PFD, Seattle Mariners: Lease and Team Non-Relocation Agreement - PowerPoint PPT Presentation

PFD, Seattle Mariners: Lease and Team Non-Relocation Agreement Presentation to PFD Board December 10, 2018

Overview • Context • Basic Lease Terms • PFD Focus • Club Obligations • PFD Obligations • PFD Oversight & Enforcement • Community Benefits

Historical Context – Then… • Kingdome: multi-use facility • New PFD, no experience as ballpark owner • Club had no experience as a ballpark operator

Where We Are Now • • A known (and aging) facility 20 years of performance and partnership history • Lessons learned from other with the PFD and Club markets – pitfalls to avoid

PFD Focus • Maintain and enhance the ballpark to promote the success of Maj or League Baseball in Washington S tate • S afeguard the public’s investment • Keep the Mariners playing in S eattle and part of our community • Encourage community benefits

Basic Lease Terms • Term: 25 years • Two 3-year renewal terms • Rent: $1.5 million, escalated by CPI • Used as follows: 1. PFD operating expenses 2. PFD contribution to CapEx Fund 3. PFD Operating Reserve Fund (or) CapEx Fund (or) Neighborhood Improvement Fund • Annual Revenue S haring • 1.5% of first $100M • 2% of all amounts over $100M • PFD contributes 100% to CapEx Fund

Basic Lease Terms: CapEx Funding • Club Contribution: $3.25 million/ year, incr. by CPI • Must fund all shortfalls • PFD Contribution: • Initial: • Transferring existing year-end balances, less $2M for operating reserves and $2M for Neighborhood Improvement Fund • 50% of any 2018 profit-sharing due under the existing lease • Annual: • 100% of Admissions and Parking Tax collected by the Mariners • Revenue S haring • $250K from Base Rent, as available after first paying PFD operating expenses

County Funding Agreement/ Financing Amendment • Entered into by King County and PFD to provide a mechanism for the County to invest a portion of lodging tax revenues for infrastructure needs in the ballpark • Fixed percentage vs. fixed dollars – could go up or down • S pecific requirements for spending funds • Financing Amendment permits bonding against the revenue stream

County Investment in CapEx • Governed by Funding Agreement between County/ PFD • Only for eligible infrastructure CapEx proj ects • Must be reviewed and approved by PFD • PFD reports to County on uses of tax revenues • County tax revenues held in a segregated fund managed by PFD

PFD Responsibilities • Ensure Ballpark is maintained and enhanced to remain a top-tier MLB ballpark • “ Applicable S tandard” : • Top 1/ 3 of all MLB ballparks (the “ Reference Ballparks” ) • Taken as a whole • Consistent with a maj ority of the Reference Ballparks • Reference Ballparks determined every 5 years, rather than remaining static for Lease Term • Carve-out for physical impossibility

Reference Ballparks MLB Ballpark Home of… Petco Park S an Diego Padres Coors Field Colorado Rockies Marlins Park Miami Marlins S unTrust Park Atlanta Braves Target Field Minnesota Twins Busch S tadium S t. Louis Cardinals Y ankee S tadium New Y ork Y ankees Citi Field New Y ork Mets Nationals Park Washington Nationals Miller Park Milwaukee Brewers

PFD Responsibilities • S afeguard public investment and keep the Mariners in S eattle: • S pecific performance if Club tries to leave • Liquidated damages if Club actually leaves • S tarts at $504 million, drops gradually • S hare of sale proceeds if Club leaves or sells to non- local buyer • $20M if sold to a non-Local Buyer in 1 st 15 years of Term, or during last 10 years of Term if there’s 10-year extension • 10% of sale proceeds at end of Term if no 10-year extension • PFD keeps balance of CapEx Fund if Club leaves the S tate at end of Term • Otherwise, the Club’s credit balance is used to pay for improvements to the existing ballpark or for new construction in S eattle or the state

Club Obligations • Club is responsible for: • Operations (staffing, security, traffic management, etc.) • Maintenance (regular, routine non-capitalized upkeep/ repair) • CapEx (capital repair/ replacement/ improvement s) • Must meet standards: • Operating S tandard for Operations • Must operate Ballpark in a 1 st class manner, consistent with other top-tier MLB ballparks • Applicable S tandard for Maintenance, CapEx

PFD Obligations • Contribute to CapEx Fund • Reimburse eligible costs from County Tax Revenues Fund • Review and comment on Operations Plan • Review and approve Maintenance Plan, CapEx Plan • Refrain from amending Funding Agreement to Club’s detriment

PFD Oversight: Operations, Maintenance • Annual Operating Plan • Budget, schedule of events, updated policies, report on community benefits, etc. • Measured against the Operating S tandard • S ubj ect to PFD review and comment • Annual Maintenance Plan • Budget, plan of regular maintenance to be undertaken • Measured against the Applicable S tandard • Must be approved by PFD

PFD Oversight: CapEx • Initial CapEx Plan • Annual CapEx budget, rolling 10-year plan • Requires provisional PFD approval • Final CapEx Plan submitted w/ Maintenance Plan • Annual CapEx budget, rolling 10-year plan, unreimbursed Club CapEx expenditures, plans & drawings • Requires PFD approval • Measured against the Applicable S tandard

PFD Oversight: Assessments, Inspections, Audits • New facility assessment s conducted throughout term • Updates existing facilities report, which will grow stale • Guides new CapEx planning • Inspection: PFD can inspect Ballpark to ensure compliance with… • Operating S tandard/ Operations Plan • Applicable S tandard/ Maintenance Plan, CapEx Plan • Audits: PFD can audit Club’s performance of Operations, Maintenance and CapEx, records for Revenue S haring and collection of Admissions/ Parking Tax

PFD Oversight: Club Default • S elf-help • Termination of Club’s Ballpark management • Termination of Lease • S pecific performance • Damages • Liquidated damages (NRA)

Community Benefits • Retain existing programs • $25 million in Club-sponsored programs • Added provisions to include WMBE goals, labor harmony/ community workforce agreements, prevailing wages • Neighborhood Improvement Fund • Funding: • $2M transferred from 2018 year-end fund balance • 50% of any 2018 profit-sharing • Annually in PFD’s discretion from Rent, after paying PFD operating expenses and CapEx Fund contribution

What the New Lease Achieves • Keeps the Mariners here for 25 more years, with a renewal term longer than the initial term • Provides secure and adequate funding to maintain ballpark • Other than defined CapEx contributions from the PFD and County, the Club is 100% responsible for operations, maintenance and CapEx Work • Ensures the ballpark will remain in the top third of MLB ballparks nationally, even as it gets older and requires more capital improvement • Incentivizes the Club to continue making S eattle their hometown

Lease Improvements  Renewal term 5 years longer than  PFD keeps CapEx Fund balance if Club initial term leaves the state at end of Term  Certainty of PFD funding obligations:  New Ballpark Neighborhood fixed contribution amounts to CapEx Improvement Fund to improve ballpark-related fan experience  Applicable S tandard keeps ballpark in  New team non-relocation agreement top 1/ 3 of MLB ballparks provides for liquidated damages if the  Reference Ballparks updated team leaves throughout lease term  PFD has stronger enforcement rights  Club responsible for all operations, if the Club defaults maintenance and CapEx, other than  Club responsible for covering all PFD and county funding contributions insurance premiums  Annual revenue sharing now certain  Contractual commitment to $25 and transparent, dedicated to CapEx million in Community Benefits  PFD oversight strengthened through  S 10-year rolling CapEx plan and new trengthened commitment to WMBE, approval rights labor