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.
- 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.
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.]
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.