area. It's all interlocked."

As I noted above, more on this in the next installment, but keep it in mind.

This Is Not Phoenix

One of the more alarming aspects to the reactions arising from this issue is the speed with which people were willing to make analogies to the Phoenix Coyotes' situation and tehir bankruptcy. Not even close folks. First, even Jim Balsillie disregards any attempts to bring Columbus into the same discussion bag as Phoenix, stating "They're not going anywhere. The market is too good." Commissioner Gary Bettman similarly refused to take the bait during a press conference at the Stanley Cup Finals, referring to the situation as a "lease issue", and acknowledging the strength of the Columbus market.

Secondly, while nobody wants to minimize the $80 million in losses that the McConnells have faced, we aren't in the same league as Phoenix. Since becoming involved with the franchise in 2001, Jerry Moyes has poured $300 million into the club, which showed losses of over $36 million per year in 2006, 2007 and 2008. Phoenix is not a strong market, and the surrounding Westgate City development has not taken off nearly as well as the Arena District.

Finally, remember that nobody from the Blue Jackets has raised the issue of moving the franchise. All of that discussion was in response to media queries. From J.P. McConnell to Mike Priest to Greg Kirstein -- they are unanimous in noting that they have started this whole process precisely to avoid ever having to address the issue of moving. 'Nuff said on this one.

Sin Tax Mythology

Much of the visceral reaction to the disclosure of CBJ attempts to get a "sin tax" increase in Franklin County stemmed from the perception that the CBJ were seeking to "end run" the citizens and get a tax levied without a vote. While one can certainly understand some institutional reticence to the concept of a vote, in light of the results in 1997, this entire issue was overblown.

First, in my opinion, a fundamental problem with the whole issue was the timing and manner of the communciations about the Blue Jackets issues and the scattered initial response. Kirstein notes (and O'Grady confirms) that the Blue Jackets and Nationwide had been in discussions for a couple of months on the "sin tax" concept, which was modeled on the precise funding mechanism used in Cleveland for the stadiums there. Where the spin got out of control was on the "vote/no vote" issue. The state legislation being contemplated would have authorized the imposition of a tax without a vote, but did not require that imposition. The County Commissioners would have been free to submit a tax to the voters, if they chose to do so. That fact was lost in the shuffle of the initial response, as alcohol and tobacco lobbying interests caught wind of the effort and put pressure to bear at the State House. The legislators, in turn, asked for an unequivocal show of support from the County. With new taxes being as popular as the plague, particularly in this economy, such a show of support was not forthcoming, and the "sin tax" was DOA.

In the end, while the CBJ and Nationwide were diligent in dong their homework, in terms of the economic impacts and review of operations, there just was insufficient time to develop a comprehensive communication plan that would have permitted a smoother roll-out of the concept, and perhaps more favorable public response.

The County Response

Another source of irritation to the hockey faithful was the perceived tepid interest displayed by County Commissioners in the immediate aftermath of the team disclosures. Commisioners Brown and O'Grady both issued written statements in response to public inquiries that were, at best, tepid, and at worst discouraging to those hoping for some definitive show of support. In light of these responses, I submitted interview requests to all three commissioners. I received a prompt reply from Brittany Thompson, Public Affairs Officer for the comissioners, and she arranged the interview with Commissioner O'Grady.

In the course of the interview, it became apparent that Commissioner O'Grady was much more engaged in the issue, and more definitive in his approach, than his written statement would lead one to believe. After reviewing the history of the recent discussions with the Jackets and Nationwide, and noting that there was "no enthusiasm" for a "sin tax increase" to support the Arena issues, he unequivocally stated that "we will get it fixed." He noted that there were many potential approaches that could potentiallyl be involved, and that the County Adminsitrator had been directed to investigate the issue and potential resolutions.

O'Grady also advised that he had met informally with some Nationwide representatives the day prior to our interview, and had urged the Blue Jackets and Nationwide to get together first and discuss some of their options, and come back to the County with more of their ideas.

O'Grady acknowledged that the emergence of this issue was not terribly surprising to him, noting that he was familiar with the nature of the agreement and that "we were bound to end up in this spot."

I then asked O'Grady if he agreed with Kirstein's call for a "public/private" partnership to engineer a solution to the deal, and noted that the overwhelming majority of arenas have public support. I also noted the other "public/private partnerships" touted by the Commissioners, including a potential expanded equestrian facility for the Quarter Horse Congress, Huntington Park, and similar undertakings. While perhaps falling short of an enthusiastic embrace of the concept, he did note that he was in favor of "the right kind of public/private partnership". He agreed that the Blue Jackets were "too important" to lose, and expressed his desire to be part of the solution. He is convinced that a solution can be found that will not require an increase in any taxes.

So, even though details are out of reach at this point, I came away with a much more positive view of the County willingness to be a participant in a solution to the issue, and was pleased to see that initial steps had been taken to investigate those solutions.

Where We Are, And Where We Aren't

In the final analysis, here is my take on where things stand right now:

• The McConnells are taking some serious financial hits, which need to be rectified
• The financial shortfalls are not the result of basic operational flaws or a bad local market
• The crux of the current situation is the Nationwide Arena lease , and the revenue streams the club cannot access.
• The Blue Jackets and Nationwide Arena are the keys to the Arena District, which is the single biggeset economic engine in Columbus. To permit that to go away would be economic and political suicide for the parties in charge.
• The County is interested in participating in a solution, but does not want to increase taxes
• The Blue Jackets are not playing the "we are moving" card, and have no motivation to do so, as long as progress is being made.
• Comparisons between this issue and the Phoenix situation are ludicrous.
• Given the success of the Arena District, public participation is far more palatable than in 1997, when the success of such an endeaver was doubted.

I am a firm believer that progress will be made and that in the long run, this will be viewed as a minor blip in the franchise history. There is too much at stake economically to ignore the problem, and we have some big hitters paying attention to it.

Next Up: How We Got Here, or Not Liking The Bed We Made

Fire away!!!