Sox score monster deal in Florida
UPDATE: A probe by the FBI may put a hold on the deal.
The Boston Red Sox are showing they have lots of power off the field, negotiating a monster deal with Florida’s struggling Lee County to build a plush, new spring training complex with taxpayer funds.
Contract documents indicate that Lee County, desperate to keep the Sox within its borders, will spend $80 million to $100 million building a 12,000-seat mini-Fenway Park and state-of-the-art spring training complex for the club. The Sox will pay annual rent that starts at $500,000 a year and slowly increases over the 30-year term of the lease, plus an average of $100,000 a year for capital improvements.
“All of the money that is generated for these [spring training] games outside of hiring the popcorn vendors and paying some rent, it’s all profit,” said Rod Fort, a sports economist at the University of Michigan who has authored dozens of books and articles on the business of sports. “It looks like they made a pretty good deal for doing what they had to do anyway, which is tune pitchers and hitters.”
John Yarborough, the former Parks and Recreation director in Lee County who came out of retirement to help woo the Sox back into the fold, said the Sox will have no trouble covering the lease payments under the deal. “Their lease is probably just picked up in T-shirt sales or hat sales,” he said, half in jest.
Mike Dee, the Red Sox chief operating officer who spearheaded the development talks, said the deal will benefit both the county and the club. “Anyone who is questioning if this is the right stimulus, they have to look at it from the point this is a 30-year relationship,” Dee said. “Over 30 years there is an ebb and flow to the economy and certain circumstances that affect both parties.”
Spring training is becoming a cash-cow for the 30 Major League Baseball teams as communities in Florida and Arizona try to woo teams — and, in turn, their revenue-producing fan base — to bigger, better, and brighter facilities to take advantage of the snowbirds flocking to see their favorite boys of summer at the tail of winter.
What the Sox were able to garner in the development (Download SpringTrainingDevelopment.pdf (744.6K)) and rent agreements (Download SpringTrainingLease.pdf (1774.0K)) with Lee County came after team officials made clear they would exercise a $1 million opt-out clause from their current lease at City of Palms Park in Fort Myers, their spring home since 1993.
The Sox openly flirted with Sarasota, which is losing the Cincinnati Reds to Arizona. That city commissioned an economic impact study that estimated the Reds generated about $25 million and created some 330 jobs from their presence each spring. But the study claimed that the Sox, a bigger and more popular draw, could generate at least $46 million (and possibly as much as $60 million) a year for the local economy and create jobs for 660 people if they set down stakes in Sarasota.
The documents show how good the deal is for the Red Sox, including such elements as:
100 percent public financing for a 12,000-capacity stadium that mirrors Fenway Park’s playing field from the short left- and right-field lines to the 420-foot centerfield triangle, with a 37-foot-high left-field wall (likely painted green) and hand-operated scoreboard that will be used for the roughly 18 spring training home games.
- A lap pool.
- All the money for the stadium naming rights going to the Sox.
- An agreement that Lee County will purchase products and services for the facility from Red Sox corporate partners and sponsors as long as the prices are competitive.
- “Most favored nation” status. In the event another team gets better provisions from Lee County in any deal (county officials are trying to entice the Baltimore Orioles to take over City of Palms Park when the Sox move into the new stadium) — the Sox would get that same deal.
- All necessary equipment and furniture for the 50,000-square-foot clubhouse, including a complete video system with monitors throughout the stadium and six television and radio broadcast studios.
- A covered player family waiting area with a swing set and sandbox.
- A 5,000-square-foot retail store whose profits all go to the Sox.
- 10 luxury boxes with 16-seats each.
Yarborough said the package is better than some deals and not as good as others for both sides, placing it in the middle of the spring training pack.
“We see it as good for the local economy and have not worried about the fact they’re not paying their full expenses,” said Yarborough, who struck deals with both the Minnesota Twins and the Sox at the beginning of the 1990s to get them to call Fort Myers home. “We use those facilities year-round to bring in other events. . . In no way do I feel that Lee County got a bad deal.”
Team officials have told Lee County they hope to create a year-round facility for minor league affiliates, extended spring training, a rehabilitation center for injured players and the potential to develop an off-season training site that would entice some of their players who spend their winters at conditioning facilities in Arizona and elsewhere.
Dee said the difference between the Sarasota deal and Lee County would have been “economically neutral,” the biggest difference being the Sox would have been given the land and a budget but taken on the responsibility to build the complex in Sarasota. Lee County is assuming all construction liabilities.
Dee said Lee officials initially made clear they would not get into a bidding war with Sarasota and team officials did not keep their negotiations secret.
“We were very forthright with Lee County, because they’ve been a very good partner,” Dee said. “Never once did we go back to Lee County and say, ‘Hey, Sarasota offered this, what are you going to do?’ We fully respected Lee County’s position on this.”
Dee said the Sox had been looking since 2005 to consolidate their facilities on a single site and create a state-of-the-art complex that could accommodate the passion of Sox fans. In the end, he said, staying where the team and its fan base has already planted roots combined with a “best in breed” facility sealed the deal.
The county has agreed to finance the project by diverting a larger share of its Tourist Development Tax revenues, a 5 percent levy on short-term lodging commonly referred to as the “bed tax.” The tax, which is estimated to bring in $22.3 million this year, is apportioned between the visitors’ bureau and advertising (54 percent), beach and shoreline projects (33 percent), and debt service for the Twins complex (13 percent.) County officials approved reducing the beach and shoreline money to 26.5 percent and increasing the debt service to 20 percent of the revenues.
Dee said it is difficult to determine what the team will earn from the agreement because much “is still to be determined.”
Fort said one way to estimate the revenue impact is to use the so-called Fan Cost Index (FCI), a survey by the Team Marketing Report, a national sports marketing publishing firm. The group uses a formula of the average price of tickets plus the cost of parking, food, drinks, programs and souvenirs for a family of four. For the Red Sox, their spring training Fan Cost Index for 2009 was $194 at City of Palms Park.
Using the same average per-person cost of $48.50, the new park would bring in an estimated $600,000 for each of the 18 or so spring training games, roughly $10.5 million. And that doesn’t include the new luxury suites or the nearly 1,000 new premium seats, including party decks, picnic areas and barbeques.
The Sox also were handed the naming rights — a high-yield, no-cost benefit for any stadium owner used to reduce the price tag of construction. Rutgers University’s Marc Edelman, a leading legal expert on stadium deals around the country, said a minor league naming rights deal could bring in at a minimum $5 million to $10 million, but with the Sox cachet, that could easily double.
“The toughest part to justify here is the naming rights,” Edelman says. “At the absolute minimum, this is $5-$10 million that the builder of a stadium is giving to the team owner with no strings.”
But with just 30 major league teams holding a monopoly over spring training, Edelman says teams like the Red Sox have leverage over communities who become reliant on the monies and prestige they and their fans bring to an area. Edelman noted the irony in the fact that Massachusetts, unlike many areas, has resisted using public money to finance stadium deals and the Sox, whose previous owners were spurned in trying to build a new Fenway in Boston with tax dollars, are now reaping the benefits in Florida.
“From top to bottom, [the Sox] have very creative ownership in looking for new revenues,” Edelman says. “They are trying to get creative here. As [Pennsylvania US Sen.] Arlen Specter would say, because they’re not able to extort it from Massachusetts, they’re trying to do it from Florida.”
The Sox helped themselves enormously in crafting the deal by getting the commissioners to appoint one of their Florida-based executives to the five-person committee working on the deal, a move that appears to be unprecedented. In addition, the Sox have veto power over everything from stadium design and construction to approval for ancillary development in the 80-acre complex.
Included in the development deal is the kind of minutiae a homeowner building his dream house wants in a contract. Officials even spelled out the minimum depth of root length for the natural turf on the playing fields and decreed that 75 percent of the seats be shaded during day games.
But, unlike the homeowner, the risk for the Sox is minimal for the type of oversight and input they are getting for the facility. Attached to the development agreement is a 29-page exhibit (see the first pdf noted above) detailing the requirements to be incorporated into the facility. Not only will Lee County build a mini-Fenway to accommodate roughly 4,000 more people than City of Palms Park, the complex will have six other practice fields, including one that copies Fenway’s field dimensions but without walls. Currently, the Sox minor league complex and additional practice fields are several miles away at the other end of Edison Avenue in Fort Myers.
The county will also build an observation tower, complete with bathroom and concession facilities, which will overlook the fields, a commanding viewpoint for the field generals to see their troops in training.
The Sox will also get 10 administrative offices for team executives and six broadcast studios for radio and television. Although the Sox own their television partner, NESN, the agreement will include equipment for the facilities. The agreement also dictates that lighting for the main field for night games will be sufficient to meet national network requirements of a minimum 150 f.c. (foot-candle, the industry measuring standard for illumination) for the infield and 100 f.c. for the outfield, even though networks do not televise spring training games.
The one-plus acre clubhouse will have “spike-proof carpeting” in the players’ areas and the dugouts must be provided with refrigerated water fountains.
While the Red Sox will reap all the monies from concession stands, the county is required to outfit the food service areas with “cookers, warmers, beverage storage, freezers, coolers, plumbing fixtures, and the hook-up of same.”
Dee said the details had been developed over time with input from baseball operations people as well as the business side. “We had worked hard on that over a several year period,” Dee said. “At the time we consummated our agreement with the county, we had done our homework.”
Beyond baseball, the lease agreement gives the Sox nearly complete control over the complex both during spring training and in the off-season. In addition to the naming rights, the Sox will benefit from all the stadium signage, including the giant scoreboard screen in centerfield. The Sox also have the right to hold non-baseball activities such as concerts and theatrical productions at the stadium.
Given their increasing use of Fenway for such concerts, the team has the expertise and contacts to pull off such stagings. And while the county can use the facility, the Sox retain the right to preempt any events if they need the complex and the county must get the Sox consent to use it for baseball activities.
Part of the vision for building the facility on an 80-acre site is to create a full service complex with retail, office and first-class hotel space. Yarborough said the Red Sox have indicated their desire to develop a hotel of their own. Dee said that’s certainly a possibility for the team, who want control over what goes on around their complex, but said they could partner with a major hotel chain to build a first-class hotel with conference facilities.Yarborough admits what is obvious in all the agreements: the Red Sox can dictate terms few others have the leverage to do. “I have little doubt that had the Red Sox not won the World Series in ’04 and ’07, we would not be discussing building a new stadium,” Yarborough says. “They are somewhat in a different orbit and we enjoy the benefits of that. It was going to take some horsepower to get them to stay.”
UPDATE: A probe by the FBI may put a hold on the deal.