IG questions legality of Red Sox deals

Sullivan says the BRA should get fair compensation for deals involving Yawkey Way and Lansdowne Street

Inspector General Gregory Sullivan is questioning the legality and fairness of a 2003 deal between the Boston Redevelopment Authority and the Boston Red Sox that allowed the ball club to reap millions of dollars in profit by building Green Monster seats and closing off Yawkey Way on game days.

In a letter sent Friday to BRA Director Peter Meade, Sullivan raised legal concerns about the eminent domain takings used to give the Red Sox exclusive access to Yawkey Way on game days and to convey to the club the air rights above Lansdowne Street that were needed to build the Green Monster seats. He also suggested the BRA may have been shortchanged on both deals and urged the agency to obtain actual revenue and expense data from the Red Sox and use that information to seek fair compensation for the use of the authority’s assets.

BRA spokeswoman Susan Elsbree said authority staff members are aware of Sullivan’s concerns from conversations with him over the past year and are trying to decide whether they agree with his conclusions. She said the authority has no intention of trying to invalidate the existing arrangement with the Red Sox and will negotiate a new deal with the club once the old one expires in 2013. “We know we need to go through a legal analysis before we do that,” she said.

The Red Sox, who were given a copy of the inspector general’s letter, declined comment. “Because we will be discussing the renewal of our license agreement with the BRA and the city, it would be inappropriate for us to make any further comment at this time,” the spokeswoman said.

Sullivan said his letter to the BRA was part of an ongoing review of the dealings between the BRA and the Red Sox. That review was prompted initially by a press inquiry and a subsequent story in the Boston Globe last November that indicated the Red Sox had earned an estimated $45 million from the BRA deals over the last nine years while paying the authority roughly $1.7 million over the same time frame. The Globe story was written by the Initiative for Investigative Reporting at Northeastern University.

At the time the deal with the Red Sox was negotiated in 2002, the team was under new ownership and seeking to expand revenue opportunities at one of Major League Baseball’s smallest stadiums. City officials, led by Mayor Thomas Menino, were eager to help. The club hit on the idea of building Green Monster seats above Fenway Park’s famed left-field wall and closing off Yawkey Way on game days to spur business for the official vendor of the Red Sox instead of independent vendors.

To facilitate both initiatives, the BRA agreed to take by eminent domain Yawkey Way on game days and the air rights above Lansdowne Street from the city of Boston. The rationale given for both takings was “to protect against or eliminate urban blight.” The BRA’s Lansdowne taking was permanent but the Yawkey Way taking expires in 2013 and it will revert back to the city. The BRA’s arrangement with the Red Sox also expires in 2013.

At the time of the eminent domain takings, a company selling Red Sox programs challenged the Yawkey Way seizure, arguing it was illegal because the area was not blighted and the deal was designed to benefit a private company.

The company later dropped its legal challenge, but Sullivan suggests in his letter that the challenge had merit. If the BRA wants to renew its Yawkey Way arrangement with the Red Sox, Sullivan urged the authority to find a different way to consummate the deal, either by putting it out to bid or seeking the approval of the Legislature to lease the property to the Red Sox.

Sullivan advised against doing another standard eminent domain taking, saying it could “expose the BRA to a legal challenge to the finding that Yawkey Way is a blighted area during Red Sox games, given the capital improvements made to the area … and the record of higher than expected revenues during game days.”

Sullivan urged the BRA to seek fair market value for both deals with the Red Sox. He specifically said the city should require the Red Sox to provide revenue and expense data covering the Green Monster seats for the last nine years and then base any new licensing agreement on that information. He also urged the BRA to seek compensation for the game-day closure of Van Ness Street, which is used for parking by the Red Sox.

The existing licensing agreement covering Yawkey Way and the Lansdowne air rights has been a bonanza for the Red Sox because the BRA set the licensing fee without taking into account how much money the team could make from the use of the two properties.

If the BRA had demanded a portion of the revenue, as is common in commercial ventures, the team would have paid the BRA millions more over the first nine years of the 11-year arrangement, according to industry estimates and an examination of city records.

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If the BRA, for instance, insisted on a 10 percent revenue-sharing arrangement for the estimated $45 million in revenue from both the Green Monster Seats and Yawkey Way, it would have received an estimated $4.5 million over the last nine years, instead of the $1.7 million it was paid.

Homepage photo by Mark Ostow.