PFD, Seattle Mariners: Lease and Team Non-Relocation Agreement Presentation to PFD Board December 10, 2018
Overview Context Basic Lease Terms PFD Focus Club Obligations PFD Obligations PFD Oversight & Enforcement Community Benefits
Historical Context Then Kingdome: multi-use facility New PFD, no experience as ballpark owner Club had no experience as a ballpark operator
Where We Are Now 20 years of performance and partnership history with the PFD and Club A known (and aging) facility Lessons learned from other markets pitfalls to avoid
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 Petco Park Coors Field Marlins Park SunTrust Park Target Field Busch Stadium Yankee Stadium Citi Field Nationals Park Miller Park Home of San Diego Padres Colorado Rockies Miami Marlins Atlanta Braves Minnesota Twins St. Louis Cardinals New York Yankees New York Mets Washington Nationals 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 nonlocal buyer $20M if sold to a non-local Buyer in 1 st 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 1 st 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