pfd, seattle mariners: lease and team non … to pfd board 12-10...presentation to pfd board...

PFD, Seattle Mariners: Lease and

Team Non-Relocation Agreement

Presentation to PFD Board December 10, 2018

• Context • Basic Lease Terms • PFD Focus • Club Obligations • PFD Obligations • PFD Oversight & Enforcement • Community Benefits

Overview

• Kingdome: multi-use facility • New PFD, no experience as ballpark owner • Club had no experience as a ballpark operator

Historical Context – Then…

• A known (and aging) facility

• Lessons learned from other markets – pitfalls to avoid

Where We Are Now

• 20 years of performance and partnership history with the PFD and Club

PFD Focus

• Maintain and enhance the ballpark to promote the success of Major League Baseball in Washington State

• Safeguard the public’s investment

• Keep the Mariners playing in Seattle and part of our community

• Encourage community benefits

Basic Lease Terms

• Term: 25 years • Two 3-year renewal terms

• Rent: $1.5 million, escalated by CPI • Used as follows:

1. PFD operating expenses 2. PFD contribution to CapEx Fund 3. PFD Operating Reserve Fund (or) CapEx Fund (or)

Neighborhood Improvement Fund

• Annual Revenue Sharing • 1.5% of first $100M • 2% of all amounts over $100M • PFD contributes 100% to CapEx Fund

Basic Lease Terms: CapEx Funding

• Club Contribution: $3.25 million/year, incr. by CPI • Must fund all shortfalls

• PFD Contribution: • Initial:

• Transferring existing year-end balances, less $2M for operating reserves and $2M for Neighborhood Improvement Fund

• 50% of any 2018 profit-sharing due under the existing lease

• Annual: • 100% of Admissions and Parking Tax collected by the Mariners • Revenue Sharing • $250K from Base Rent, as available after first paying PFD

operating expenses

County Funding Agreement/ Financing Amendment

• Entered into by King County and PFD to provide a mechanism for the County to invest a portion of lodging tax revenues for infrastructure needs in the ballpark

• Fixed percentage vs. fixed dollars – could go up or down

• Specific requirements for spending funds

• Financing Amendment permits bonding against the revenue stream

County Investment in CapEx

• Governed by Funding Agreement between County/PFD

• Only for eligible infrastructure CapEx projects • Must be reviewed and approved by PFD

• PFD reports to County on uses of tax revenues

• County tax revenues held in a segregated fund managed by PFD

PFD Responsibilities

• Ensure Ballpark is maintained and enhanced to remain a top-tier MLB ballpark • “Applicable Standard”:

• Top 1/3 of all MLB ballparks (the “Reference Ballparks”)

• Taken as a whole

• Consistent with a majority of the Reference Ballparks

• Reference Ballparks determined every 5 years, rather than remaining static for Lease Term

• Carve-out for physical impossibility

Reference Ballparks

MLB Ballpark Home of… Petco Park San Diego Padres Coors Field Colorado Rockies Marlins Park Miami Marlins SunTrust Park Atlanta Braves Target Field Minnesota Twins Busch Stadium St. Louis Cardinals Yankee Stadium New York Yankees Citi Field New York Mets Nationals Park Washington Nationals Miller Park Milwaukee Brewers

PFD Responsibilities

• Safeguard public investment and keep the Mariners in Seattle: • Specific performance if Club tries to leave • Liquidated damages if Club actually leaves

• Starts at $504 million, drops gradually

• Share of sale proceeds if Club leaves or sells to non-local buyer

• $20M if sold to a non-Local Buyer in 1st 15 years of Term, or during last 10 years of Term if there’s 10-year extension

• 10% of sale proceeds at end of Term if no 10-year extension

• PFD keeps balance of CapEx Fund if Club leaves the State at end of Term

• Otherwise, the Club’s credit balance is used to pay for improvements to the existing ballpark or for new construction in Seattle or the state

Club Obligations

• Club is responsible for: • Operations (staffing, security, traffic management,

etc.)

• Maintenance (regular, routine non-capitalized upkeep/repair)

• CapEx (capital repair/replacement/improvements)

• Must meet standards: • Operating Standard for Operations

• Must operate Ballpark in a 1st class manner, consistent with other top-tier MLB ballparks

• Applicable Standard for Maintenance, CapEx

PFD Obligations

• Contribute to CapEx Fund

• Reimburse eligible costs from County Tax Revenues Fund

• Review and comment on Operations Plan

• Review and approve Maintenance Plan, CapEx Plan

• Refrain from amending Funding Agreement to Club’s detriment

PFD Oversight: Operations, Maintenance

• Annual Operating Plan • Budget, schedule of events, updated policies, report on

community benefits, etc.

• Measured against the Operating Standard

• Subject to PFD review and comment

• Annual Maintenance Plan • Budget, plan of regular maintenance to be undertaken

• Measured against the Applicable Standard

• Must be approved by PFD

PFD Oversight: CapEx

• Initial CapEx Plan • Annual CapEx budget, rolling 10-year plan

• Requires provisional PFD approval

• Final CapEx Plan submitted w/ Maintenance Plan • Annual CapEx budget, rolling 10-year plan,

unreimbursed Club CapEx expenditures, plans & drawings

• Requires PFD approval • Measured against the Applicable Standard

PFD Oversight: Assessments, Inspections, Audits

• New facility assessments conducted throughout term • Updates existing facilities report, which will grow stale

• Guides new CapEx planning

• Inspection: PFD can inspect Ballpark to ensure compliance with… • Operating Standard/Operations Plan

• Applicable Standard/Maintenance Plan, CapEx Plan

• Audits: PFD can audit Club’s performance of Operations, Maintenance and CapEx, records for Revenue Sharing and collection of Admissions/Parking Tax

PFD Oversight: Club Default

• Self-help

• Termination of Club’s Ballpark management

• Termination of Lease

• Specific performance

• Damages

• Liquidated damages (NRA)

Community Benefits

• Retain existing programs • $25 million in Club-sponsored programs • Added provisions to include WMBE goals, labor

harmony/ community workforce agreements, prevailing wages

• Neighborhood Improvement Fund • Funding:

• $2M transferred from 2018 year-end fund balance • 50% of any 2018 profit-sharing • Annually in PFD’s discretion from Rent, after paying PFD

operating expenses and CapEx Fund contribution

What the New Lease Achieves

• Keeps the Mariners here for 25 more years, with a renewal term longer than the initial term

• Provides secure and adequate funding to maintain ballpark • Other than defined CapEx contributions from the PFD

and County, the Club is 100% responsible for operations, maintenance and CapEx Work

• Ensures the ballpark will remain in the top third of MLB ballparks nationally, even as it gets older and requires more capital improvement • Incentivizes the Club to continue making Seattle their

hometown

Lease Improvements

Renewal term 5 years longer than initial term

Certainty of PFD funding obligations: fixed contribution amounts to CapEx

Applicable Standard keeps ballpark in top 1/3 of MLB ballparks

Reference Ballparks updated throughout lease term

Club responsible for all operations, maintenance and CapEx, other than PFD and county funding contributions

Annual revenue sharing now certain and transparent, dedicated to CapEx

PFD oversight strengthened through 10-year rolling CapEx plan and new approval rights

PFD keeps CapEx Fund balance if Club leaves the state at end of Term

New Ballpark Neighborhood Improvement Fund to improve ballpark-related fan experience

New team non-relocation agreement provides for liquidated damages if the team leaves

PFD has stronger enforcement rights if the Club defaults

Club responsible for covering all insurance premiums

Contractual commitment to $25 million in Community Benefits

Strengthened commitment to WMBE, labor