Do not be surprised when teams withhold rent as part of lease talks

The Merc reports that the 49ers have withheld more than $5 million in rent from the City of Santa Clara.

Yawn.

The team is due a rent “reset” that could eventually lower its annual payments from $24.5 million, a figure that includes operating costs. The 49ers like to claim that it’s the highest rent in pro sports, though most leases don’t include operating costs, usually an eight-figure item on their own. Even with those costs removed, it’s still a pretty high rent payment. That doesn’t mean anyone should be sympathetic to the Yorks. Forbes had the team’s revenue and operating income for the 2014 season at $427 million and $123.7 million, respectively.

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The 49ers believe the rent on this place is “too damn high”

That said, the system, and the very nature of these lease agreements puts teams in a negotiating advantage from jump. If a lease is about to expire, or if there’s a clause that allows for renegotiation, chances are the team is going to take advantage of it. Let history be a guide.

  • A year ago the Raiders withheld rent as they talked 2015 lease with the Coliseum JPA. The lease ended up being for only one year.
  • The A’s famously had a lengthy brouhaha with the GPA over shorted parking revenue that eventually spilled over into lease talks. After Oakland played hardball with the A’s, then-MLB commissioner Bud Selig pulled the move threat card and Oakland backed down.
  • During the Chris Cohan era, the JPA sued the Warriors three times over breach of contract, ending in settlement.
  • The Giants owned the AT&T Park structure, so their lease with SF was for land, a nominal fee. That didn’t stop the Giants from arguing over property taxes, eventually going to court over the matter.

All of that happened since the turn of the millennium.

In a more charitable world, teams and their incredibly wealthy owners would hold to their contracts, instead not even waiting for the ink to dry. That’s not the world we live in. So we can grouse more about certain owners we disdain as opposed to others we hold in higher regard. It doesn’t matter. This is how teams operate. Since these facilities have such huge mortgages and most of them are publicly owned, it’s the municipalities that get the worst of it. Exactly what can the cities do, anyway? Evict the teams? Cities can and should fight for what they can, but remember that in the end, they’re not supposed to be the winners. The teams are. The deck is stacked against the public.

News for the week: Tommy Boy Edition (1/16/16)

While Mark Davis drowns his sorrows with some beer and wings, pondering his next move, we should consider what else has been happening this week. After all, unless either the Chargers decide to stay in San Diego, Davis is more-or-less stuck in Oakland. He could conceivably apply to move to a vacated San Diego or San Antonio, but that require going through this rigmarole again with a much smaller payoff. So we’ll let whole football thing settle down for a few weeks. If you want to understand what Oakland is getting ready to offer the Raiders, read my post from November.

Matier and Ross reported earlier this week that Oakland Mayor Libby Schaaf is pushing Howard Terminal hard for a new ballpark, which is no secret. Included was this nugget:

The city would probably also have to come up with at least $90 million in infrastructure improvements, including funding for a car and foot bridge connecting Howard Terminal to Market Street east of the railroad tracks.

That $90 million figure is no accident. Schaaf is offering the Raiders the same amount for infrastructure at the Coliseum. She’s trying not to play favorites with either team. Of course, there is the danger of spiraling costs, and Oakland is putting itself in the position to carry the debt burden all by itself, since it’s nearing a deal to buy out Alameda County. As costs rise, the question will linger over how much Schaaf is willing to support before the projects become untenable. At least her staff has acknowledged the need for an overpass at Market Street, which was a major issue for me. Frankly, I think they need two overpasses because of Market Street’s location well away from Jack London Square. If you want to get reacquainted with Howard Terminal, read my various posts about the site.

Other news:

  • The City of St. Petersburg’s City Council approved by a 5-3 vote to allow the Rays to explore other stadium sites outside the city limits. That includes all of Pinellas County (St. Pete is the county seat), and neighboring Tampa and Hillsborough County. It’s too early to tell whether this will ultimately lead to the end of the Rays’ tenure in St. Pete, but proponents are at the outset painting this as the team’s best chance to stay in the 4.3 million-strong Tampa Bay Area, which has proved poor for attendance and excellent for TV ratings. As always, the biggest issue is figuring out how to pay for it. Head over to Noah Pransky’s Shadow of the Stadium for complete coverage.
  • The Warriors are pushing back the opening of their arena to 2019 to accommodate the legal challenge by the anti-arena Mission Bay Alliance. MBA also sued UCSF’s Chancellor and now has two lawsuits against the arena project in different jurisdictions. It’s a legal Hail Mary that will largely depend on whether the arena will be afforded an expedited legal review. (SFGate, LA Daily News)
  • The new arena near the The Strip in Las Vegas has a $6 million per year naming rights deal with wireless carrier T-Mobile. (Las Vegas Review Journal)
  • Hartford’s downtown ballpark is delayed and has $10 million, for which no one has figured out how to pay. Thanks to the delays, the AA (Eastern League) Yard Goats will be forced to play on the road for the first six weeks of the season. (Hartford Courant)
  • Walmart announced a slew of store closures, including a store in south San Jose and the Oakland store on Hegenberger near the Coliseum. The store will close Sunday, which led @fanpledge to wonder if it could work as an A’s ballpark site.

Most importantly, the In-N-Out in the northeast corner can stay intact. I’ll cover this site in greater depth later.

Swingin’ A’s Podcast Interview

Sometimes it’s easier to ramble on a podcast than to write and edit a couple thousand words on a topic. Actually it’s a lot easier. If you’re wondering how all the stadium business with the A’s and Raiders is going to work out, head over to today’s Swingin’ A’s Podcast at Hardly Serious. I talked for nearly an hour with host Tony Frye about the fallout from the SCOTUS decision, how the Raiders are holding everything up, and what I think is going to happen over the next few months. I even explain how a ballpark deal could get done. Take a listen, and try not to focus on how many times I pause while delivering an answer. It’s a podcast, I’m allowed.

The eternal struggle between sightlines and safety, Part 1: Nets

Part of the view from Section 119 is "obstructed" by the backstop net

Part of the view from Section 119 is obstructed by the backstop net

During today’s A’s broadcast, the between-pitch conversation turned to netting and foul balls. New part-time color commentator Eric Chavez provided an anecdote from during his career. He was hitting batting practice at Boston’s Fenway Park, when a ball he hit went into the stands, hitting a child. Chavy found out that the child had subsequently needed five eye surgeries.

Boston became a focal point of safety when parts of Brett Lawrie’s broken bat ended up in the third base stands, hitting a fan in the head. Tonya Carpenter suffered life threatening injuries, but was eventually released from the hospital. Another fan who was hit by a ball while in the usually glass-protected EMC Club decided to sue the Red Sox last week. The glass had been removed for renovations.

Baseball is unique among all major professional sports in that it is the only sport in which the object of play (ball) routinely travels into the seating area. Most are balls hit into foul territory, with some going out in fair territory as home runs or ground rule doubles, or sometimes the occasional errant throw. For many fans, the souvenir ball is a treasure, a real achievement. For others, the foul ball is a source of potential danger. Bats present an even more perilous, albeit less frequent, hazard.

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These accidents and their often horrific severity have caused MLB to consider changes to ballparks to increase safety, counter to the so-called “Baseball Rule.” The Baseball Rule stipulates that stadium operators can’t be held responsible for injuries caused by stray balls or bats. Over time lawsuits have whittled away at the rule’s strength, to the point that teams have to be much more cognizant of the risk than ever before. Yet little has changed to protect fans. Right now backstop nets generally cover about sixty feet behind home plate and little else. At the Coliseum, the net is full height at the back of the notch, with additional netting angling down towards the front of the notch. The dugouts and field boxes are completely exposed. Only seats at dugout level (sunken below the field) and dugouts at new ballparks tend to be protected. Everything else is typically exposed.

The threat to baseball became more pointed when Gail Payne, an A’s season ticket holder, filed a class action lawsuit against MLB over the threat to fan safety. Never mind that a winged fruit bat has more chance of reaching Payne’s seats than one of Lawrie’s maple bats, there are still plenty of safety issues that MLB has neglected for far too long. A ball coming off the bat can reach the first row behind the dugout in every ML ballpark in one second. 1,750 fans are hit every year, the vast majority in foul territory. The lawsuit asks for new protective netting to be installed from foul pole to foul pole, covering all of the front row seats in foul territory.

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A foul line drive could reach these seats in less than two seconds

MLB is certain to fight that as much as it can, reasserting its Rule to some extent. To do so would severely impact views for the high-paying fans next to the field. At the same time, they have to be ready for a compromise solution. One that has been discussed recently is an extension of netting to the far edge of each dugout. That should cut down on a number of injuries, though there would still be concerns about fans farther down the lines.

Considering that Lawrie’s bat brought all of this to a head, it’s worth mentioning maple’s role in all of this. Maple bats have long been known for their greater power thanks to the wood being harder than ash. The downside of the maple bat is its tendency to shatter, creating wood shards that fly around like shrapnel, hitting fans and players alike. If it came down to banning maple bats or extending nets, MLB would most likely choose the latter, since the loss of maple bats could have a negative effect on offense.

The increasing role of technology is also a concern, particularly the use of smartphones and tablets during the game. As I sat in the seat pictured above for the A’s-Dbacks game last weekend, I constantly reminded myself to pay more attention to the game. That was a complete failure as I routinely looked down at my Twitter app, putting the phone away only when I was eating (another type of distraction). Going to the other end of the spectrum, it wouldn’t hurt to have a glove on in case something happens. Then again, if the A’s defense is having trouble fielding balls, how much can we expect of fans?

College and amateur facilities have taken the safety net a bit further than the pros have gone, covering some of their small ballparks in nets. Tony Gwynn Stadium at San Diego State University has nets that extend several feet above the railing along the front row.

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Is this a bad view because of the net?

Other parks have a small extended railing, maybe a foot high, above the dugout. The fact is that there’s no proper standard. Factors other than safety can also come into play. The Yankees had difficulty opening the new Yankee Stadium when they had to balance the safety concern with the visual effect of the backstop net on the home plate camera during Yankees broadcasts on the YES Network.

MLB has plenty of data on injuries to institute new standards at current and future ballparks. They’ll have a couple chances to effect change at their two offseason owners meetings, where the safety issue should be a hot topic. Several teams are ready to extend the nets, provided that MLB enacts new standards. The cost should be minimal, in the low five-figures per ballpark. If MLB truly cares, they’ll act quickly by extending the nets instead of creating a task force to study potential changes. Some foul balls will go away, along with the combination of danger and excitement that being exposed entails. It’s worth the sacrifice to reduce the number of injuries.

P.S. – Part 2 will cover railings and their associated risk.

Glendale, AZ voids lease with NHL Coyotes, leaving team’s future uncertain

The City of Glendale, Arizona called an emergency city council meeting tonight for one purpose: to vote on terminating the Arizona Coyotes’ lease at Gila River Arena. You may remember two years ago, when the Coyotes seemed bound for anywhere but the desert as the franchise’s reported financial losses piled up and the city faced bankruptcy in what could be considered the worst stadium deal in North America.

The Coyotes' demise in the desert is at hand

You may not see that banner up there for much longer

The NHL even bought the team and operated it for a while, waiting for an ownership group to come in and operate the team, hopefully not at a loss. The deal struck included a payment from Glendale to the Coyote owners’ arena management wing of $15 million per year over 15 years on top of $50 million in subsidies up front. That’s right, the city is paying the team to stay. Glendale was supposed to get limited event revenues, and because the team’s future was supposed to be secure, there were fewer worries about the city’s ability to handle ongoing arena debt. Eventually the team would start winning again and the money would roll in for both parties.

That money never came. The Coyotes haven’t averaged more than 13,000 per game in attendance since 2009. They haven’t been in the playoffs since 2012. Other than the small number of hardcore fans, no one came. The $15 million operating subsidy from the city roughly covers the lost revenue from 4,000 empty seats every home game when compared to other teams. No one’s happy. The current mayor and council have expressed displeasure with the Coyotes, the NFL over the Super Bowl, and its two spring training MLB tenants, the Dodgers and White Sox (at Camelback Ranch). Glendale has overextended itself time and time again, spending so much on pro sports and getting less than zero out of it. And unlike the arrangement at the Coliseum for the two venues there, Glendale, a city about the same size as Fremont, funded the arena itself.

All of this drama set the stage for the big vote. Supporters of the Coyotes came in from all around the West Valley to denounce the plan to kill the lease. The trigger for the lease termination was not about the losses, though the Coyotes have the ability to leave on their own if they accrue $50 million in losses over five years. Instead, Glendale cited a conflict of interest, which allegedly occurred when Glendale’s former city attorney took a position with the Coyotes shortly after the lease was approved in 2013.

After public testimony was cut off, those on the dais made a few comments, culminating with a 5-2 vote to terminate the lease. The Coyotes responded within minutes, threatening to sue Glendale for up to $200 million.

FOR IMMEDIATE RELEASE:
Wednesday, June 10, 2015

GLENDALE, ARIZONA — Arizona Coyotes Co-Owner, President and CEO Anthony LeBlanc issued the following statement following tonight’s Glendale City Council meeting.

‘We are disappointed with the city’s decision to violate its obligations under the agreement that was entered into and duly approved only two years ago. We will exhaust any and all legal remedies against the city of Glendale for this blatant violation of its contractual obligations to us.’

One thing to note is that the Coyotes had themselves reported $34.8 million in losses for 2014-15 season alone. The team’s well on its way to hitting that $50 million mark, and the only consolation it can provide to Glendale is that the city’s loss will be $6 million as opposed to the projected $7 million before the season.

Coyotes fans don’t deserve to go through all of the drama built up over the past decade. Yet they’re powerless, as fans often are. Their limited numbers don’t impress NHL brass, who stalled as long as they could while fighting off relocation rumors and threats. Right now three cities are considered frontrunners for a move, which could come this fall.

  • Las Vegas – A new arena on the Strip is being built by MGM and AEG. While its primary purpose is to be a major concert venue, it will have the capacity to host NHL and NBA teams. The arena won’t be ready until 2016, so a relocated Coyotes squad would play at the MGM Grand Garden Arena or Thomas and Mack Center for a year or so.
  • Seattle – Arena efforts have largely stalled since efforts to buy and move the Kings to the Emerald City died. NHL is also on the radar, though basketball is clearly the primary focus. A rival arena plan has been proposed for Tukwila, not far from SeaTac airport.
  • Quebec City – A brand new venue is nearing completion, and could be ready to host the Coyotes in September. The downside is that a move to Quebec would also cause the league to embark on another round of realignment. The already shorthanded Western Conference (14 teams) would send another one to the East (16 teams), forcing another team to move to the West.

Northern California cities such as San Francisco and Sacramento are not in the offing because both have built-in revenue competition from basketball teams, and the Warriors’ and Kings’ new venues won’t be optimized for hockey. If the NHL is going to move the Coyotes, they’ll go to a place that has minimal competition and an arena with few scheduling conflicts.

The Coyotes and Glendale could also reach some sort of truce, allowing both to co-exist and renew their partnership. It’s hard to see that as every bridge has been burned. The team is bringing legal action Thursday, so the battle is just beginning.

SC County Judge declares A’s-San Jose land option illegal

Just in from Santa Clara County Superior Court: Judge Joseph Huber, who has presided over the smaller Stand for San Jose-vs.-City of San Jose case for a few years now, has called the land option agreement between the City and the A’s against the law. Wrote Huber:

“The city is and has been in violation of (the law) for several years and it does not appear it will comply with the terms in the foreseeable future.”

Combine that with the blows that San Jose has received in federal court, and you have to think that any chance of a ballpark happening in the South Bay is toast, short of a miracle. Yet it all comes down to some serious strategic errors on San Jose’s part that could have strengthen their case, in this local venue and the federal one.

Remember that it was former mayor Chuck Reed who wanted to go to the ballot box in November 2009 (!), then March 2010. The deal would’ve set up the possibility of a voter-approved stadium deal in San Jose. Instead, he had a discussion with former MLB president Bob DuPuy, who relayed then-MLB commissioner Bud Selig’s desires to keep the deal on the shelf. Reed complied, there was never a referendum or initiative, and San Jose’s position has looked significantly worse ever since. All San Jose has right now is a prayer for SCOTUS to take the case, which isn’t likely. Throughout all of the various legal battles, at different levels, the weakness of the option agreement has been cited. The A’s have little vested interest in San Jose, and the City is no closer to putting together a deal than it was six years ago.

Now that even Lew Wolff has for all intents and purposes given up on San Jose, the spotlight is on Oakland, where that city faces an uphill battle at Coliseum City and could entertain an A’s proposal should the football stadium plan fizzle out. That brings to mind three scenarios.

  1. If Oakland can’t get Coliseum City done and the NFL doesn’t allow the Raiders to move to LA, the Raiders would either be forced to limp along at the Coliseum indefinitely or consider a move to either San Antonio or even St. Louis. The former would be a continuation of the awkward status quo, with no new venues in sight for either the Raiders or A’s.
  2. Should the Raiders vacate, they would clear the path for the A’s to build a new ballpark at the Coliseum, infrastructure or other public contributions to be up for significant debate. Or maybe no new infrastructure (no baseball village) because no one has figured out how to pay for it.
  3. If Oakland gets Coliseum City to work out with only a football stadium (the NFL’s and the Raiders’ preference – no one sane is buying into the multi-venue fantasy at this point, right?), the A’s are pushed out (per lease terms) and have no obvious backup plan. Would MLB direct the A’s to start looking in the East Bay and maybe the broader Bay Area for ever diminishing land opportunities, or start playing hardball and making threats as it does with so many other markets? How does a stifled San Jose factor in? And what of the Giants?

It’s just as well, we’re so overdue at this stage for a stadium that San Jose will soon have to deal with Sharks owner Hasso Plattner on his designs for a makeover at the 21-year-old arena that bears his company’s name. And if the goal is to get on par with the best new hockey arenas, it won’t be cheap. That discussion is for another day.

P.S. – The scant output over the last month was an intentional move on my part to see what would happen if I chose not to be swayed by every little gesticulation in the media over the A’s or Raiders. While readership was down a little, I felt it was the right move because there was no need to blog about mostly vague details or the rumor mill. Therefore I’m getting to stick to publishing 2-3 times a week while using Twitter to get out quick notes or retweets. If you haven’t already, follow the feed. Things should pick up again in June with the next set of Coliseum City deliverables is expected to be released.

San Jose City Council approves taking antitrust case to Supreme Court

Despite losing handily twice in federal courts, the City of San Jose won’t relent, voting unanimously today to take its antitrust case against Major League Baseball to the Supreme Court. While its chances of overturning baseball’s antitrust exemption remain slim, the City’s game plan is simply to have the Supremes take the case, which could cajole MLB into settling. Even that outcome is a long shot, as Wendy Thurm explained at Deadspin two weeks ago. Regardless of the long odds, Mayor Sam Liccardo seems to be spoiling for a fight:

We may know the Court’s decision by summer.