Breaking Down the Gwinnett Braves Stadium Deal

Now that the initial shock of the move of the Triple-A Braves from Richmond to Gwinnett County has worn off, I’d like to take a look at the stadium deal. The AJC has run several articles on the subject, and the articles contain most of the details of the Braves’s lease with the city. Here are the details that I know.

  • It is a 30-year lease (2009–2038) with the opportunity for termination by the Braves after the 2023 season (15 years); however, the conditions for termination look to be quite stringent.
  • Gwinnett is responsible for design and construction of the stadium and parking facilities, as well as covering major capital repairs to the stadium and non-preventive maintenance (e.g., HVAC, scoreboard, seats, walls, floors). To ensure that the improvements will happen, Gwinnett must maintain a capital maintenance fund with a minimum balance of $500,000.
  • The Braves are responsible for operation costs not associated with capital maintenance and repairs.
  • The Braves retain all revenues from the operation of the facility during Braves events. This includes revenue from tickets, concessions, luxury suites, club seats, sponsorship, advertising, and broadcasting.
  • The Braves have exclusive rights to the stadium, except for 10 non-Braves events hosted by Gwinnett. The Braves are entitled to concessions revenue from these events.
  • Gwinnett is responsible for selling the naming rights. The Braves are entitled to $350,000 share of this revenue annually.
  • The Braves will operate parking services and set parking fees. Revenues will be split 50-50 with Gwinnett.
  • The Braves will pay rent of $250,000 per year for the first five years. After this time the rent will increase according to the growth of the Consumer Price Index. In addition, the Braves will pay Gwinnett a ticket fee of $1 per ticket sold, with a minimum guarantee of $400,000 remitted to Gwinnett.

After reviewing the agreement, I see why the Braves were so eager to sign this deal, and why Gwinnett officials negotiated this deal in private and approved it quickly. Gwinnett County administrator Jock Connell anticipates the total expenditure for the stadium to be $45 million. $12 million will come from tax dollars earmarked towards recreation, and the remaining $33 million will be borrowed with revenue from the stadium paying off the debt. From the information I have seen, I don’t think this is likely.

Gwinnett is guaranteed four sources of revenue: rent, naming rights, parking, and non-Braves events. Let’s look at what these sources will bring in.

  • Gwinnett is guaranteed a minimum of $650,000 a year in rent: $250,000 (rent) +$400,000 (ticket fee minimum). While it is possible for the county to earn more from the ticket fee, I think it is unlikely. In 2006, the Richmond Braves total home attendance was 321,696 and averaged 4,730 per game.
  • The current ballpark design is for 5,500 seats, 1,500 in grass seating, 300 club seats, and 16 suites. In order to earn more than $400,000 from the ticket fee, the team would have to average over 5,700 fans a game (assuming 70 home games). That is not going to happen.

    [Update: This stadium design refers to an older design considered by Gwinnett for hosting an independent league team. To be a Triple-A facility, it most hold a minimum 10,000 fans. However, I still do not think the team will average more than 5,700 fans.]

  • Gwinnett retains all naming rights sales beyond $350,000, which it must pay to the Braves. How much will the naming rights generate? Let’s look for a comparable deal. Lackawanna County Stadium—home of the Scranton/Wilkes-Barre Yankees—sold its rights to be called PNC Field for the price of $365,000 annually (a three-year deal) just last year . While I don’t doubt that a new stadium in Gwinnett can garner a higher price, I don’t think it will be that much higher. I’ll be generous and assume that they can sell the rights for $450,0000 per year. Thus, the county gets $100,000 ($450,000 — $350,000)
  • Gwinnett receives 50% of the parking. Richmond charges $3 for parking. If we assume that the Braves sell out all 2,300 parking spaces for 70 games, this translates to $483,000 in revenue. Gwinnett would receive $241,500 of this.
  • As for revenue from the 10 non-Braves events, I won’t even try to guess. But the fact that the Braves retain all of the concession revenues doesn’t help.

So, let’s add up what we have. We anticipate an annual income stream of $991,500—I’ll make in an even million. Will the non-concession revenue from the 10 non-Braves events be enough to cover the debt payments and capital maintenance over the life of the stadium? The stadium will be financed through local bonds, which is complicated. But let’s just make this simple by pretending this is a regular 30-year mortgage for $33 million, and we will give the county a 3% interest rate. This results in annual payments of $1.67 million, which means that Gwinnett needs to bring in $670,000 per year on the 10 non-Braves events in order to cover its loan payments. If each of these events brings in 7,000 people (approaching stadium capacity), then the county must bring in about $10 per person in profits (revenue minus operating costs) at these events. I think that this is unlikely.

[Update: I have just received a copy of the feasibility study of bringing a minor league team to Gwinnett, which was released in summer 2007. The plan calls for borrowing for 25 years at a 5.5% interest rate. Keeping the term of the loan to 30 years and re-running the numbers with the higher interest rate, the annual dept payments rise to $2.25 million.—requiring nearly $18 per person in profit to cover the remaining debt with 10 events of 7,000 people.]

I want to caution that this is a first pass at these numbers, and I have had to make several simplifying assumptions. However, I have tried to be optimistic about revenue projections that favor Gwinnett. I am willing to update my estimates as new information comes to light.

I find it disturbing that Gwinnett officials pushed this through so quickly and without public debate. If the Braves sell 5,000 tickets a game for and average of $10, the team will bring in $3.5 million year just off of tickets. With naming rights ($350,000) and all of the other rights (concessions, advertising, etc.) adding in, this is a good deal for the Braves.

I think it is a shame that this was rushed through in secret. It is possible that Gwinnett County residents don’t mind an increased tax burden if it means they get the Braves. It could mean only a few dollars more in taxes a year for the next 30 years. But, I think everyone would be happier if we could have had the opportunity to agree on this with some advance notice.


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17 Responses “Breaking Down the Gwinnett Braves Stadium Deal”

  1. Andrew says:

    I noticed areas on the stadium plan designated for retail use and a hotel. Could this be where the Gwinnett Braves make up the difference?

  2. JC says:

    Possibly, but who knows? It would have been nice if all this information could have been released to the public in advance.

  3. Sean Forman says:

    They may lose money at the start, but the revenue streams will go up over time with inflation, which their bond payments (as I understand it) will be consistent.

    About five AAA teams top 6m in attendance each year: Sacramento, Memphis, Buffalo, Pawtucket, Louisville and Round Rock.

    I would also be shocked if parking stayed at $3.

    They might get $10/cap for a series of good concerts (along with parking). They might break even.

  4. Kyle S says:

    JC – you forgot to inflate rent payments by the CPI. Using a 3% assumption for years 6-30 of the deal, this brings in an extra $3.1mm over the lifetime of the contract. also, the naming rights agreement should inflate as well – if you assume they sign three year agreements, starting at 450k/yr for 3 years, and that the agreement value inflates 3% every three years (which is more conservative than the cpi assumption i used), that’s another $1.9mm in additive revenue. parking revenue will inflate as well, but not much.

    Of course, those two things only add $5mm total in revenue over the 30 years, and there is a roughly $20mm gulf to be made up, so taxpayers will still have to eat that part of it. glad it’s not my tax dollars.

  5. Max says:

    But, new teams and nice stadiums in good baseball areas, generate buzz, interest and fans?

    I mean, my reference could be an abberation, because in NYC, the Cyclones (NY-P Mets)since opening in around 2001, have continually sold out and keep on breaking their own records. Keyspan with seating for 7,500, manages to sell to well over that number, often touching 8,000.

  6. JC says:

    Kyle,

    You’re right on the rent. Thanks for pointing this out. I was being a little too simple there. Unfortunately, as you point out, it doesn’t help a lot.

    On naming rights, I am a bit confused; not by your analysis, but by exact the terms of the deal, which I did not report. Apparently, the fee that the Braves receive can escalate as a pro rata share according any increase in naming rights. I think this means that relative to any increase in rights fees over an initial agreement. For example, if the initial naming rights fee of $450K is replaced by 10% increase ($495K), then the fee the Braves gets also rises by 10% ($350K to $385K).

  7. Ken Houghton says:

    Maybe, Max, but the Cyclones have limited competition and a much larger populace (all of Brooklyn, all the people who are nostalgic about Brooklyn) with limited other options.

    And note that, even so, they don’t reach an attendance that would increase their base rent (see here (PDF).

  8. Max says:

    And now that I have read Mr. Thompsons Audit Reports etc etc, I understand what you are getting at on your second point.

  9. Marc Schneider says:

    I’m not a resident of Gwinnett County but this deal strikes me as outrageous, especially the arrogance of the officials in negotiating in secret. At least here in DC, we knew that the City Council was getting ready to give away the farm and people were able to voice their displeasure–and the councilmembers had to vote and be accountable to the public. This is the worst kind of back room politics. Even if it was a good deal, people have a right to know what their tax dollars are being used for. Baseball teams are becoming extremely accomplished at manipulating the political process even at the minor league level and shamelessly taking money from the public trough.

  10. I am shocked that the local yokel politicians would have the audacity to put their citizens on the hook for a bad deal that benefits a money-making enterprise! I’m just absolutely shocked! What’s further surprising is that they would flaunt the spirit of open government laws to rush all of this through with little public involvement. What has our world come to if we can’t trust the politicians!

  11. Mark S says:

    Can a copy of the feasibility study – or a link – be posted here for reference?

  12. JC says:

    It is not available online.

  13. Troy says:

    On top of likely additional taxes/surcharges in the proposed retail/hotel area to accompany the ballpark, is it possible the county could add say a $1 “tax” on ticket sales (in addition to what the tickets sell for) or a special food/beverage sales tax on concessions?

  14. Troy says:

    Somewhat answered my own question. From this story:

    http://www.gwinnettdailypost.com/main.asp?Search=1&ArticleID=9910&SectionID=6&SubSectionID=84&S=1

    LAWRENCEVILLE – Gwinnett commissioners plan to impose a new tax to pay for the county’s new baseball stadium.

    Officials expect to earn $500,000 a year through a 3 percent tax on car rentals. The money will go to paying off the debt for the stadium.

    “It takes the burden off the local taxpayers,” Commissioner Bert Nasuti said of the car rental tax, which is also in place in Atlanta to fund improvements made to Philips Arena in the late 1990s. “The reason you do that is so you don’t raise taxes.

    “There’s almost no place in the universe that doesn’t have a rental tax,” he added, referring to large cities. “It’s been a part of the finance plan all along.”

    According to Gwinnett Finance Director Lisa Johnsa, the yearly payment on the bonds will be determined by a number of factors, but the county expects a total of $1.7 million in revenues from the stadium.

  15. R.Schreck says:

    I am shocked to find out about this stadium right at our back door. Did no one consider the homeowners that have lived in that area for over 20 years and what this does to our way of life? Thanks to the Mall being built we now have to plan our travel around the hours of the mall. I can image what traffic will be like now and get worse with time. Why didn’t these commissioners take a weekend and sit at the intersection of Rocksprings and Buford Drive and watch the traffic build through out the day? Did they bother to check the history of wrecks in that area since the mall was built? There are alot of questions that should have been asked had us homeowners had a clue what was going on behind closed doors. Thanks alot commissioners. Job Well Done!

  16. Scott says:

    All of this critcisim is just another example of how the gwinnett folks want to stay in 1980. The mall has brought traffic but it also brought the acre per land from 3k to 30k. It has brought homes and jobs. Braselton and North would still be ghost towns with out north developemnt. We must keep the growth to keep things moving.

    I also as many would have liked more details before we made the deccision but in the pass the leaders couldnt put in traffic light with out the whole county trying to stop it. Keep up the good work as in any biz. the details will work them self out over time. I belive we can and will hit the attendace needed as it will be family fun at a lower price then going downtown.

  17. GCB says:

    There are a few factors in this deal that were not made public.

    1…Who made the decisions?……answer…..The very people that “OWN” the developement around the new stadium are the people that control the executive board of the Gwinnett Convention and visitors buerough…..Selling the Braves a deal they could not refuse, owning the property, and then selling the county board members the “DEAL” on 12 of the 70 acres of land to build the stadium.

    2…All the deals were done by the GCVB executive board…..and brought to the county as a package with the stipulation that it had to be done VERY QUICKLY and QUIETLY…..It was a raw deal for Gwinnett and pushed down the commissioners throats without giving a chance to rebut facts.

    3…There was a couple of privately owned stadium deals very close to being implimented without any public money at all……These were known about by the GVCB Executive board members, and the Board of commissioners……Why were they not even considered for this deal….it would have saved the county an estimated $100,000,000 over the 30 years…

    It is very important for the taxpayers to start asking questions……

    1..Who owns the properties and development around the stadium….answer…..the very people that made the decision on where it would go…

    2..who is going to pay for this stadium……who is going to reap all the benefits from the county building this stadium….answer….the owners of the land around it, and the braves(that was the tool these people used to get them away from Richmond)

    3..The most important question…..Who made these decissions to spend taxpayers money, on a private development, and hand all the revenue sources to the Braves….The executive board of the GCVB….and why did the county commissioners roll over and except this deal without even questioning who was involved, and what it would cost our taxpayers….and what return we would get…..