Cobb County Commission Approves Braves Move

What follows is an analysis of the Memorandum of Understanding between the Braves and Cobb County.  The commissioners probably should have done something similar. But did they?

So what did they vote for?

Here a break down of the Memorandum of Understanding which they voted to approve. Your Peach Pundit staff is still digesting the vote and the MOU but here are some initial thoughts. Note: there were two amendments announced to the MOU at the meeting, but no text has been provided. One seemed to eliminate some sort of arterial train. It is unlikely that any of the commissioners fully read the MOU as they were too busy helping their friends buy up parcels of land around the new stadium. I kid, I kid!

Analysis of the Cobb/ Braves MOU

 

The Atlanta Braves’ total contribution of $372,000,000 over the life of the stadium project consists of $280,000,000 paid by Opening Day 2017 and $92,000,000 (Net Present Value) being financed over the 30-year term of the stadium operating agreement, and paid via Atlanta Braves’ annual guaranteed revenues ($6,100,000 annually), as detailed below:

a. Rent: $3,000,000

b. Naming Rights Revenue: $1,500,000

c. Parking Revenue: $1,500,000

d. Marquee Advertising Revenue: $100,000

Total: $6,100,000

http://homeofthebraves.com/images/Braves-Cobb-MOU-Summary.pdf

 

Let’s take each of those items one by one:

 

  • Rent

$3,000,000 / 81 games = $37,037 game, which is about $1 per seat per game.  That actually seems reasonable given that not every seat will be filled at every game over the 30 year lifespan of the stadium.

 

  • Naming Rights Revenue

Below is a spreadsheet showing the revenue generated from naming rights for every baseball stadium with a corporate name:

 

Stadium

Company

Team

Revenue/Year

Through

Ameriquest Field

Ameriquest Capital Corp.

Texas Rangers

$         2,500,000.00

2034

Bank One Ballpark

Bank One

Arizona Diamondbacks

$         2,200,000.00

2028

Cinergy Field

Cinergy

Cincinnati Reds

$         1,000,000.00

2002

Citizens Bank Park

Citizens Bank

Philadelphia Phillies

$         2,300,000.00

2028

Comerica Park

Comerica

Detroit Tigers

$         2,200,000.00

2030

Coors Field

Coors Brewing

Colorado Rockies

$            789,473.68

INDEFINITE

Great American Ball Park

Great American Insur.

Cincinnati Reds

$         2,500,000.00

2033

Jacobs Field

Richard Jacobs

Cleveland Indians

$            695,000.00

2014

Miller Park

Miller Brewing

Milwaukee Brewers

$         2,100,000.00

2020

Minute Maid Park

Coca Cola

Houston Astros

$         6,000,000.00

2030

Petco Park

PETCO

San Diego Padres

$         2,700,000.00

2026

PNC Park

PNC Bank

Pittsburgh Pirates

$         2,000,000.00

2020

Safeco Field

Safeco Corp.

Seattle Mariners

$         2,000,000.00

2019

Tropicana Field

Tropicana

Tampa Bay Devil Rays

$         1,500,000.00

2026

U.S. Cellular Field

U.S. Cellular

Chicago White Sox

$         3,400,000.00

2025

average:

$        2,258,964.91

median:

$        2,200,000.00

 

This is where Cobb County begins to leave money on the table.  Minute Maid Park is obviously an outlier at $6M/ year, but so are Coors Field and Jacobs Field (whose contract expires next year).  My guess is that a 30 year naming rights deal in 2017 will be worth well north of the average of existing contracts in 2013, but we’ll conservatively assume that $2.2M is the likely number.

So, for the right to name a stadium that Cobb taxpayers own, the Braves will collect at least $700,000 per year.

  • Parking Revenue

And here is where it goes all wrong for Cobb.  $1.5M per year in parking revenue?  A quick calculation using very conservative inputs (particularly for a stadium with zero transit) gives us this:

10,000 cars per game X $10 per car X 81 games per year = $8,100,000

“But wait!  You forgot the expense of the workers,” you say.  OK, fine.

100 workers x 8 hours x $10/hour x 81 games = $648,000.

The Braves will net at least $5,952,000 per year in parking revenues.

For people concerned about transit, it is this aspect of stadium agreements that cause the most concern. By structuring deals this way, the team is incentivized to oppose transit options, because their ideal customer is one who drives to the game. A parking lot is the actually the most efficiently profitable thing a team does, from a ROI perspective. That problem leads to the pursuit of transit options that are “fan experiential” rather than good people movers, or those that fans are disinclined to use which all increase that the team can charge for parking.

  • Marquee Advertising Revenue

I’m not sure exactly what this is, but I have to assume it is revenue from the digital marquee along the interstate.  $100,000 is a drop in the bucket, but I doubt it’s worth a hell of a lot more than that.  Double or triple it and it’s still a drop in the bucket.  This is throwaway revenue.

The MOU goes on to state that “Except for the County’s share of naming rights revenues, parking revenues and marquee advertising revenues, the Atlanta Braves will retain all revenues associated with the Stadium.”  This means that the Braves will get to keep all revenues from concessions, as well as all advertising revenue from permanent or semi-permanent billboards, outfield walls, strikeout counters, giant animatronic Chick-Fil-A cows, etc.  And all of that may be fair, so to speak.  The Braves will have to pay the operating expenses, like water and electricity, not to mention the costs of employing hundreds of part time workers.

Capital expenses, on the other hand, are split 50/50 between the Braves and the County.  Those expenses should be low initially, but no one should be surprised if the Braves want a new Jumbotron or replacement seats at the 10 or 15 year mark.  After all, the Braves replaced the screen at Turner Field in 2005 (at a cost of $10M) and specifically mentioned seat replacement as one of the issues with the Ted.  Or to put it another way, if Turner Field requires $150-200M in capital improvements at the 17 year mark per the Braves’ FAQ, then you can bet the new stadium will as well.  Cobb taxpayers will be on the hook for another $75-100M (in 2013 dollars) by the year 2034.

Moving on to Cobb County’s contribution to the stadium, the MOU states:  “The local commitment includes a transportation improvement contribution of approximately $14,000,000.”  Meanwhile, the FAQ at homeofthebraves.com includes this information about traffic improvements in the area surrounding the new stadium:

There will be multiple access points to the site from varying directions, including Windy Hill Road, U.S. 41/Cobb Parkway and others. The Georgia Department of Transportation is widening one of the bridges over U.S. 41/Cobb Parkway and is planning to widen the Windy Hill bridge over I-75 and add a diverging diamond interchange at the Windy Hill/I-75 interchange.  Plans also call for widening Cobb Parkway from Paces Mill to Akers Mill Road.

Other transportation options are being explored to facilitate efficient traffic flow, including the utilization of the Cobb Community Transit bus system and the development of a trolley line connecting Cumberland-area businesses. Cobb County officials also plan sidewalk improvements around the site and have potential plans for a bus transit and pedestrian-only bridge connecting I-285 to the Galleria area.

Cobb County officials also are planning to build a bridge that will span I-285, connecting the Cobb Galleria office park to the stadium. Tim Lee gushed over this “Cheesecake Factory” bridge in a recent story. He stated it would have a shuttle that ran across it all the way to the Cumberland Mall/Galleria area. The bridge at 17th street in Atlanta cost approximately 40 million. That bridge was much easier to build than this one, as the interstate runs significantly below grade at the crossing point. The highway in this instance is well above grade, and the bridge will have to be much longer and built much higher. The grade cannot be very great or the shuttle, in whatever form it takes, will not be able to climb the bridge. This points to a bridge cost of conservatively 3 times the 17th street bridge, probably closer to 4. It is safe to say that this bridge, though specifically stated as being part of the the overall costs in the MOU, has not been budgeted.

The first paragraph discusses things that GDOT is already doing or planning to do, so there’s no cost there to Cobb taxpayers outside of what they already pay in state taxes.  The second and third paragraphs refer to “options,” “plans,” and “potential plans.” Is $14M enough to cover building pedestrian bridges and trolleys, in addition to the more likely items like sidewalks and CCT buses?  My guess is no.

As an Atlanta resident and a Braves fan, I wanted the team to stay in my backyard.  However, it is obvious that this deal was far too good for the Braves to pass up. For Cobb residents and taxpayers, it is a very expensive feather in their caps for now. Long term it will be an expensive and very heavy feather in a drooping, no longer fashionable hat. The unequal bargaining relationships of the parties is all over this deal, and shows why different areas of a city shouldn’t compete against one another for sports teams. The known revenues are split heavily towards the lessee, who will be able to rent the stadium through its entire useful life for a total present value cost of about a 1/10th of its construction cost. Many of the County’s costs are estimated conservatively. It is likely the state DOT will have to catch some of the total left over when the irrational exuberance fades.

 

30 comments

  1. John Konop says:

    Good points but a few things you should consider:

    Rent is a problem if the Braves can walk away and owe only 3 mm a year. The bonds are for 30 years…and if the Braves get a better offer after about 15 to 20,years, usually life cycle of stadiums, than 3mm is not a lot of money for a major upgraded stadium…..you realize in today’s money this worth at least an extra 20 mm a year from downtown location.

    Agree about capital expenses and above puts county in bad negotiating position in future.

    Parking I disagree….you can only provide so much via capacity…..and the average send per person attending is worth more than just getting extra parking revanue. The Braves are incented to increase capacity and access points to the stadium. The Braves want as many people in seats first…..Do not get wrong the high end boxes are a big help…..but all teams want fans……this project is about attendance…….

    Finally the devil is always in the detail, until we see actual contrat than we will really understand the deal. My bet is on the Braves on this part of the deal…..

    • analogkid says:

      Read the MOU. The Braves are on the hook for $3M in rent for 30-35 years plus $3.1M in “additional rent” until the bonds are paid off. So, it’s more like $6.1M. They could walk away from this stadium at any point I suppose, but that’s very unlikely, at least until the bonds are paid off and they can shed the additional $3.1M.

      What’s interesting is that any additional money that the county makes off the stadium (e.g., from the 3 events the county is “allowed” to hold per year) is required to go to debt service. That’s some impressive negotiating on the Braves part.

      • John Konop says:

        You are assuming that is the breakage language in the contract. That is why I used the word ” if” and pointed out we really do not know the deal until we see contracts. A MOU is not a final contact…..

          • John Konop says:

            Dog,

            The design of the deal creates who has leverage ” Art of the Deal” 101. This is all about the money…..nothing against the Braves…..you must understand as an executive your job is to get the best ROI for your stock holders.BTW read about the Tampa Bay team…..and you will see MLB does threaten to walk…..

            • xdog says:

              Look, these guys aren’t gypsies. They sign a deal, they stick to the deal. You’re getting hung up on a far-fetched possibility.

              Your mention of Tampa fails to note that despite their abysmal attendance and their cruddy and out of the way park, they continue to stick to terms of their lease.

              Every party to every deal concentrates on getting the best return possible. It’s just that when dealing with sports teams, municipal governments tend to negotiate as fans instead of businessmen. The Braves schooled Gwinnett when they moved the AAA team there and my bet is they’ll school Cobb when the deal is done.

              • John Konop says:

                ………..Every party to every deal concentrates on getting the best return possible. It’s just that when dealing with sports teams, municipal governments tend to negotiate as fans instead of businessmen…….

                Well said that is my point. Also voters get emotional about issues like this ie charter schools, stadiums …… As you know the point I have made for years it should be about business first not how you feel about the project.

                I saw the Cobb commissioner meeting it was rather disappointing at best.

                1) 1 commissioner claims that a few weeks was enough to review yet details were even changing at the meeting….and she really did not demonstrate real knowledge of deal point issues…..and voted yes…and put down the one commissioner who wanted to slow down and understand the fine print…

                2) Another commissioner claimed they knew very little about transactions like this, but said it was better deal than others that went bad…..once again had no details or deal points to back up his claim…and voted yes….

                3) Another commissioner basically supported taking risk with tax payer money not HER PERSONAL INVESTMENT MONEY…..and did not think we needed to weigh the risk just jump in and have faith type attitude….and voted yes

                4) The chairman sounded like a cheerleader of the Braves not a businessman.

                I do not blame the Braves, Charter USA……on deals like this, they are private business focus on ROI…If you send in the above team without well thought out rules/laws in place you know most times what will happen…..which is why I have been pushing for best practices bill for awhile….before we tax payers have the above people like the above crew negotiate for us.

                READ BELOW YOU WIILL SEE THIS IS HARDBALL NOT SOFTBALL:

                St. Pete council says Selig has ordered Rays not to pay to break stadium lease

                http://www.fieldofschemes.com/2013/09/06/5865/st-pete-council-says-selig-has-ordered-rays-not-to-pay-to-break-stadium-lease/

                • xdog says:

                  John, I think we’re in agreement that the rush to a deal is to the detriment of Cobb and state residents, as it appears to leave them on the hook for uncapped future outlays.

                  Also, yes, Braves negotiators have an obligation to Liberty to get the best deal they can.

                  However I don’t see why you keep harping on the possibility of the Braves breaking their lease when a) teams don’t break leases without indemnities; b) your own link on Tampa shows that; c) the Tampa situation is very complex, involving a lousy park, puny attendance, a possible move across the bay, downtown development plans, etc; and d) I don’t know what Tampa has to do with Braves/Cobb anyway.

                  Please know that I’m aware that THIS IS HARDBALL NOT SOFTBALL. You don’t have to shout to get my attention. If you want to pursue the Tampa/St Pete/DRays negotiations, here are a couple of links:
                  http://www.tampabay.com/sports/baseball/rays/the-powerful-piece-of-paper-that-is-the-tampa-bay-rays-lease/1223089
                  http://tbo.com/pinellas-county/st-pete-officials-say-rays-balk-at-paying-to-break-stadium-lease-20130905/

                  • John Konop says:

                    Dog,

                    The point is not if the Braves move or not in the future….it is how the Braves can use it as a negotiating chip if not well thought out. The capital improvements part is still murky…..if the Braves negotiated that Cobb picks up 50 percent for life of deal than it would not matter….but than no one really knows how much Cobb commited to the up grade fund…..we already know in current dollars the Braves wanted a 100mm for lighting…..who knows how much Cobb is on the hook for…..could be ok, but as I said numerous times it is all in the fine print…..

        • analogkid says:

          JK,

          You’re correct that I’m making an assumption. However, my assumption is based on the plain language of the MOU. Your assumption is that the Braves might walk away from the stadium and just pay the rent for the remainder of the term. I acknowledged that that is technically a possibility, but pointed out that the rent is twice the number you keep quoting (6.1M vs. 3M). Thus, one of your assumptions is wrong and the other is contrary to the plain language of the MOU.

          That said, I don’t doubt that Cobb is stupid enough to write a contract that allows the Braves to walk away before the end of the term. They already agreed to a very lopsided MOU after all.

          • John Konop says:

            Analogkid,

            It is all speculation…..until the actual contract is done…..My main point has been all along is it seems the Braves have the A team negotiating with fans not business people….It could be a good deal…..but I would bet on the professionals ……if Cobb rushes the contract like they did the MOU this will be another one on those deals……Rushing to do contracts without understanding the deal preasure points is not usually a good formula…..

  2. Dave Bearse says:

    Sure, there’s no cost to Cobb taxpayers for various GDOT highway projects. The cost will be the additional delay incurred by road users, mostly Cobb residents, to accommodate ballpark traffic the projects weren’t designed for, since the capacity is being given to the Braves.

    Using Cobb County reasoning the stadium would be a good fit in the Perimeter Center area if there were vacant land available, what with all the transportation improvements like the DDI recently completed there.

  3. Loren says:

    The part of the MOU that is liable to really hurt Cobb in the long-run is down in Paragraph 9: the “Capital Maintenance Fund.” At last week’s town hall meeting, Tim Lee claimed this would cost the county about $1.5 million a year.

    Now even at that price, that’s $40 million over the term of the lease. But could anyone seriously believe that it’s going to cost *only* that much? The MOU says the maintenance fund is to cover such features as seats and lighting; in other words, the exact sorts of things the Braves were just asking the City of Atlanta to pay $150 million for JUST THIS YEAR.

    If Cobb isn’t attentive in negotiating this term in the final agreement, and assuming they haven’t already blown their opportunity at limiting this clause, they could easily find themselves on the hook for upwards of $100 million just in maintenance costs. That money’s gotta come from somewhere, and the county’s been largely quiet thus far just about the *existence* of this clause.

  4. TomC says:

    Dear citizens,
    The cost of employing “workers” is $10/hour.
    Signed,
    Someone that has never employed “workers”.

    • analogkid says:

      I’ll bite. What’s your fully loaded hourly cost for part time employees working a parking lot? $20/ hour? Doesn’t change the math much, particularly if you consider that the Braves currently charge $15 for parking, not the $10 listed above.

  5. Mark_M says:

    I believe the author, Stefan, and the commenter, Loren, put their hands on one of the major problems. However, they understated its magnitude.

    This is from the Atlanta Business Chronicle on November 11:

    “Mike Plant, the Atlanta Braves’ executive vice president of operations, said the team had been considering its future since 2005, knowing its lease at Turner Field would run out by the end of 2016. Plant said the Braves invested $125 million in Turner Field and would have to spend another $150 million in “back-of-the-house” improvements just to keep the facility in good working order.

    Plant said it would have cost another $200 million to significantly enhance the fans’ experience.”

    Section/Paragraph 9 contains provisions that obligate the County to share 50/50 in capital improvements to maintain the stadium as a competitive MLB facility. Essentially, The Board of Commissioners has agreed to participate in stadium “arms races.” So as other teams add stadium features, the Braves can claim a need to maintain competitiveness, and obligate the County to share in the funding of improvements. This is in addition to the Capital Maintenance Fund for the Capital Maintenance and Repair items set forth in Exhibit B (of which many items look like ordinary operating expenses).

    Those numbers mentioned above by the Braves’ Mike Plant are probably a reasonable starting point for creating an estimate. Assuming the $200M is needed to have a competitive MLB facility and the $125M + $150M represents capital maintenance and repairs, the total of those numbers is $475M for a 17-year-old Turner Field. The new agreement, with optional extension, could last up to 35 years. Doubling that figure would not be an unreasonable estimate for the new Stadium: $950M. That puts the County on the hook for $475M, which is an additional annual cost of $13.6M using 35 years as term (assuming the optional extension is exercised).

    Everything will be great during the first few years of operation in new stadium. As the stadium ages and other teams add new features to their stadiums, I would expect to see demands for capital improvement starting between years 5 and 10.

  6. Mark_M says:

    In this morning’s Atlanta Business Chronicle:

    “He did see that a couple of changes had been made in the MOU. Lee said the Atlanta Braves had agreed to a $35 million cap on the county’s share of the “capital maintenance fund.” Maintenance costs previously did not have a cap, and Cobb County and the Braves would have split those expenses.”

    See more at: http://saportareport.com/blog/2013/11/cobb-commission-welcomes-atlanta-braves-stadium-in-4-to-1-mou-vote/#sthash.j4IDNUle.dpuf

    It’s not clear if this cap also includes capital improvements.

  7. Jon Lester says:

    I think we all know that those who identify as “conservative” in Cobb County are not, in fact, primarily motivated by what the proper role of government should be, and I don’t think I have to say what their first concern really is.

    • seenbetrdayz says:

      With liberty, justice, and sporting events for all.

      How soon people forget that the prime reason for independence from Great Britain was a disagreement over where the Boston Red Sox should build their stadium.

  8. Ellynn says:

    Naming rights can have other clauses that can effect the price. Example, Miller Brewing is one of only two neighbors the Brewers’ stadum has (the other being a cemetery). If you stand in the parking lot of the stadium all you see is a 8 story set of grainery tanks painted like beer bottles and the huge Miller Highlite logo on the top of them. They are paying for the name and to make sure no other beer company can have their name of the building next to them. They are also paying to make sure no other brewery has a naming or selling right to anything else in the stadium.

    What major company is located near the site? That’s who is going to give you the best contract.

    • Michael Silver says:

      Pepsi …. vs. Coke which didn’t want to have any Olympic events in Cobb including the torch run.

      Lowes …. vs. Home Depot whose founder owns the Falcons and which didn’t think about locating in Cobb.

      Accuweather …. vs Weather Channel which is nearby

      Kia …. vs ford or Government Motors who both closed sizable plants in Georgia

      Southwest ….. vs Delta

      There are lots of options. Its important to note that the stadium and company’s logo will be seen from the interstate so the number of eyes seeing logo has much value.

  9. Three Jack says:

    Big win for Cobb! Growing up in this county, I recall most of us being pretty excited whenever we were able to expand and grow. Perfect example is the Cobb Galleria Centre which when announced seemed like an absolutely crazy idea. But it worked and the county/region benefited greatly from this risky public/private development. The Braves announcement is an even bigger project that should be something Cobb County residents rally around. In the long run, this will be seen as a major accomplishment for the county and Commission Chairman Tim Lee.

  10. Al Gray says:

    OK, if this is “an analysis of the Memorandum of Understanding between the Braves and Cobb County. ” where is the link to the MOU? All I see are some comments based upon “Atlanta Braves
    and Cobb County Major Deal Points Summary”

    BTW, here is a link to it that works-

    http://mediad.publicbroadcasting.net/p/wabe/files/201311/Braves-Cobb-MOU-Summary.pdf

    If you can’t see it and read it, you don’t have it. This is very important because, as with the Falcon’s MOU, what was in the summary and what was in the details was significantly different.

    • John Konop says:

      Do not worry one of the Cobb commissioners voted yes because she does not think you need to weigh risk of tax payers money just have faith. I wonder if she invest her own money that way?

      • Al Gray says:

        I wonder if any of them would contract to build a duplex in a partnership with the other resident and let him/her design the place! This is what the Falcons and Braves are being allowed to do. Heck, give me control of design of the stadium and let you be obligated to run utilities and build improvements to meet my design and I will shift $50 to $150 million to you from me.

        As for ‘analyzing’ an MOU summary, the Braves are following the same gambit that Mayor Reed did with a similar ‘Summary’ of that Falcon’s MOU, which said costs were capped at $200 million, a figure which the AJC and other misguided reporters, like Maria Saporta, repeat with abandon. The funding portion of the Falcon’s agreement with the City says the funding shall be “not less than $200 million.” Anyone believing there is no difference there has not been in business or has experience with lawyers!

  11. SmyrnaModerate says:

    They aren’t building anywhere near 10,000 parking spaces at the stadium itself. Remember the plan is to have everyone park at existing office parks and Cumberland Mall (never mind that none of these private entities have said they have any intention of allowing this to happen) when they will then board some form of tram to go to the stadium. I find it amusing that the Braves as the were leaving town were making such a fuss out of GA State not vacating the Turner Field lots at 5 pm on opening day as part of how shabbily they were treated by the City and the Stadium Authority. Believe it or not, most workers at all these office parks they intend to utilize don’t leave at 5 pm every day. Its going to be extremely difficult for people to be able to “experience” this ballpark for hours before first pitch when they can’t park in spaces already filled up with office workers.

    I’m also amazed at all these press releases pointing out G-DOT is rebuilding a bridge over the River at US 41 as if this is some amazing thing that will help traffic to the new stadium. They are simply replacing the span over the River, US 41 is still just the same 2 lanes in each direction on either side of the bridge it has always been. Yes theres a “plan” to widen the Cobb side of 41 but there’s plans for hundreds of road projects there isn’t any more money for either…

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