Private company’s stupid plan to build new D-Backs stadium falling apart, because it was stupid

The bizarro plan to have private investors buy Chase Field, home of the Arizona Diamondbacks, from Maricopa County and maybe build a new one already wasn’t going well when the putative investors never showed up to any meetings, though they did have their lawyer send a letter to the local newspaper. And now it’s really not going well, as recounted by the Arizona Republic’s Rebekah Sanders:

  • The Diamondbacks undermined investors by releasing to The Republic notes from a discussion that Stadium Real Estate Partners II had asked to remain confidential. According to notes by an attorney representing the team, attorneys representing the investors criticized the “structural integrity” of Chase Field and the anticipated high cost of repairs — as much as $180 million. Touring the ballpark “scared the s*** out of” the investors, according to the notes. “Putting money in this aging facility is a waste.”

  • The investors hoped to use the Government Property Lease Excise Tax incentive program to avoid millions of dollars in property and excise taxes on a new stadium, according to the notes. No property taxes are currently paid at Chase Field since a government entity — the county — owns the land.

That’s a lot of tea leaves to read, but it sounds like: 1) the Diamondbacks owners are more interested in making a case for their stadium upgrade demands than for a sale plan that was the county’s idea in the first place, and 2) the private investors didn’t really know what they were getting themselves into, other than “hey, let’s get a stadium and get subsidies for it somehow,” which is working the D-Backs owners’ side of the street.

The problem remains much the same one as with Donald Trump’s infrastructure privatization scheme: If a project isn’t making any money, just shifting it from public to private hands isn’t going to suddenly make it more profitable, unless there are new subsidies involved. The only real hope for this stuff is that you find a private developer who’s able to come up with an innovative way of making money that the government hadn’t thought of (not likely, but possible) or who’s dumb enough to throw money at a gamble that’s likely not going to pan out (also not likely, but possible); the danger is that either you have to subsidize the project up front, or that the private entity goes belly-up and leaves its public partner holding a half-billion-dollar bag, which is all too possible. So it might actually be easier for all concerned if these private buyers bail on the plan, and just leave the D-Backs owners and the county to keep fighting it out over who’ll spend on what — if nothing else, that kind of subsidy battle is way easier to understand.

UPDATE: The plan is now totally dead. In lieu of flowers, send ideas for fixing Shelby Miller.

Shadowy developers say they’ll build new D-Backs stadium without public funds, don’t say how

What is this, mysterious private developer interest in rebuilding sports venues week? The private group that expressed interest in buying the Arizona Diamondbacks‘ Chase Field from Maricopa County then didn’t bother showing up for any meetings to discuss the plan have instead taken their case to the Arizona Republic:

“For decades the Arizona taxpayer has funded billions of dollars for the construction and renovation of stadiums and arenas,” wrote Nick Wood, a Valley attorney for the private investors, Stadium Real Estate Partners II LLC. “Today, my client, together with real estate developer Egbert Perry, Chairman of Fannie Mae and President of Integral Group LLC, has stepped up to relieve the taxpayer of that extraordinary expense and seeks to not only purchase Chase Field, but to also construct a brand new, state-of-the-art, downtown baseball stadium for the Diamondbacks using all private money.”

What’s undisclosed: the proposed location of a new stadium in downtown Phoenix, when construction could begin and the cost, which likely would run to the hundreds of millions. Wood would not clarify any of those questions.

So, yeah. This is a complicated three-way dance between the county, the D-Backs owners, and these would-be private stadium developers, but so far we’re barely at the dueling press releases stage. Promising a brand-new stadium with all private money is certainly a great way to get attention — and hey, if it’s for real, more power to them. If anyone here thinks it’s likely to be for real, please raise your hand. Then see me after class for a remedial lesson in sports venue operations financing.

Turns out nobody actually wants to buy Diamondbacks’ stadium, oops

The crazy-ass plan for Maricopa County to sell the Arizona Diamondbacks‘ Chase Field — which the Diamondbacks owners want either upgraded or replaced or they’re threatening to move — to some out-of-state investment bankers turned out to be even more crazy-ass than anyone expected, as the potential buyers haven’t even shown up to any meetings to discuss a sale price. Apparently a used stadium with an angry tenant who has to approve your purchase and probably won’t isn’t a hot commodity among real-estate investors, who knew?

Instead, the county may hire an outside firm to appraise the stadium and its surrounding land, to see if its $60 million asking price was reasonable. Which, sure, go for it, Maricopa County. But it’s still hard to see how shifting ownership of the stadium resolves the underlying problem, which is that D-Backs owner Ken Kendrick is demanding at least $187 million in stadium upgrades, mostly for things his lease says he has to pay for, a battle that is likely to end up in court. Maybe the county should sell the stadium to a bunch of lawyers — at least they’d guarantee themselves lots of billable hours.

County okays pursuing D-Backs stadium sale, lacks only all details about everything

Going into yesterday’s Maricopa County board meeting on the possible sale of the Arizona Diamondbacks‘ stadium to a private investment firm, two of the big questions were: Could the county craft a deal that the Diamondbacks owners, who have the right to block a sale, would approve? And would any public money be required?

Coming out of the meeting, the Arizona Republic reports:

The Maricopa County Board of Supervisors voted unanimously Wednesday to move forward with negotiations to sell Chase Field, the downtown Phoenix home of the Arizona Diamondbacks, to private out-of-state investors…

But the county vote raised several key questions that went unanswered, including whether the team would support a sale and whether a taxpayer subsidy would be included.

Yeah, we’re cooking with gas now!

County supervisors told the Republic that the deal would extend the Diamondbacks’ lease through 2028, which sounds awfully presumptuous given that nobody’s actually talked to the team owners about this. The paper also reports that “the buyer would be required to reach a deal with the team within the first two years of the contract to pay for capital repairs over the life of the stadium,” which seems nuts — if the two sides just stare at each other saying, “You pay for it!” “No, you!”, what happens, do the buyers go back to the county for a refund?

On the subsidy front, supervisor Andy Kunasek, who you’ll remember from his profanity-laced “go to West Virginia” tirade in response to the D-Backs’ subsidy demands, raised the possibility of giving the private investors either a property tax exemption or a kickback of sales taxes, which apparently he doesn’t think would be “parasitic” if it’s someone other than the Diamondbacks owners getting it. (Maybe he’s still pissy over the Shelby Miller trade?)

Of course, all this is still in the very early stages, so it’s probably best not to think of anything as more than a harebrained scheme that somebody threw out there to see if it’ll stick. I mean, listen to this, from the Republic:

New shops, restaurants and hospitality services could spring up at the ballpark, as the buyer seeks to develop the site into a sports and entertainment “destination.” Among the ideas: Add retail and dining to the open plaza outside the stadium and within the stadium by reducing the seating capacity from 48,000 to 30,000.

This is for a stadium with a retractable roof, mind you, so it’s not like you can easily reduce the building’s footprint in order to jam in more steakhouses. I guess you could rip out all the seats down the left-field line and build a giant sushi bar or something, but that doesn’t seem like a much better idea. Besides, do you really want people eating raw fish before having to watch Shelby Miller?

County to D-Backs: If you’re going to be that way, maybe we’ll just sell your damn stadium

I learned long ago never to be surprised by anything that happens in the stadium world, but this is just bizarre:

The Maricopa County Board of Supervisors is contemplating selling Chase Field in downtown Phoenix to private, out-of-state investors, and will meet Wednesday to vote on initiating negotiations.

The starting point for the proposed deal, made public Tuesday, is a $60 million sales price. It would include keeping the Arizona Diamondbacks at the stadium through 2028 — the remainder of the team’s contract with the county — and potentially longer. A draft contract showed the county would retain a handful of perks like a stadium suite and premium parking, despite no longer owning the building.

Okay, let’s walk this back. Maricopa County, you may recall, is in the middle of a big-as fight over whether the public will pay for at least $187 million in improvements to the Diamondbacks‘ 18-year-old stadium, as the team owners want, or the team will pay for them if it wants them, as the county’s study that identified the wishlist spells out. Now, it appears, the county is preparing to wash its hands of the whole place and sell it to a shadowy investment group called Stadium Real Estate Partners II LLC, which has ties to investment banker Sorina Givelichian and Fannie Mae board chair Egbert Perry.

Givelichian and Perry don’t sound certifiably insane, so it’s hard to say why on earth they’d want to take on the stadium, since it’s unlikely they’d earn back even a $60 million investment, especially if the Diamondbacks make trouble with their lease, which they’re already doing. The investors issued a letter saying they hoped to create “a sports and entertainment district surrounding the facility [that] would further complement and enhance the downtown area and increase tax revenues within such sports and entertainment district,” which is a lot of nice verbiage but doesn’t exactly explain where the district would go or how big it would be — it’s a pretty tight squeeze around the ballpark, so does this mean them buying adjacent parcels or what? (The buyers’ letter of intent says the purchase would include stadium parking areas, but the page that’s supposed to show a map of the parcels is blank.) And does that “increase tax revenues” line presage a request for TIF tax kickbacks, or is it just a way to sweeten the pot for county board members voting on this?
It’s all extremely weird, and almost feels like a gambit by the county — keep threatening to sue us and we’ll just go ahead and sell your stadium — except then what’s in it for Givelichian and Perry? I really hope there’s more info after today’s county board meeting, because so far this doesn’t make a whole lot of sense.

Phoenix mayor: Don’t listen to county supervisor, we’ll “facilitate” stadium upgrade

To anyone still all excited about yesterday’s revelation that the lead elected official of Maricopa County told the Arizona Diamondbacks owners to take their subsidy demands and shove them, Phoenix Mayor Greg Stanton is here to let the world know that some Arizona politicians are still going to stand up for truth, justice, and the American way of offering whatever it takes to the local sports team owner if they please, please won’t even consider moving out of town:

Stanton said a letter to county officials from team president Derrick Hall, revealed Monday by The Arizona Republic, was a surprise and should not lead fans to believe Phoenix has lost interest in a compromise that does not cost taxpayer money…

“Any impression that was left that the City of Phoenix wasn’t interested in keeping the Diamondbacks in downtown Phoenix for the long haul is inaccurate,” Stanton said. “I’m willing to roll up my sleeves and get to work to keep the Diamondbacks.”…

Stanton said he reached out to the team Monday to offer assistance: “We stand ready now and into the future to facilitate a long-term solution to this situation if we can be helpful.”

That bit about “does not cost taxpayer money” sounds somewhat promising, though somewhat less promising when you consider that Stanton has previously said that building a new arena with tax money doesn’t count as tax money if it’s tax money that the city is already collecting. Mostly, it looks like Stanton was just reacting to D-Backs president Derrick Hall’s letter saying that the team would proceed on the assumption that neither the county nor city wanted to renegotiate the team’s stadium lease, with the mayor saying, “No, no, we’ll talk! Don’t listen to that crazy guy in county government!” Which totally undermines any attempts by the county to hold a hard line, yes, but in America that’s what we call statesmanship.

Arizona official calls baseball “parasitic,” tells D-Backs owner “go to West Virginia”

To recap briefly the Arizona Diamondbacks‘ stadium squabble: In March, team execs sent a letter to Maricopa County, saying if they didn’t get $187 million (or maybe more) to upgrade (or maybe replace) their 18-year-old stadium, they’d sue to break their lease and move. In April, county officials wrote back that most of the $187 million in proposed upgrades in a 2013 county study was for things that the lease explicitly says the team should be paying for, so seriously, guys?

That should be enough epistolary bad blood for anyone, but the Arizona Republic just turned up another letter, this one from County Supervisor Andy Kunasek to Diamondbacks president Derrick Hall in April that included some remarkably pungent language for an official missive from a public landlord to its whiny tenant:

Your slanderous public comments and attempts to rewrite history demand a response. The false narrative you are trying to sell impugns the character and competence of many dedicated people who have worked diligently to protect the interested taxpayers who paid for and own the stadium…

My instinctive concern for the taxpayer is amplified by my belief that this facility should never have been built using taxpayer funds, and to turn the music up louder, THEY WERE NEVER GIVEN THE OPPORTUNITY TO MAKE THAT DECISION AT THE BALLOT BOX. I have no intention of compounding that wrong by supporting your obscene demand that we provide another massive infusion of taxpayer money to the private business that currently employs you…

As for your business, profession baseball is evolving into a parasitic enterprise which is well on its way to destroying its host. … I suggest that you focus on your job, which should be the development of a success product (a winning team), which will improve the fan experience and in turn, will increase ticket sales and reignite a desire for people to attend and watch professional baseball in Arizona. Or, if you want, run for a seat on the Maricopa County Board of Supervisors. Maybe you can become the personal valet your owners want on the Board. Please quit trying to do both jobs.

Boom! And if that weren’t enough, the Republic reports that Kunasek hand-delivered the letter, and added a few more choice words at the time:

As Kunasek delivered the letter to the team, he directed a profanity-laced storm at Hall, calling on owner Ken Kendrick to “take your stupid baseball team and get out” and go back to “f–king West Virginia,” according to team notes that Kunasek does not dispute.

Kunasek, a fiscal-responsibility Republican who’s been in office since 1997, has already said he’s not running for re-election this year, so this was an opportune time for some venting. As for what it’ll mean for the Diamondbacks’ future, Hall wrote back with a long letter about what the Diamondbacks allegedly do for the local economy, and concluding:

Your candor with respect to this issue will cause us to move forward in a different direction from what we had anticipated and hoped, and where we had tried to find resolution in the past to no avail.

So that’s a threat, albeit probably an idle one unless Hall and Kendrick really think they can win a court case to break their lease, which seems questionable at best. More likely they’ll wait to see who’s on the county board after November, and see if they’re more willing to play ball. Kunasek certainly set the battle lines for any future stadium talks, though, which isn’t bad for a parting shot after 19 years on the job.

County to D-Backs: Most of $187m in upgrade demands is items team agreed to pay for

Maricopa County responded to the Arizona Diamondbacks owners’ demands for at least $187 million in improvements to Chase Field plus maybe additional tax subsidies with a letter of their own this week, which you can read in its entirety here. The key bit, though, is this:

Screen Shot 2016-04-12 at 3.17.25 PMTranslated, this means: Okay, you keep saying our 2013 study of possible repairs/improvements to Chase Field lists $187 million in needed work. But $55 million of that is your own operations and maintenance expenses, and another $90 million is wish-list stuff that is explicitly excluded from the county’s obligations. So, WTF?

I also asked a county representative about that “Non-Obsolescence Fund” that the Diamondbacks can draw on if they agree to extend their lease: Right now it has a whopping $460,000 in it, so that’s not really worth worrying about.

To my knowledge, D-Backs execs haven’t yet responded to this letter — but then, they wouldn’t need to, if their concern is less legal niceties than trying to drum up an urgency to fix their stadium situation out of thin air. Whether Maricopa County stadium officials see this as a crisis or not, the media certainly does, which means elected officials are likely to as well, and that can be enough to set the ball rolling on hundreds of millions of dollars shifting pockets. A contract may be a contract, but when you’re seen as a 700-pound gorilla, you don’t need to sweat the fine print.

D-Backs CEO: Give us rent breaks and other goodies, and maybe we’ll consider staying till 2027

Arizona Diamondbacks CEO Derrick Hall issued a new set of demands yesterday in the team’s attempt to break its stadium lease, and they are simultaneously convoluted and pretty clear in their intent to fund Chase Field improvements and/or replacement with somebody else’s money:

  • The Diamondbacks would get a “significantly” reduced rent from the $4 million a year it currently pays to Maricopa County, plus take over booking all non-baseball events at Chase Field (and keep the revenues from those).
  • In exchange, the team would take over responsibility for projected “repairs and enhancements” at the stadium, which Hall has estimated at $187 million, though it’s not like he’s provided an itemized receipt.
  • The county would hand over the stadium to the city of Phoenix, which unlike the county stadium district has the power to raise taxes and sell bonds to either renovate or replace the 18-year-old stadium.

The rent-for-upgrades swap is clearly meant to be a way of distracting attention from team ownership’s demands: Oh, we don’t really want public money, in fact we’ll relieve you of this $187 million obligation we decided you had in exchange for us not giving you rent payments and a share of non-baseball revenues, like we promised when taxpayers built this thing for us in the first place. The county-to-city shift, though, is potentially even more dangerous, since it raises the specter of more subsidy demands to come, probably as the D-backs’ 30-year lease draws to a close in 2027. (Hall did not suggest that he’d agree to a lease extension in exchange for these concessions, because why would he?)

As I detailed at Vice Sports last week, the Diamondbacks’ lease doesn’t actually have a state-of-the-art clause requiring the county to provide upgrades or let them walk — the closest it comes is a clause that the county must provide any capital repairs necessary “so that [the stadium] is safe and can readily be made available for the playing of Home Games,” which probably wouldn’t require $187 million. This latest missive from Hall makes it all the more likely that the team’s nastygram to the county is less legal missive than, you know what, let me just quote myself:

For most team owners, though, the point of state-of-the-art clauses isn’t even so much about legal language as it is about shifting the debate around replacing nearly new stadiums from “What the hell are you talking about?” to “I suppose we’ll need to address it sooner or later.” Looked at that way, the Diamondbacks’ letter makes a lot more sense: though the team owners included the requisite threat of legal action (“If permission is not granted [for the team to move if it decides upgrading Chase Field isn’t feasible], we will ask the Court for all appropriate relief”), the real goal was to start the conversation about replacing Chase Field at public expense, to ensure there would be no danger of having to play in a stadium that’s past its Carrousel age.

“What can the government do about the crisis that the Diamondbacks are stuck in an 18-year-old stadium?” is now a thing that the public and media are expected to debate like it’s sane. Be afraid, be very afraid, for there are a hell of a lot of other stadiums that were built in that late-’90s sweet spot, and it’s not just the D-Backs and Cleveland Cavaliers owners who are going to be sniffing around for ways to ways to get back on line at the trough.

Diamondbacks owners to taxpayers: Give us blank check to upgrade 18-year-old stadium, or we’ll sue to move

Hold onto your hats: The owners of the Arizona Diamondbacks have issued an ultimatum to their Maricopa County landlords, saying unless taxpayers agree to upgrade or replace 18-year-old Chase Field, they could move the team out of town.

We are not prepared, nor are we willing (or obligated), to expend $187 million, or any monies, to solve the deficiencies the District acknowledges exist.

So there is not misunderstanding, we would very much like to remain in downtown Phoenix. However, if the District makes that impossible, the principals of the Diamondbacks will look elsewhere.

Now, there’s one small problem with the D-backs threatening to bolt Phoenix: They have a lease that requires them to stay put through 2028, and prohibits them from even talking to other cities until 2024, a la the old Tampa Bay Rays lease. To get around that, the team owners repeatedly cite the need to maintain a “state-of-the-art facility,” something they say the county is failing to do by not spending that $187 million for upgrades to such things as lighting, improved luxury suites and scoreboards, and enhanced video surveillance. The problem with that is that the county doesn’t appear to have actually put a state-of-the-art clause into the Diamondbacks’ lease — something team officials try to get around by listing all eleven times that the county mentioned a “state-of-the-art facility” in its annual financial reports:

Screen Shot 2016-03-25 at 7.21.18 AMWe’d already heard hints that the Arizona Diamondbacks execs might be seeking upgrades last month, when team CEO Derrick Hall declared Chase Field to be “too big” for the ideal modern baseball stadium. (Translation: Fans won’t run out and buy high-priced tickets ahead of time because they know there will always be plenty available.) The new letter significantly ups the ante, though, declaring that even $187 million in needed upgrades wouldn’t be enough:

Even if the District had been able to identify adequate financial resources to fund the $187 million anticipated maintenance and repair costs, it would make no economic sense to make that investment in what would then be a 30-year-old facility. This should not rule out the possibility of retrofitting Chase Field if it is determined to be the best option. However, the $187 million would cover only basic maintenance and repair costs. It would do very little to upgrade the stadium to a “state-of-the-art facility” — it would mere enable an aging building to remain open.

The letter also includes much whining that team owners spent all this money on this stadium that their team plays in and they get all the revenues from, and this is the thanks they get? Oh, and that “if permission is not granted [for the team to move if it decides upgrading Chase Field isn’t feasibly], we will ask the Court for all appropriate relief.”

In short, then, this is a shot across the county’s bow: We know we have a lease, but we think you should pay untold hundreds of millions of dollars to upgrade it or maybe replace it, or else we’ll move, and if you won’t let us move, we’ll sue you. It’s the mother of all nastygrams, and like all such missives, it’s meant less to spell out legal niceties than to intimidate the recipient into talking about ways to make the issue go away. If the public discourse around the Diamondbacks’ stadium demands shifts in coming weeks from “Wait, didn’t we just build them one?” to “How much does the public have to spend to keep the team owners happy?” then you’ll know it has done its job.