Category: Baltimore Orioles

The maybe-billion-dollar Baltimore Orioles renovation subsidy and development deal came to a screeching halt on Friday, at least for the moment, as Maryland Gov. Wes Moore canceled a planned announcement after state senate president Bill Ferguson raised objections:

“Fundamentally, I believe that the long-term lease for the use of the ballpark should not be conditioned on whether or not a private owner receives a 99-year ground lease to develop land owned by Maryland taxpayers,” Ferguson, a Democrat whose district includes the ballpark, told The Baltimore Banner. “This is more relevant today, as recent news has heightened uncertainties about the future ownership of the team.”

That “recent news” refers to reports that billionaire private equity goon David Rubenstein is in talks to potentially buy the Orioles from the Angelos family. Team ownership goon John Angelos has said he doesn’t intend to sell — among other things, if the family waits until his father, 94-year-old Peter Angelos, dies, they can evade capital gains taxes — but that apparently didn’t placate Ferguson, who either really doesn’t want to approve a giant development deal for a pig in a poke, or doesn’t want to approve a giant development deal at all and is using the team’s potential sale as an excuse to slam the brakes.

The Orioles deal was already getting weird, as Moore tried to get the team’s owners to sign a lease extension while the development fine print is still being finalized. As an inducement to that, a proposed revised deal would have handed the Angeloses $600 million (and more) in state money for stadium renovations approved last year, while giving the team and public officials four years to agree on a development plan; if they couldn’t work one out, the team owners, whoever they were at that time, would be able to break their lease after just ten years.

What happens now is unclear: Ferguson said in his statement that he’s “confident the parties will reach a fair deal before the end of the year,” which certainly implies that he has some modifications in mind that would placate him, but if so he didn’t divulge what they are. Nothing to do now but keep watching the tea leaves in the next week or two, and see whether this ends up being a game changer or merely a speed bump.

I don’t know how you spent your weekend, but part of mine was dedicated to going through 299 pages of documents I received from the Maryland Stadium Authority about how the state determined the Baltimore Orioles‘ annual lease payments for 2022. As you may recall, the O’s annual rent is calculated according to a complex formula — 7% of net ticket revenues, 7.5% of most concession revenues, 50% of net parking revenues, 25% of net ballpark ad revenues, 10% of suite revenues, and 7.5% of club seat revenues, among other things — and it’s been unclear how closely the state vets the team’s numbers for these items. So I filed a a public records request, and this is what I got back.

Let’s dive in and see what turned up:

The first 208 pages are just the Orioles’ lease at Camden Yards from 1992, much of which has nothing to do with rent payments. (Though it is fun in a way to learn things like that the Orioles had a separate agreement with Sony to provide “certain television and other video equipment” for the stadium.) Most of the good bits in that regard are in Article IV, which spells out that:

• Net admissions revenues are after deducting ticket taxes and revenue sharing with the league and visiting team.
• Concessions revenues are gross revenues paid to the team by its concessionaire.
• Net ad revenues are after deducting agency fees and commissions, plus “reasonable and necessary expenses” for building and installing ad panels.
• Net suite revenues are after deducting taxes and other suite payments like for tickets and parking that are covered elsewhere.

That’s all reasonable enough. The Orioles also have a state-of-the-art clause, though at least it’s limited to requiring that the stadium needs to be held to the “maintenance and repair standards” of the top 25% of baseball stadiums, not to have the amenities of the top 25%. Still, it does raise the question: If all stadiums have to be in the top 25%, what happens to the three-quarters of stadiums that are in the bottom three-quarters at any given time, given, you know, math? One would think that some stadium district lawyers might have thought of this, but then, knowing local government lawyers, maybe one doesn’t.

As for the reporting, the Orioles management has to provide the stadium authority with a written schedule showing how it calculated the team’s rent, prepared in accordance with generally accepted accounting principles. A sample report is included as Exhibit D, and looks like this:

Unfortunately, there are no examples of filled-out forms. And most of the rest of the documents are also from 1992, so aside from marveling at the one with signature spaces for both Larry Lucchino and Sargent Shriver, there’s not much else here. And the MSA’s cover letter probably explains why:

So, the Orioles pay rent based on their revenues, but those are confidential. Meaning you’ll just have to trust that the stadium authority is keeping track of them accurately, just like the stadium authority trusts the Orioles to fill out their revenue forms accurately. Trust! It’s the basis of all human interaction, and why we have never had need of things like “contracts” or “laws” or “oversight.”

Sorry if this is disappointing in terms of revelations, but look at it this way: At least you didn’t have to look at 299 pages of documents before getting to it. “Explaining Lack of Transparent Government Since 1998,” that’s our motto, at least since the better one was already taken.

One of the big questions surrounding the Baltimore Orioles‘ new sweetheart lease deal is how much the development rights to land surrounding the ballpark, which under the lease will be granted to the team owners for just $94 million of 99 years, is worth. Earlier this month I estimated that, along with absolving the O’s owners from paying rent in exchange for taking on maintenance costs, the land transfer could be worth more than $100 million — on top of the $600 million, and maybe even more than that in the future, that the Angelos family is getting in state cash.

But on Friday afternoon, the dead zone of the news week, the Baltimore Sun dropped an analysis that sheds more light on how much handing over Camden Yards’ famous warehouse to the team could end up costing taxpayers:

The stadium authority retained Crossroads Consulting and Entreken Associates Inc. in 2019 to provide economic advisory services regarding the historic, 430,000-square-foot building. The consultants’ report, obtained by The Baltimore Sun, said that if the warehouse is converted to a hybrid of retail, hotel, apartment, and/or office space — at a cost ranging between $16 million and $36 million — it could produce net operating income of $4.6 million to $7.1 million annually.

That’s a good bit more lost income than the $3.7 million the state got from renting out warehouse space in 2022. The Sun wasn’t clear if that projected net operating income would rise over time and if so how much, but even if it wouldn’t, we’re talking about between $70 million and $110 million worth of future revenue that the state is handing over to the Orioles. Add in maybe $40-50 million from the free-rent deal, and we’re suddenly looking at upwards of $150 million in lease revenue being transferred from the state to the Orioles on top of $600 million or more in state cash.

The Sun contacted a bunch of sports economists about what they thought of this deal, and none minced words:

• The team’s $94 million in payments over 99 years come to “a trivial amount of revenue,” says Geoffrey Propheter of the University of Colorado.
• It’s “a pitiful amount of money,” says Dennis Coates of the University of Maryland, Baltimore County.
• The foregone development income, meanwhile, is “a lot of money,” says J.C. Bradbury of Kennesaw State University. “This is essentially gifting the land to the Orioles.”

So to recap: The Maryland legislature approved with no public notice $600 million in cash for the Orioles, then tacked on what could be a bottomless pool of additional future state money, and now has added about $150 million in rent breaks and development rights. Whatever else you want to say about it, that’s some astoundingly bad negotiating just to get a mere 30-year lease extension that Angelos hasn’t even formally agreed to yet. I’m not sure what else the Orioles owner could even ask for at this point — residuals on reruns of “The Wire,” maybe? — but if he comes up with something, it’s a good bet that the state of Maryland will be quick to provide it.

The Baltimore Sun ran a long FAQ on the Orioles‘ not-actually-a-new-lease-deal on Tuesday, covering a lot of the same ground we did here on Monday. However, there were a couple new twists:

• Absolving the Orioles owners from paying rent on the stadium in exchange for the team taking on operating and management costs — the same deal as the Ravens currently have — is hard to calculate the exact costs of, because the team’s rent currently fluctuates year to year: “The baseball team’s stadium rent is tied to a formula reflecting the team’s attendance and other factors,” writes the Sun, and between COVID and the Orioles being godawful, “the rent paid by the Orioles had been relatively low.” But with the O’s now fielding a young, winning team, they “would benefit from stopping paying rent while they are drawing larger crowds.”
• The team’s new development deal for land around Camden Yards — which pretty much just amounts to the historic B&O warehouse alongside the stadium, the air rights over Camden Station, a small parking lot to the north of the station and a small plaza between the south end of the warehouse and the stadium’s Lot A — would mean the state would no longer receive rent from the warehouse, something that currently amounts to “several million dollars a year.”

Neither of those reports is too specific about the actual numbers, so let’s see what we can find out. On the stadium rent front, Marquette University’s sports lease database reveals that the formula is indeed extremely complex, amounting to 7% of net ticket revenues, 7.5% of concession revenues (with a whole ton of exceptions, including “four and one-sixth percent (4-1/6%) of concession revenues from catering provided in the Private Suites” and “two and one-half percent (2-½%) of concession revenues from the sale of specialty novelties”), 50% of net parking revenues, 25% of net ballpark ad revenues, 10% of suite revenues, and 7.5% of club seat revenues. (Marquette doesn’t bother to define “net” of what, here.) Without a more detailed look into the O’s finances — which the Maryland Stadium Authority may have for purposes of making these calculations, feel free to file some FOIL requests, journalists out there — there’s no way to know exactly how much team owner John Angelos might save from being absolved from paying a share of revenues to the state while taking on about $3.2 million a year in maintenance and operating cost; given that the O’s paid $4.7 million in rent in 2022 even while barely drawing flies, though, Angelos’s savings are likely to be at least a few million dollars a year.

As for lost warehouse rent, the MSA financial report has that as well: The state took in $3.7 million from renting out space there in 2022, again a number that’s likely to rise in the future.

Even if we make a conservative estimate of future lost combined stadium and warehouse rent of about $7 million a year, that’s still present value of $100 million, pushing the total taxpayer price tag above $700 million. Plus we still don’t know what the development rights are actually worth that the team owners will only be paying a little under $1 million a year for, or any property tax breaks that may come with leasing the land from the state rather than owning it. It’s not impossible that this entire deal could end up costing Maryland taxpayers more than $1 billion, and it’s very likely to be close to that; enjoy having a winning team for all it’s worth, O’s fans, because the better the team is, the more this deal will end up costing you in tax dollars.

Baltimore Orioles management and Maryland Gov. Wes Moore announced their new Camden Yards lease deal on Friday as promised, and … it turned out not to be a lease deal at all:

Instead of a lease that will keep the team in Baltimore, the Orioles, Gov. Wes Moore’s administration and the Maryland Stadium Authority said Friday they have agreed to a “memorandum of understanding” — essentially an agreement on some issues and a promise to continue working toward a long-term lease.

The “memo of understanding” is not binding, but the sides say it’s all in the lawyers’ hands now and the focus should be back on the diamond for the playoff push.

Oooookay. So what exactly is in this non-binding MOU that is all over except for the lawyers hashing out, you know, stuff? Neither the O’s nor Moore’s office released any of the actual language, either, instead resorting to a summary that included:

• The lease extension, once it exists, will run for 30 years until 2054, with the option (on the team’s part, presumably, but this wasn’t specified) for two five-year extensions.
• “A 99-year development rights agreement for the areas surrounding the ballpark, including the Warehouse and Camden Station, to energize and revitalize the Camden Yards complex.” The Orioles will pay $94 million in rent for this, over 99 years.
• Shifting operations and management costs (currently about $6.5 million) from the state to the Orioles, though the state will make up part of this by paying the Orioles $3.3 million a year toward a “safety and repair fund.”
• Though not mentioned in the press release, Orioles owners the Angelos family will presumably now get to unlock the $600 million and maybe more in the future from a “revolving fund” in renovation money that the state approved last year.

How bad a deal is this for the public? Who the hell knows! The acreage of the redevelopment area surrounding Camden Yards isn’t specifically spelled out, for one thing (though see below), so we have no idea if $950,000 a year in rent is a reasonable fee or an outright giveaway on par with the Los Angeles Angels‘ failed land grab. If the Angeloses will be paying “rent,” that implies that the land in question will be owned by the state, which further implies that the team owners will be absolved from paying property taxes on their new development whatever it is, but again, few actual details of what hasn’t actually been signed yet have been revealed.

The MOU itself was finally posted by the Baltimore Banner (whose tagline isn’t “The Last Remaining Baltimore News Source” but probably should be), and a few more details can be gleaned from that:

• The Orioles owners will absolved of paying any rent on their stadium, though it’s unclear how much that currently amounts to.
• In addition to the $3.3 million a year toward “safety and repair,” the state will kick in $1 million a year to a “capital improvements and repair reserve fund” as well as up to $1 million a year to a “emergency reserve fund,” depending on how fast that latter fund gets used up.
• The development area around the stadium includes “all areas north of Lee Street currently owned by MSA on the Camden Yards site, except for Lot A,” for which the team owners will pay $1.5 million a year for the first five years, then $500,000 a year for the next 25, then an amount starting at $750,000 a year and escalating 1% a year for the last 69 years. I don’t have the math this morning to come up with a present value figure for that — maybe around $20-30 million? — but without a better sense of exactly how much acreage this represents or what development rights there are worth, there’s no way to know how much of a sweetheart deal this is.
• The Maryland Stadium Authority, Baltimore mayor, and Maryland governor will still each get their own luxury suites for the course of the lease.

Announcing the upbeat bits while keeping the knotty details as secret as possible is a time-honored tradition in the stadium game, of course, but doing so with a non-announcement of a non-deal on the day after your team clinched its first division title in ten years is some next-level BS. All we really know for sure is that John Angelos and the state of Maryland have agreed to try to agree to a deal for the Orioles owner to receive somewhere between $600 million and who-knows-what in exchange for not threatening to move who-knows-where for at least the next 30 years — unless, of course, the eventual lease includes some kind of state-of-the-art out clause that would enable the O’s owners to break it early if future upgrades aren’t made. But surely Maryland state officials will be keeping a close eye on that—

“Amazing news! Now lets celebrate with some playoff wins! #LetsGoOs” said Delegate Dana Jones.

Siiiiiigh.

Feeling just enough better today to play everyone’s favorite game, “What’s Baltimore Orioles Owner John Angelos Seeking Public Money For Now?”

Last year, you’ll recall, just weeks after the state of Maryland approved $600 million in public funding for Orioles stadium upgrades if and when Angelos signed a new lease, the state stadium authority agreed to let Angelos keep all the money from a Paul McCartney concert, disregarding his existing lease that said 45% of the proceeds was supposed to go to the state treasury. Now, one of the other living gods of stadium rock, Bruce Springsteen, is playing at Camden Yards, and have they worked out that whole who-gets-the-money thing yet?

Rock icon Bruce Springsteen will play Saturday at Oriole Park. As landlord, the Maryland Stadium Authority could receive 45% of the profits (or suffer 45% of the losses) from the event, which is hosted by its tenant, the MLB team. However, the Orioles asked the state not to share in the revenues, which would allow the team to keep all profits from the concert, and the stadium authority board unanimously agreed Tuesday.

This may seem slightly weird for the stadium authority to just give in on, especially given that the state is in the middle of contentious negotiations with Angelos over signing a new lease already. But stadium authority director Michael Frenz told the Baltimore Sun yesterday that Angelos has said having to give the state its contractually mandated cut would be a “significant disincentive” to holding more concerts, and “from our perspective, we do want there to be more of these.” But, Michael, why exactly do you want there to be more concerts even at the expense of the state getting none of the reven — oops, sorry, you’re still talking:

Frenz said it’s “reasonable to conclude” that the Springsteen show will turn a profit, but because the current lease is expiring and the new lease is unlikely to have the same revenue-sharing provision, the authority thought it best to allow the club to keep the revenues.

“We did say [in 2019], yeah, we would look at it in the future,” Frenz said Tuesday. “But I really think that given where we are in the life of the current lease, given that we’ve opted out of the previous two [concerts], I think for us to opt into this one may have been — it’s possible it would send the wrong message to the team.”

So the message that the state stadium authority wants to send to its baseball owner tenant, who is refusing to sign a new lease despite more than $600 million in promised subsidies, is that he shouldn’t have to worry about sharing any concert revenues with his public landlord, either now or in the new lease that he’s refusing to negotiate. That is maybe a slightly odd negotiating tactic, but then letting the stadium authority have final say over whether the local team owner pays his rent is slightly odd as well. “A savvy negotiator creates good vibes by giving the other side whatever it wants and hoping this will lead to voluntary concessions,” as Jerry Reinsdorf never said.