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LWIB: "Development Rights" in MLB, Astros Part-Owner in RSN, Tidbits PDF Print E-mail
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Pete Toms Article Archive
Written by Pete Toms   
Tuesday, 02 November 2010 00:00

Last Week in Bizball by Pete Toms

This week in “Last Week in BizBall”, “development rights” in MLB, Astros partner with Comcast in new RSN, plus tidbits.

“DEVELOPMENT RIGHTS” IN MLB

Last year at this time we published, THE POLITICS OF SPRING TRAINING: A GOOD INVESTMENT? The impetus of the piece was the competition between Naples FLA and Mesa AZ to host Cubs spring training. The Naples bid has been, at least temporarily, shunted to the background. Mesa can take a major step towards keeping Cubs spring training for decades to come should voters pass Proposition 420 today. Prop 420 is the latest effort to secure public investment for a new Cubs spring training facility in Mesa. Earlier this year, an effort at the state level to secure public funding failed. That proposal included a very unpopular plan within MLB to levy a “Cubs tax” of 8% on all Cactus League games. Proponents of Prop 420 peg the city’s contribution at $99 million. That investment would be funded from a combination of the sale of city owned real estate, a hike in the “bed tax” and investment from the Arizona Sports and Tourism Authority. Supporters of Prop 420 also argue that the accompanying “Wrigleyville West” mixed use development (see renderings here and here) will generate future tax revenues.

LWIB saw Cubs legend Ernie Banks accompany Cubs owner Tom Ricketts on a tour of the area to generate support for Prop 420. Billy Williams, Ron Santo and Fergie Jenkins have also made appearances. While the former Cubs greats garner attention and generate warm feelings for the proposal, the trail of the money reveals who has the most at stake today. The Phoenix Business Journal reported on who is behind the Keep the Cubs - Yes on 420 committee.

The Yes on 420 group includes Mesa Mayor Scott Smith, Arizona House Speaker Kirk Adams, R-Mesa, Mesa Convention and Visitors Bureau President Robert Brinton and former Cubs player Ron Santo.

The campaign is being run by HighGround Inc. The Phoenix-based consulting firm represents Gov. Jan Brewer as well as Ice Edge Holdings LLC, an investment group seeking to buy the Phoenix Coyotes hockey team.

LWIB, The Arizona Republic reported that the pro-Cubs PAC had collected approximately $350,000, “…aided by some heavy hitters in the local business community.” According to an earlier report, the Cubs have donated approximately $100,000 of that amount. According to the “Keep the Cubs - Yes on 420” website, “…major funding provided by the Chicago Cubs Hunt Construction, Rural Metro Corp., United Mesa Fire Fighters, DLR Group, Hyatt Place Phoenix-Mesa, McCarthy Building Companies and Longbow Golf Club Associaton.”

Reminiscent of the (eventually futile) opposition to public funding of the Arizona Diamondbacks ballpark, opposition to Prop 420 has been led by a number of conservative/anti-tax/anti - corporate welfare groups (see here and here for example). These critics are sceptical of the Prop. 420 proponents claims of the $138 million in economic benefits that Cubs spring training generates annually for Mesa. The same opponents believe that the $99 million public investment forecast will, in the end, prove far greater. In addition there is the always present debate in these matters over “opportunity cost”. I.E. what else the city could have done with the donated real estate and investment of public dollars.

Whether or not Prop. 420 passes today, the time and money that the Cubs owners have invested in it is telling. The previous instalment of LWIB examined how the ownership model in MLB is increasingly about media content and real estate development. Just as the Naples FLA bid to lure Cubs spring training was largely motivated by developers interest in a “commercial district” to be established in the area surrounding the baseball facilities, so is “Wrigleyville West” the key to the Cubs interest in Prop. 420. Despite the stalled or failed ballpark village developments in St. Louis, Arlington (Glorypark) and Fremont CA., the Cubs are not alone in their plans to leverage their brands and ballparks as part of larger commercial developments. Should the Giants win the World Series, they will benefit from an enormous increase in demand for their product next season at AT&T Park. Perhaps more important to the Giants could be the momentum and good will it could generate for their proposed Mission Rock “mixed use” development. LWIB, Giants President Larry Baer spoke with Bloomberg about their development plans:

Docks once laden with bananas from Central America and opium from China gave way to the $357 million privately built ballpark that hosts the World Series beginning tonight.

The San Francisco Giants say they hope to spur a similar transformation of the mostly neglected area behind AT&T Park, where they welcome the Texas Rangers in the opening game of a best-of-seven matchup for Major League Baseball’s championship.

Giants President Larry Baer looks at the parking lots and decrepit docks sitting just beyond the right-field wall and envisions a cultural, residential and retail complex.

“It’s really the last frontier in San Francisco,” Baer, 53, said in an interview in his ballpark office. “There’s nowhere else in San Francisco left to build.”

According to the report, the Giants plans for the Mission Rock development could include a new arena to house the Golden State Warriors. Multiple reports earlier this year linked the Giants to different groups interested in acquiring the NBA franchise. Should the Warriors be interested in relocating across the Bay, the Giants hold the development rights for a prime arena location. Not only would the Warriors provide an anchor tenant for an arena centred mixed use development but ticketing and marketing functions for both the baseball and basketball franchises could be amalgamated.

In September, the Florida Marlins issued a press release soliciting bids for a retail development adjacent to their ballpark scheduled to open in 2012:

Currently, the Marlins are calling on local retailers to bid for the opportunity to become part of this new retail area in Little Havana. The Marlins are looking for long-term leases for the development and management of a full service public restaurant and bar as well as four individual retail stores to be located on the Ballpark Plaza. Selected retailers will have daily customer traffic, in addition to at least 81 Major League Baseball Games, World Baseball Classic, concerts, trade shows, other sporting events, and private functions.

The Padres recently acquired their Triple A affiliate, with the eventual plan that it will relocate to the San Diego suburb of Escondido. LWIB, it was reported that Escondido is investigating establishing a 150 acre Sports Entertainment District which would include a new ballpark for the Padres Triple A franchise. Projected future tax revenues from the development would finance the issuing of $180 million in bonds to fund the city’s contribution. This sort of financing is very controversial amongst politicians, economists and public policy wonks. Usually it goes by the name Tax Increment Financing or TIF. Both the Milwaukee Brewers and Oakland A’s have Cactus League leases soon expiring and no doubt will be looking for public investment in new or upgraded spring training facilities. In September, Mike Sunnucks reported in the SportsBusiness Journal that, “Arizona is the only state that lacks a statute allowing TIF mechanisms.” According to the report, a proposal to allow TIF in AZ was defeated during the 2010 legislative session but will be revisited in January. MLB will be amongst the “big 4” closely monitoring the situation:

The Arizona officials mapping a new TIF proposal are at a fork in the road. They could propose a tax zone plan focused on higher-wage jobs and industries such as manufacturing, aerospace and solar energy. That could include some kind of wage or project requirement to qualify for special tax financing.

Alternatively, a TIF plan could be used to help fund sports and entertainment complexes, including construction of new Cactus League ballparks; bolstering Westgate City Center, Jobing.com Arena and the Camelback Ranch spring training facility in Glendale; and boosting long-term plans by the Bidwill family, owners of the NFL Cardinals, to develop University of Phoenix Stadium parking lots into hotels, shops and office buildings.

Should Prop. 420 be defeated the Cubs will eventually find another municipality willing to work with them on their vision for a spring training site/mixed use development. Such is the demand for MLB spring training. Whether it is good public policy for governments to partner in these initiatives has been debated for years. The argument against such public investments was neatly summarized recently by the former VP of the Minneapolis Federal Reserve Bank, Art Rolnick. Commenting on the Minnesota Vikings request for public investment in a new football stadium, Mr. Rolnick was quoted, "I agree with them that it is about economic development," Rolnick said. "But recognize that what drives economies is not building, it's people. It's human capital." (HT The Sports Economist) Whether good or bad public administration and despite the crap economy and tight credit, the recent and current efforts of the Cubs, Giants and Marlins indicate that the importance of “development rights” in MLB isn’t going away anytime soon.

SELECT READ MORE TO SEE DETAILS ON THE ASTROS BECOMING PART-OWNER OF A NEW RSN, PLUS TIDBITS

ASTROS BECOME PART OWNER OF NEW RSN

I’ve blogged a lot here this year about the growing importance of Regional Sports Networks (RSNs) to the biz of MLB. This subject recently garnered a lot of attention when the Texas Rangers extended their deal with Fox Sports Southwest for a reported $1.6 billion over 20 years. Franchises are either cutting huge rights deals with RSNs, launching their own or partnering with Comcast in their stable of countrywide sports channels.

LWIB, the long rumoured departure of the Astros from Fox Sports Houston was announced. The Astros and NBA Rockets are now partners in the newest Comcast RSN, CSN Houston. CSN Houston will begin airing Astros games in 2013. The Astros and Rockets will own either 70 or 80 percent of the RSN, depending on which news report you read. As LWIB noted last month, “Comcast shares ownership of a number of RSNs with MLB franchises. CSN Bay Area (Giants), CSN Chicago (White Sox, Cubs) CSN Philadelphia (Phillies) and SportsNet NY (Mets)).”

You should read David Barron’s report. It explains the history of FS Houston and the battles fought between the channel and the Astros and Rockets. Mr. Barron also looks ahead to looming carriage battles for the new channel as well as what Comcast might have paid to the sports franchises.

TIDBITS

  • Contrary to what many believe, including I think, many baseball reporters, Chuck Greenberg and Nolan Ryan don’t really own the Texas Rangers. LWIB, Mitchell Schnurman profiled one of the heavyweights behind the purchase of the franchise, Bob Simpson. (HT Fang’s Bites) In July, Daniel Kaplan reported in the SportsBusiness Journal that Mr. Greenberg was acting as the “control partner” in the bid for the club. According to Mr. Kaplan, Mr. Greenberg’s investment in the franchise is approximately $3 million. (the bankruptcy auction of the franchise had not been concluded at the time of Mr. Kaplan’s report) None of this is to discredit the role of Greenberg and Ryan in the acquisition of the club. It was their involvement in the bid that made it the most favourable to MLB (ok, Bud Selig)
  • Richard Sandomir speculates that we may have seen the last of Jon Miller and Joe Morgan on ESPN’s Sunday Night Baseball. (HT Fang’s Bites) According to Mr. Sandomir, Mr. Miller might land with MLB Network.
  • In Tucson, the arrival of Triple A next season has resulted in the departure of the independent Golden League. Read Baseball America for more.


Pete Toms is senior writer for the Business of Sports Network, most notably, The Biz of Baseball. He looks forward to your comments and can be contacted through The Biz of Baseball.

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