VOL. 129 | NO. 5 | Wednesday, January 08, 2014
Council Approves Ballpark Deal
By Bill Dries
Memphis City Council members approved the city’s $19.5 million purchase of AutoZone Park Tuesday, Jan. 7, and another $4.5 million in improvements to the baseball park.
The deal includes the St. Louis Cardinals buying the Memphis Redbirds franchise and entering into a 17-year lease with the city of Memphis at $300,000 a year.
The Cardinals also put up the bulk of the money for the ballpark improvements.
Key to the 8-4 council vote were some changes in the last week that included AutoZone Inc. agreeing to put up $100,000 annually over 10 years if sales tax rebate revenues don’t meet projections to help pay the debt from the bonds financing the deal.
The Cardinals had already agreed to an additional $100,000 a year also as a backstop in sales tax rebate revenue doesn’t meet projections to pay the largest amount of the debt.
The deal garnered the support of some on the council who had been critical of the deal including council chairman Jim Strickland.
Strickland, like other council members, met privately with Cardinals front office executives as well as Memphis Mayor A C Wharton Jr. around and after the New Year’s holiday in an intensive effort to save a deal that the council twice delayed in December.
At the time, Wharton insisted that the city had to close the deal by the end of the year in order for it to happen.
Strickland said Tuesday that he came to support the deal because his view of sales tax rebate figures changed. The figures show growth over the 20 years of the bonds to be issued by the Center City Revenue Finance Corporation.
That growth could include surplus sales tax rebate revenue from prior fiscal years to compensate in years when the revenue stream doesn’t meet expectations.
The deal also includes an early termination clause in which the Cardinals would pay all of the rent due over the 17-year term of the contract and one year of debt service if the organization leaves Memphis early. The Cardinals would also pledge to help the city find a new tenant for the ballpark in the following year and if they didn’t, the Cardinals would pay five more years worth of debt service.
If the Cardinals leave AutoZone Park in the sixth year or later, the city gets the rent and one year of debt repayment from the Cardinals and could sue for more in damages.
Some on the council had pushed for an early termination clause closer to the one in the contract the Memphis Grizzlies have with FedExForum.
City Council member Harold Collins estimated the total payment could be as little as $3 million depending on when the Cardinals left. But the administration said it would be as much as $17 million.
“I’m skeptical of the fact that the citizens of Memphis would be exposed,” said Collins, who was one of the four “no” votes on the deal. “It would have been great to have an agreement like we have with the Grizzlies. Today we can’t get that. We can get very, very close. And then it becomes a risk.”
Strickland said the financing numbers as explained in the last week work for him although there remains some risk.
“I believe there is little risk if we purchase the team and it’s a much higher risk of failure of Major League Baseball in Memphis if we don’t.”
In the lobbying effort in the last week, the city also hired financial investment advisor David Waddell, president and CEO of Waddell & Associates, to review the return Fundamental Advisors gets from selling the ballpark to the city.
The New York-based equity firm effectively bought the ballpark after the Memphis Redbirds Foundation defaulted in 2009 on the bonds that built the stadium.
Waddell said Fundamental Advisors gets a six percent rate of return in the deal compared to at least 10 percent and maybe as much as 20 percent it could have yielded from other types of investments “with a whole lot less drama.”
Fundamental Advisors Chairman and CEO Laurence Gottlieb said the company is “extremely proud of what was accomplished.”
“Working together, a revitalized AutoZone Park has been returned to the City of Memphis with the Redbirds now in the hands of the world-class St. Louis Cardinals,” Gottlieb said in a written statement after the council vote. “We believe the future is bright for the great city of Memphis.”
The Center City Revenue Finance Corporation, which is issuing the bonds, meets next week with its part of the amended ballpark deal on the agenda then.
Still to come is action by the Shelby County Commission approving the assigning of its interest in the land beneath the ballpark to the city under terms of the deal.
Cardinals General Manager John Mozeliak described the current Redbirds operation as “underperforming.” As owners of the franchise, Mozeliak said the Cardinals plan to change that and grow ticket sales by 100,000 a season to approximately 600,000 incrementally over several years
“Our job is to make money. To make a profit at this ballpark,” he said, adding that the profit and increase in ticket sales generates the sales tax rebate revenue that pays the bonds financing the city’s purchase of the park. “We certainly aren’t coming down here trying to run losses.”
Mozeliak was the featured speaker at a noon rally in the plaza of AutoZone Park in below freezing temperatures. The several hundred people who rallied in the plaza then marched to City Hall, arriving just about the time that the Wharton administration began handing out documents that were the final version of the deal to council members.
The rally was organized over a 48-hour period with the Cardinals front office heavily involved in it.
The Redbirds and Cardinals contributed hot chocolate and food as well as Redbirds baseball caps and red knit caps as well as signs and foam fingers.