This is an archived version of a Field of Schemes article. Comments on this page are closed. To find the current version of the article with updated comments, click here.
November 08, 2011
Red Sox earning $5m a year windfall on city handover of Fenway streets
The Boston Globe ran a long article yesterday by some Northeastern University journalism students (sadly, now behind the Globe's subscription paywall) that investigated a fascinating topic: How much has being granted control over the streets around Fenway Park on game days been worth to the Red Sox. Their answer: oodles.
Over the last nine years, the Boston Red Sox have increased their revenue by an estimated $45 million through the use of two streets that city officials handed over for a relative pittance: an average of $186,000 a year in lease fees.
Every home game, the Red Sox close off Yawkey Way, where thousands of fans congregate and, over time, spend millions at concessions before heading into the park.
Around the corner, the team has turned the air rights over Lansdowne Street into 269 expensive seats and 100 standing-room spots atop the Green Monster.
The leasing agreement, whose details have never been publicly reported, has been a bonanza for the Red Sox, because the city set the lease fees without taking into account how much money the team could make from use of the properties.
If the city had demanded a portion of the revenues, as is common in commercial ventures, the team would have paid the city millions more over the first nine years of the 11-year lease, according to industry estimates and an examination of city records.
For the math-phobic, $45 million over nine years amounts to $5 million a year in new revenues for the team from expanding out into the surrounding streets — which were declared "blighted" in 2002 by the Boston Redevelopment Authority and turned over to the Sox — for which the city is only collecting $186,000 a year in rent. The good news: According to the Globe report, the Sox' ten-year lease on the streets expires in 2013, and BRA director Peter Meade is currently seeking to renegotiate the deal to get the city a cut of the added revenues.
Still, it's yet another sign of the hidden subsidies that Judith Grant Long has noted add an average 40 percent to the public price tag of stadium projects. Something for Rahm Emanuel to keep in mind the next time Chicago Cubs owner Tom Ricketts asks if he can set up a game-day shopping mall on Sheffield Avenue.
Article is still available on their mobile site:
mobile.boston.com/sports/baseball/redsox/articles/2011/11/07/streets_use_a_sweet_deal_for_red_sox/?sp=1&search=yawkey+way
Posted by MikeM on November 8, 2011 11:50 AM
Seems like Boston was taken for a ride here, but the counter argument is, "what value does that land have to anyone else?". Maybe it is a lot, but this seems to be one of those cases where nobody except the Red Sox wanted to do anything with the land, anyway. Asking for a king's ransom in lease fees now that it's successful seems like dirty pool.
Posted by Ben Miller on November 8, 2011 09:29 PM
"dirty pool"? Pretty funny to apply that phrase to the public side of a stadium issue. More like "performing your fiduciary responsibilities as a city employee". Anything less is a fireable - and perhaps criminal - offense.
Getting what the market will bear is a pretty basic concept of capitalism.
Posted by Keith on November 9, 2011 06:52 AM
Ben:
It's not dirty pool, it's just business. If you rent out new or vacant commercial property, you'll often do a sub market lease for the first year or two to allow the tenant to establish the new business. Once that lease is up, if the venture is successful, the price rises. Boston has lost significant revenue by giving the Sox that length of lease at such a low price. That should not continue.
Dirty pool would be refusing to renew the lease at anything less than the $5m the Red Sox are currently earning from the land.
A fair deal would be increasing the base payment to $500k, then taking somewhere between 5-10% of the net proceeds on top. That might even go some small way to paying for extra policing required for Red Sox games...
Posted by John Bladen on November 12, 2011 11:53 PM
Not living in Boston, I don't know what the local sales taxes are...so, how much has the city collected in taxes on these increased sales over the last 10 years. Certainly multiples more than $186,000/year; infinetly more than the $0 they collected before someone other than they came up with a profitable use for the area.
Also, I remember reading that the team already pays for extra policing during game days.
Finally, governments do not practice capitalism, and do not extract money based on market forces. They confiscate money, ultimately by force if need be.
Posted by Vic on November 15, 2011 06:45 PM