Friday, May 21, 1999
Reds, county will sign lease today
30-year deal says ballpark opens in '03
BY LUCY MAY
The Cincinnati Enquirer
Hamilton County and the Cincinnati Reds will announce this morning a new lease on life for professional baseball's oldest team. The 30-year lease deal between the county and team provides the financial framework for a new $297 million riverfront ballpark to open in 2003.
Team leaders expect the new ballpark will bring as much as $24 million a year that will help the financially fragile Reds field a better team in one of baseball's smallest markets.
The completion of this lease is critical to our long-range future, said Reds Managing Executive John Allen, the team's chief negotiator. The financial terms are good when you compare it to other baseball deals. But no one should read into this that just because we got this lease signed we're going to go out and sign a lot of free agents.
County Commissioner Bob Bedinghaus said the signing of the lease is much bigger than the ballpark itself: What the Reds lease signifies to me is that we have finally solidified Cincinnati's riverfront for generations to come.
The deal comes at a time of dramatic change for the franchise.
Just last month, Cincinnati financier Carl Lindner and two other limited partners in the Reds signed an agreement with suspended CEO Marge Schott to buy her controlling interest in the team for $67 million.
The new ownership, expect ed to be finalized next month by Major League Baseball, and the new ballpark offer the team the stability it has lacked during Mrs. Schott's tumultuous 15-year tenure.
We think it's a very good lease, and we're excited to get into the new stadium, said a source close to the new majority owners.
Ironically, it was Mrs. Schott's signature on the lease what promises to be one of her last official duties as the team's majority owner that helped secure that future.
County commissioners will vote next week to authorize County Administrator David Krings to add his signature to Mrs. Schott's and Mr. Allen's, Mr. Bedinghaus said, adding that he expects the vote to be unanimous.
Mrs. Schott and Mr. Lindner are expected to join Mr. Bedinghaus, Mr. Allen and County Commission President Tom Neyer Jr. for this morning's announcement.
Terms of the lease, obtained Thursday by the Enquirer, mirror a tentative stadium deal reached in July. But, unlike the July deal, the lease is legally binding.
Also, the Reds lease spells out the maximum contribution the county is willing to make to the project in much clearer terms than the county's stadium deal with the Bengals.
The deal to build the new Paul Brown Stadium complex has been widely criticized for its $404 million price, which includes land, the team's practice fields and some infrastructure costs.
The county used the maximum county contribution language in the Reds lease to make clear to the Reds we're not going to build them a $400 million stadium, said Mr. Krings, the county's lead negotiator.
Added Mr. Bedinghaus, This is the second time we've been through this. We certainly learned a little bit from our first time.
In the 30-year lease with the Reds, Hamilton County agrees to contribute $235 million in constant dollars toward the new ballpark. That figure is in 1998 dollars that will be adjusted for inflation, however, and it doesn't include costs for land acquisition, parking or demolition of Cinergy Field.
Another county estimate puts the total cost of the ballpark at $297 million, which includes money for partial demolition and other site work but doesn't include parking costs. That figure likely will change, too.
Architects haven't yet determined exactly what the ballpark will look like. Even the exact site hasn't been finalized, although team and county leaders agree it will sit just west of the Firstar Center in the spot known as Baseball on Main or the Wedge.
The site is complicated and will require partial demolition of Cinergy Field's parking garage and seating bowl while the Reds continue to play there. Architects estimate one-third of the 3,300-space garage will be razed along with up to 12,000 seats.
The new ballpark is expected to have a grass playing field and 45,000 seats, including 3,000 premium club seats and 51 luxury suites. The team is guaranteed 3,500 parking spaces for fans' use, although the details of the parking plan haven't been spelled out.
Major construction of the new ballpark won't begin until August 2000. That's when the reconstruction of Fort Washington Way is scheduled to be finished, freeing up part of the site, and when the Bengals move into Paul Brown Stadium.
In all, the new homes for the Reds and Bengals and the riverfront parking the county plans to build will cost $1.2 billion, including interest payments.
Hamilton County voters agreed to provide the bulk of the funding for the project in March 1996 when voters approved a half-cent increase in the county sales tax.
During that campaign, both stadiums were expected to cost $544 million. Even so, financing plans developed for the county show the sales tax increase will cover the higher cost of the project.
For the new ballpark, the Reds will contribute $30 million toward construction costs $10 million at groundbreaking, $10 million a year after groundbreaking and $10 million when the stadium is finished.
The team also will pay $2.5 million a year in rent for nine years a total of $22.5 million. For the other 21 years of the lease, the team will pay $1 a year in rent.
The county will decide whether to sell seat licenses for the new ballpark, although any such sales would be limited to premium seating like club seats, Mr. Allen said. Any money generated by those sales would be counted as part of the team's contribution.
In return, the team keeps all the revenue generated by the stadium from ticket sales, concessions, advertising and parking and gets the bulk of construction costs paid by the county.
The county also will contribute $1 million each year of the lease to a reserve fund to pay for any repairs needed at the new ballpark. The county must pay for any such repairs, even if the cost exceeds the amount in the reserve fund.
The county will give the team $500,000 a year to help cover the costs of operating and maintaining the ballpark. That payment will grow 5 percent each year for the life of the lease.
And, back in July, the county agreed to let the team off the hook for about $6.2 million in back rent and reduce the team's rent for its remaining years in Cinergy Field.
Still, Mr. Allen has argued that the team isn't getting a free stadium. Last September, during the campaign to determine where the new ballpark would be built, he argued the team would be paying more than $260 million toward the cost of building and maintaining the ballpark over the life of the lease.
In addition to the $30 million contribution to construction and $22.5 million in rent, the team will contribute the proceeds of the 25-cent ticket tax and will cover an estimated $7 million a year for operation and maintenance of the new ballpark.
Sports economists say the team got a pretty sweet deal from the county.
This is a very good deal for the team, said Andrew Zimbalist, a professor of economics at Smith College in Northampton, Mass. The team's contribution is smaller compared to other recent deals.
Most teams pay an average of 30 percent of construction costs, Mr. Zimbalist said. He added, though, that other baseball teams have gotten better deals in recent years, such as the Colorado Rockies, the Cleveland Indians and the Baltimore Orioles.
The Reds didn't get as good a deal as the Bengals either, although county officials have stressed throughout the negotiations that it's unfair to compare the deals of the two teams because the economics of the two sports are so different.
The Bengals contributed a total of about $50 million toward the project, which included revenue from the sale of personal seat licenses, their rent and proceeds from the 25-cent ticket tax.
The football team will pay $11.7 million in rent for the first nine years of the lease, and no rent after that. The team also got guaranteed revenues of $29.4 million in non- football revenue during the last nine years of its 26-year lease.
The county guaranteed the Bengals the revenue from 50,000 general admission tickets for each of the team's first 20 home games. If the team sells fewer than 50,000 tickets, the county will pay the difference.
And the county agreed to pay millions of dollars in late fees if the Bengals stadium is not finished by August 2000 as scheduled.
Mr. Allen sought similar provisions for the Reds with no luck. The Reds had requested $33.6 million in guaranteed revenues during the middle years of a 30-year lease and late fees of at least $300,000 per game if the new ballpark wasn't finished by the 2002 season.
Those were two elements that had made the Bengals' deal so attractive, but Mr. Allen said back in July, I had to put the blinders on and get the best baseball deal we could for this organization for the long term.
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