PFD, Seattle Mariners: Lease and Team Non-Relocation Agreement - - PowerPoint PPT Presentation

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 Maj or League Baseball in Washington S tate

• S

afeguard the public’s investment

• Keep the Mariners playing in S

eattle 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 S

haring

• 1.5%
• f first $100M
• 2%
• f 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%
• f any 2018 profit-sharing due under the existing lease
• Annual:
• 100%
• f Admissions and Parking Tax collected by the Mariners
• Revenue S

haring

• $250K from Base Rent, as available after first paying PFD
• perating 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

• S

pecific 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 proj ects
• 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 S

tandard” :

• Top 1/ 3 of all MLB ballparks (the “ Reference Ballparks” )
• Taken as a whole
• Consistent with a maj ority 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 S an Diego Padres Coors Field Colorado Rockies Marlins Park Miami Marlins S unTrust Park Atlanta Braves Target Field Minnesota Twins Busch S tadium S

• t. Louis Cardinals

Y ankee S tadium New Y

• rk Y

ankees Citi Field New Y

• rk Mets

Nationals Park Washington Nationals Miller Park Milwaukee Brewers

PFD Responsibilities

• S

afeguard public investment and keep the Mariners in S eattle:

• S

pecific performance if Club tries to leave

• Liquidated damages if Club actually leaves
• S

tarts at $504 million, drops gradually

• S

hare 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%
• f sale proceeds at end of Term if no 10-year extension
• PFD keeps balance of CapEx Fund if Club leaves the

S tate 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 S eattle 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/ improvement s)
• Must meet standards:
• Operating S

tandard for Operations

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

tandard 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 S

tandard

• S

ubj ect to PFD review and comment

• Annual Maintenance Plan
• Budget, plan of regular maintenance to be undertaken
• Measured against the Applicable S

tandard

• 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 S

tandard

PFD Oversight: Assessments, Inspections, Audits

• New facility assessment s 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 S

tandard/ Operations Plan

• Applicable S

tandard/ Maintenance Plan, CapEx Plan

• Audits: PFD can audit Club’s performance of

Operations, Maintenance and CapEx, records for Revenue S haring and collection of Admissions/ Parking Tax

PFD Oversight: Club Default

• S

elf-help

• Termination of Club’s Ballpark management
• Termination of Lease
• S

pecific 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%
• f any 2018 profit-sharing
• Annually in PFD’s discretion from Rent, after paying PFD
• perating 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 S

eattle their hometown

Lease Improvements

 Renewal term 5 years longer than

initial term

 Certainty of PFD funding obligations:

fixed contribution amounts to CapEx

 Applicable S

tandard 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

 S

trengthened commitment to WMBE, labor