Thursday, March 12, 2009

Royals Agree To Ballpark in Sarpy County; Boondoggle Moves Forward

A lot has been made and said over the last few days over the agreement to build a new ballpark for the Omaha Royals in Sarpy County. Depending on who you talk to, it's either the "first step", "99.9% done", or a certainty. Which is it? Hard to say, as the details are not terribly clear. (Here's the agreement, in PDF form, if you want to read a lot of legalese...)

What do we know? There is a proposed preliminary agreement, and the Royals have signed off on it. The Sarpy County Board is interested in it, but won't vote on the preliminary agreement until next week. We also know the parameters of how much Sarpy County and the Royals think this will cost, and what the Royals intend to contribute to this agreement.

What don't we know? Where the ball park would be located, and how Sarpy County will pay for it.

The Royals have agreed to pay $350,000 during the development phase, $2 million during the construction phase, and $450,000 a year (with inflation adjustments periodically) for 25 years. The stadium is expected to cost $20.3 million, though site preparation and acquisition costs could stretch the bill upwards of $26 million. The stadium will be financed through bonds. The stadium is expected to seat around 6,000 fans.

Some people have reported that this means the Royals will pay for half of the stadium, but that appears to make the assumption that Sarpy County will pay 0% interest on the bonds. (Disclaimer: I'm not an attorney, nor an accountant. So my interpretation could also be completely wrong.) By my math, that should cover about $8.4 million of the cost, if financed at 5.5% over 25 years. ($2.3 million up front, then about $6.1 million amortized over 25 years.)

That means that Sarpy County still needs to cover $12 million to as much as $17 million as their end of the deal. They pledge not to raise property taxes for it, but it's becoming clear where Sarpy County plans to get the funds for their share of the ballpark: the taxpayers of the state of Nebraska.

Bellevue State Senator Abbie Cornett has introduced three bills in the state legislature to help pay for the ballpark. LB 615 creates a county sales tax for "entertainment districts" and allows the use of both the state and county sales tax to be used to help fund projects in and around the entertainment district. LB 616 allows counties to divert state cigarette tax receipts to projects, such as the ballpark, and LB 617 allows for taxing districts be developed for property and sales tax purposes for building projects. Those are the keys to whether this happens, or not.

Here's the gist of those proposals: they would allow Sarpy County to claim much of the state and local taxes generated at and around the ballpark, and use that money for the ballpark. Of course, in the case where those taxes were already being used by the state, that means a shortfall in revenues. Much of these proposals were proposed twice before, and were voted down for that very reason. And in this economy and in this budget situation, I still question how these proposals stand a chance. If they fail, then Sarpy has to find $1.5 million or so a year to pay for this ballpark.

At this time, there does not appear to be a plan B in the works, or at least proposed at this time. In terms of the preliminary agreement, there doesn't need to be one. Sarpy can walk away from the deal at any time up to June 1st. What this essentially means is that Sarpy County can approve this agreement next week, and change it's mind if the Legislature doesn't pass these bills. The county board has no risk to vote "yes" next week, as they aren't committed to the deal until June. The Royals, however, are committed, and thus, won't be able to consider counteroffers from MECA or other cities.

There were a couple of interesting items in the proposal. First of all, Sarpy County and the Royals intend to pursue the NAIA College World Series for the new ballpark. Which seems kind of silly, since that would require the Royals to vacate the new stadium for a week and a half, and they already complain about having to leave during the NCAA CWS. Granted, the NAIA series is shorter, but it would seem that the Pacific Coast League wouldn't particuarly enjoy having to schedule all those road trips around both college series. On the other hand, bringing new tourism to the area is always a good thing. That's one benefit for the entire metro area.

The bigger one is that old canard: parking. The agreement calls for paved parking around the stadium, one spot for every four seats, with the following stipulation:
"all of which shall be revenue producing parking spaces for the ORoyals."
--- Section 9.3
That's right. The Royals apparently plan to charge for parking around the new ballpark. How much will they charge? Well, let's look at what other PCL teams charge: Iowa $6, Indianapolis $5, Colorado Springs $6. So guess what? All those complaints about MECA's $6 parking? Well, guess what. It would happen in Chalco anyway.

So what happens next? The way the Sarpy/Royals agreement is structured, the county board vote is a mere formality. It'll get approved...but doesn't mean a darned thing. The real action is in the Legislature where the three Cornett bills begin deliberations. If those pass, the Chalco ballpark is 99.9% home, as much as I hate to say. If those fail (which I've maintained was the key sticking point all along), then this becomes a much more interesting issue. Sarpy County leaders will plead that this is the ONLY way the Royals stay in Nebraska, but the truth is, there is still another option. (I mean, there is still the question of whether 6,000 seats is enough, and whether $20 million is enough, but that's an issue for another day...)

It's getting dimmer. But it's still there, waiting for the leaders across the area and the state to do the right thing.

4 comments:

  1. Can't be positive can you? This is going in a good direction, not a bad one and you can't support it. Also, the Royals want to be here during the CWS, not away.

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  2. Define "positive", "good direction", and "bad one" for me. Those are your feelings and opinions. You're welcome to yours.

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  3. Additionally, Sarpy County shall have the right to terminate this
    Agreement in the evenSarpy County determines in its sole discretion not to
    proceed with the transactions contemplated by this Agreement prior to 5:00 pm
    (Central Time) on June 1, 2009; provided that in the event that Sarpy County does
    not exercise this termination right in accordance with the terms and conditions of this
    Agreement by 5:00 pm (Central Time) on June 1, 2009, it shall not be entitled to
    thereafter terminate this Agreement pursuant to thist that Notwithstanding anything to the contrary set forth herein, in the event this Agreement
    is terminated by Sarpy County pursuant to Section 2.3(b)(ii) or the ORoyals pursuant
    to Section 2.3(c)(i), the ORoyals shall reimburse Sarpy County for the amount of the
    reasonable fees and expenses incurred by Sarpy County in connection with the
    performance of its obligation under this Agreement prior to the date of termination,
    which fees and expenses shall specifically include legal fees incurred; provided,
    however the maximum amount required to be paid by the ORoyals in connection with
    such termination shall not exceed Two Hundred Fifty Thousand Dollars and 00/100
    ($250,000). Sarpy County shall provide supporting documentation for all fees and
    expenses for which it is entitled to reimbursement hereunder.

    ReplyDelete
  4. (b) Additionally, Sarpy County shall have the right to terminate this
    Agreement in the event that:
    (i) Sarpy County determines in its sole discretion not to
    proceed with the transactions contemplated by this Agreement prior to 5:00 pm
    (Central Time) on June 1, 2009; provided that in the event that Sarpy County does
    not exercise this termination right in accordance with the terms and conditions of this
    Agreement by 5:00 pm (Central Time) on June 1, 2009, it shall not be entitled to
    thereafter terminate this Agreement pursuant to this Section 2.3(b)(i);
    (ii) the Required Approvals are not obtained by the ORoyals
    prior to 5:00 pm (Central Time) on June 1, 2009; provided that Sarpy County shall
    not be entitled to terminate this Agreement pursuant to this Section 2.3(b)(ii) if the
    failure to obtain the Required Approvals is the result of a breach by Sarpy County of
    its obligations under Section 2.1(a);
    (iii) the aggregate proceeds received by the County from the
    sale of the Bonds is less than the amount of proceeds proposed to be received by the County for such sale set forth in the Budget or, alternatively, Sarpy County
    determines in advance of said sale that the market for the sale of the Bonds would
    be insufficient to generate the proceeds expected, which determination shall be
    confirmed by an opinion rendered by the Financial Advisor and delivered to the
    ORoyals; or
    (iv) Sarpy County and the ORoyals are not able to agree on
    the identification and selection of the Stadium Site (as defined in Section 1.65) in
    accordance with Section 5.1 prior to 5:00 pm (Central Time) on April 22, 2009.
    (c) Additionally, the ORoyals shall have the right to terminate this
    Agreement in the event that:
    (i) the Required Approvals are not obtained by the ORoyals
    prior to 5:00 pm (Central Time) on June 1, 2009; provided that the ORoyals shall not
    be entitled to terminate this Agreement pursuant to this Section 2.3(c)(i) if the failure
    to obtain the Required Approvals is the result of a breach by the ORoyals of its
    obligations under Section 2.1(a);
    (ii) Sarpy County and the ORoyals are not able to agree on
    the identification and selection of the Stadium Site (as defined in Section 1.65) in
    accordance with Section 5.1 prior to 5:00 pm (Central Time) on April 22, 2009;
    (iii) Sarpy County has not entered into the Site Acquisition
    Documents, in accordance with Section 1.65, with the owner of the Stadium Site, by
    the later of: (a) 5:00 pm (Central Time) on June 1, 2009; or (b) seven (7) days after
    the date that Sarpy County is notified that the Required Approvals have been
    obtained by the ORoyals;
    (iv) the aggregate proceeds received by the County from the
    sale of the Bonds is less than the amount of proceeds proposed to be received by the
    County for such sale set forth in the Budget and the County does not agree with the
    ORoyals in writing to satisfy such shortfall within five (5) days of the closing of sale of
    the Bonds; provided that the ORoyals shall be under no obligation to amend or
    modify any of the terms or conditions of this Agreement in connection with the
    County’s attempted satisfaction of such shortfall;
    (v) Sarpy County breaches any of its representations,
    warranties, covenants or obligations set forth in Section 6.2; provided that the
    ORoyals have provided written notice of the alleged breach to Sarpy County and
    provided Sarpy County has not cured such breach within thirty (30) days of receipt of
    written notice thereof; or
    (vi) the Professional Baseball Agreement terminates and a
    similar agreement is not entered into between Major League Baseball and the
    National Association and no comparable or successor arrangement is implemented
    by Major League Baseball pursuant to which the ORoyals can continue operation in
    the Stadium pursuant to this Agreement In the event that either party desires to terminate this Agreement in accordance with
    Section 2.3, it shall provide written notice to the other setting forth a reasonable
    description of the facts and circumstances giving rise to such termination.
    Notwithstanding anything to the contrary set forth herein, in the event this Agreement
    is terminated by Sarpy County pursuant to Section 2.3(b)(iii) or by the ORoyals
    pursuant to Section 2.3(c)(iv) or (v), Sarpy County shall pay to the ORoyals an amount
    equal to the sum of Two Million Dollars and 00/100 ($2,000,000) plus the amount
    of the reasonable fees and expenses incurred by the ORoyals in connection with the
    performance of its obligation under this Agreement prior to the date of termination,
    which fees and expenses shall specifically include legal fees incurred, as well as the
    amount of any Predevelopment Contribution made by the ORoyals prior to the date of
    termination. The ORoyals shall provide supporting documentation for all fees and
    expenses for which it is entitled to reimbursement hereunder.
    Notwithstanding anything to the contrary set forth herein, in the event this Agreement
    is terminated by Sarpy County pursuant to Section 2.3(b)(ii) or the ORoyals pursuant
    to Section 2.3(c)(i), the ORoyals shall reimburse Sarpy County for the amount of the
    reasonable fees and expenses incurred by Sarpy County in connection with the
    performance of its obligation under this Agreement prior to the date of termination,
    which fees and expenses shall specifically include legal fees incurred; provided,
    however the maximum amount required to be paid by the ORoyals in connection with
    such termination shall not exceed Two Hundred Fifty Thousand Dollars and 00/100
    ($250,000). Sarpy County shall provide supporting documentation for all fees and
    expenses for which it is entitled to reimbursement hereunder

    ReplyDelete