“If there’s one thing the Braves know how to do, it’s how to get money out of tax­pay­ers”

Is build­ing a sta­dium for the Braves a good deal for any­one but the Braves?

Bloomberg Businessweek (North America) - - Con­tents - By Ira Boud­way and Kate Smith Pho­to­graphs by Matt Eich

Some­time in 2003, when he was the mayor of Pearl, Miss., Jimmy Fos­ter got a visit from a man he’d never met. The stranger, Tim Ben­nett, came to City Hall, an old brick school­house on Pearl’s church-lined main street. “He just showed up in my of­fice that day,” says Fos­ter, “and started talk­ing about base­ball.” Specif­i­cally, Ben­nett wanted to know if Pearl might be in­ter­ested in build­ing a sta­dium for a mi­nor league team.

A ball­park, it turned out, was just the kind of project Fos­ter was look­ing for. Now 62, with gray hair and a pot­belly, Fos­ter, who spent 19 years as a po­lice­man in Pearl be­fore be­com­ing mayor, was des­per­ate to help his home­town shed its rep­u­ta­tion as a poor neigh­bor of Jack­son. “There just wasn’t a lot of com­mer­cial or re­tail in town,” he says. “And there wasn’t a lot of money.” The sew­ers, the streets—it all needed at­ten­tion. “Hav­ing a base­ball team in Pearl? That was a pipe dream.”

No­body had sent Ben­nett to Pearl. He was work­ing in con­struc­tion and try­ing to launch him­self as a deal­maker. “I was re­ally a rogue,” he says. Now 47, he came to Mis­sis­sippi from cen­tral Florida, where his fa­ther ran a lawn-mow­ing busi­ness. “We grew up in a dou­ble-wide trailer with six of us and a bunch of dogs and cats,” he says. “And we cut grass for the right peo­ple.” One of the lawns Ben­nett used to tend be­longed to a part- owner of the Tampa Bay Rays, and he learned that the fran­chise’s Dou­ble-a team was look­ing to move else­where.

Ben­nett had no spe­cial fond­ness for base­ball and never played, but he saw a chance to make some money: sell a South­ern town on a team, get the Rays on board, and col­lect a piece of the ac­tion. He started in Jack­son, the big­gest city in Mis­sis­sippi, which lost its Dou­ble-a team in 1999. The city wasn’t in­ter­ested, how­ever, and the Rays’ af­fil­i­ate wound up mov­ing to Mont­gomery, Ala. Ben­nett, close to broke, needed a new team and a new town. If Jack­son wouldn’t lis­ten, maybe Pearl, a scruffy sub­urb of 26,000 next door, would.

“Pearl was the trailer park cap­i­tal of Mis­sis­sippi,” Ben­nett says, “so that ba­si­cally means it was the trailer park cap­i­tal of the world.” He went to Fos­ter’s of­fice in City Hall with a blind of­fer. Ben­nett didn’t have a team in mind yet, but he fig­ured if the mayor was will­ing, he could find one. He left with a hand­shake agree­ment. “I’ll han­dle the pol­i­tics,” he re­calls Fos­ter say­ing. “You han­dle the base­ball.”

Ben­nett caught wind that the At­lanta Braves’ Dou­ble-a team in Greenville, S.C., was com­ing to the end of a 20-year lease and po­ten­tially in the mar­ket for a new home. He saw an open­ing. In De­cem­ber 2003, with ne­go­ti­a­tions inch­ing along in Greenville, he per­suaded the Braves to let him pitch them on Pearl, only a 50-minute flight from At­lanta and with a mayor ea­ger to make a deal. The Braves liked what they heard. A few weeks later, Fos­ter found him­self driv­ing Ben­nett and John Schuer­holz, then the Braves’ gen­eral man­ager, in his pickup truck at night to the acres of swamp near High­way 80, where a ball­park could go.

Over the last 15 years, the Braves have

ex­tracted nearly half a bil­lion in pub­lic funds for four new homes, each big­ger and more ex­pen­sive than the last. The crown jewel, backed by $392 mil­lion in pub­lic fund­ing, is a $722 mil­lion, 41,500-seat sta­dium for the ma­jor league club set to open next year in Cobb County, north­west of At­lanta. Be­fore Cobb, the Braves built three mi­nor league parks, work­ing their way up the lad­der from Sin­gle A to Triple A. In ev­ery case, they switched cities, pit­ting their new host against the old dur­ing ne­go­ti­a­tions. They show­ered at­ten­tion on lo­cal of­fi­cials un­ac­cus­tomed to deal­ing with a big-league fran­chise and, in the end, left most of the cost on the pub­lic ledger. Says Joel Maxcy, a sports econ­o­mist at Drexel Uni­ver­sity: “If there’s one thing the Braves know how to do, it’s how to get money out of tax­pay­ers.”

The At­lanta Braves own most of their mi­nor league farm sys­tem, in­clud­ing, along with a Dou­ble-a team, the Triple-a team in Gwin­nett County, Ga.; the Sin­gle-a team in Rome, Ga.; and lower-level teams in Danville, Va., and Lake Buena Vista, Fla. It’s an un­usual ar­range­ment. Ma­jor League Base­ball teams al­ways man­age their play­ers at ev­ery level, but they usu­ally leave the day-to- day op­er­a­tions of farm teams to in­de­pen­dent own­ers. The Braves pre­fer more con­trol. “We can cre­ate a seam­less thread all the way through our sys­tem,” says Mike Plant, the team’s pres­i­dent of devel­op­ment. The teams are all named the Braves and wear near-iden­ti­cal uni­forms. Even the “Tom­a­hawk Chop” chant is the same from At­lanta to Rome. “We def­i­nitely ex­tend that Braves brand through ev­ery­thing we do,” says Plant.

The Braves are sim­i­larly me­thod­i­cal about us­ing other peo­ple’s money to build their ball­parks. In 2001, for ex­am­ple, while try­ing to per­suade Rome to build a $15 mil­lion, 5,105-seat sta­dium for the Sin­gle-a Braves, who then played 150 miles south in Ma­con, the Braves brought lo­cal of­fi­cials to Turner Field for ex­ec­u­tive din­ners and to watch games from the owner’s box. “It was hands down the high­light of my life,” then-floyd County Man­ager Kevin Poe says. That Novem­ber, Rome vot­ers ap­proved a 1¢ sales tax to pay for the sta­dium by a 142-vote mar­gin.

In those days, the owner’s box be­longed to Ted Turner, who bought the team in 1976 and used it to fill out pro­gram­ming on his ca­ble su­per­sta­tion, Turner Broad­cast­ing Sys­tem. Now that box be­longs to John Malone, the bil­lion­aire chair­man of Lib­erty Me­dia. Malone and Lib­erty picked up the Braves for $450 mil­lion in 2007 as part of a larger deal with TBS’S par­ent com­pany, Time Warner. Malone, 75, has been as­sem­bling and dis­as­sem­bling me­dia com­pa­nies for more than 40 years. His deal­mak­ing helped drive the rapid ex­pan­sion of the ca­ble in­dus­try in the U. S., made him a bil­lion­aire

eight times over, and earned him a rep­u­ta­tion as a mas­ter of ar­cane fi­nan­cial en­gi­neer­ing.

Not long after Ben­nett first vis­ited Pearl’s

City Hall, Fos­ter brought his base­ball dreams to the city’s bond at­tor­ney and fi­nan­cial ad­viser. They told him a stand­alone sta­dium wouldn’t pay for it­self, no mat­ter how you crunched the num­bers. Fos­ter was un­de­terred. He’d been chat­ting with Bass Pro Shops, the hunt­ing and out­door re­tailer, about open­ing a store in town. So he went to Bass with the idea of build­ing next door to a new sta­dium. Bass Pro was in­ter­ested. Early in 2004, Fos­ter and Ben­nett worked with Plant, the Braves ex­ec­u­tive, to out­line a plan to bring the team and a Bass Pro Shop to Pearl, with the city is­su­ing bonds to pay for both.

For Plant, who was still in talks with Greenville, Pearl’s ea­ger­ness for a sta­dium was a use­ful bar­gain­ing chip. Greenville’s city man­ager at the time, Jim Bourey, says the Braves were clear about their ex­pec­ta­tions. “They said, ‘We have a sta­dium that’s go­ing to be built for us in Pearl, Mis­sis­sippi,’ ” he re­calls. “‘If you’re go­ing to be com­pet­i­tive, you need to build a sta­dium.’ ” Greenville scraped to­gether some money to help pay for a new ball­park; the Braves wanted more. On April 1, Greenville and the Braves an­nounced that the com­ing sea­son would be the team’s last in South Carolina. The next day, Fos­ter stood at a podium at the Mis­sis­sippi state Capi­tol in Jack­son be­fore a crowd of about 200, by an AP re­porter’s es­ti­mate. “Ladies and gentle­men, we got ’em,” he said.

A few days later, Plant hosted Fos­ter, Ben­nett, and a hand­ful of Pearl al­der­men at Turner Field in At­lanta to watch the Braves play the New York Mets. They sat in Turner’s per­sonal suite and met the team’s man­ager, Bobby Cox, and Hall of Fame slug­ger Hank Aaron. “They re­ally pulled out the red car­pet for us,” Fos­ter says.

Un­der Pearl’s sta­dium agree­ment, which Fos­ter closed in a marathon phone ses­sion with Ben­nett and Plant just be­fore the an­nounce­ment, the city would raise $78 mil­lion through a se­ries of bonds, with $28 mil­lion set aside to pay for the ball­park. “The whole deal was very much be­hind closed doors,” says Michael Hotchkiss, a Pearl na­tive, then an edi­tor at the Clar­ion-ledger. “By the time it was pub­lic, the whole thing was done.”

The terms span al­most 5,000 pages in three dusty blue hard­cover books now kept in a win­dow­less back­room at the law of­fices of Bob Wood, the Pearl bond at­tor­ney who worked on the deal. “Un­less you were in­volved in it, you couldn’t know all the ins and outs be­cause it’s a flip­ping huge book,” says Brad Rogers, Pearl’s cur­rent mayor. Rogers, 46, is sit­ting in the con­fer­ence room in City Hall. He slowly taps both feet on the floor and drums his fin­ger on the long wood table. After weeks of unan­swered phone calls, he agreed to an in­ter­view when a re­porter showed up unan­nounced. The bond books for Trust­mark Park, as it’s now called, de­tail, among other things, how Pearl paid Ben­nett a finder’s fee of more than $1 mil­lion, about a fifth of what the town col­lects each year in prop­erty taxes.

Pearl planned to pay back bond­hold­ers through more than a half- dozen rev­enue streams, in­clud­ing a $1 sur­charge on ev­ery game ticket and half of the sales tax from the Bass Pro Shop. (Bass didn’t re­spond to re­quests for com­ment.) The city also planned to col­lect $ 3 or $ 4 per car for

park­ing. “That didn’t go over too well,” says Fos­ter. Fans screamed at the park­ing lot at­ten­dants and jumped the fences. So Pearl swapped out the park­ing money for a new sales tax on a shop­ping and restau­rant district near the ball­park.

Al­to­gether, the taxes and fees were sup­posed to be more than enough to pay the debt back. But just in case, Pearl pledged to cover as much as $950,000 an­nu­ally from other sources if money didn’t come in as planned. It hasn’t. In 2014, the most re­cent year on record, the city paid $911,748, more than 5 per­cent of its gen­eral fund spend­ing for the year, to cover short­falls. The year be­fore, it paid $967,944. Rogers says he isn’t sure why Pearl paid more than it pledged.

The math is al­most al­ways the same when

cities build ball­parks: Teams keep most of the money spent by fans, and the share that cities get—rents, ticket sur­charges, park­ing fees, cuts of con­ces­sion sales—is rarely enough to keep up with debt costs, let alone gen­er­ate a sur­plus. “You can’t sell enough hot dogs, and get a penny or two in sales tax, to pay off a $50 mil­lion sta­dium,” says Nola Agha, a Uni­ver­sity of San Fran­cisco pro­fes­sor of sports man­age­ment, who’s stud­ied mi­nor league fi­nanc­ing.

Cities keep try­ing, but the eco­nomic stim­u­lus pro­vided by pro sports teams—the park­ing lots full of out-of-state li­cense plates, the over­flow­ing restau­rants—is more anec­do­tal than real. Agha looked at 283 cities with mi­nor league teams from 1985 to 2006. While she found mod­est in­creases in per capita in­come in some cases (mostly mid­size cities with Triple-a teams), the tax gains rarely cov­ered sta­dium ex­penses. In an­other study, she found that peo­ple will some­times pay a lit­tle more in rent, all other things be­ing equal, to be in a town with a mi­nor league team. Again, the in­creases didn’t jus­tify the lev­els of pub­lic spend­ing. “In gen­eral, it doesn’t pay off,” she says. “You can look at the num­bers up and down and side­ways.”

In De­cem­ber, Moody’s In­vestors Ser­vice cut Pearl’s debt rat­ing four notches, to junk sta­tus, cit­ing on­go­ing sta­dium li­a­bil­i­ties. Wall Street sees Pearl about as likely to re­pay its debts, in other words, as Detroit just be­fore it went bank­rupt. With credit this poor, Pearl can’t bor­row money to fix a road or build a fire sta­tion with­out pay­ing in­ter­est rates that might make a credit card user think twice, as­sum­ing it can even find a will­ing in­vestor. Moody’s also put Pearl on re­view for fur­ther down­grades. When it asked Pearl for de­tails on the sta­dium deal, the city brushed it off. “No­body but us needs to un­der­stand how this ball­park works,” says Rogers, claim­ing the down­grade was un­war­ranted.

Fos­ter, who lost his bid for a fourth term in 2009, blames his suc­ces­sor, Rogers, for the town’s fi­nan­cial trou­bles. “There was more than enough to cover those bonds, and you can’t con­vince me oth­er­wise,” he says. “If there’s still not, I don’t know what’s go­ing on.” Rogers says he was sad­dled with a bad deal and has re­vised the bonds four times in the last five years. To help keep len­ders whole, ac­cord­ing to Pearl’s fi­nan­cial ad­viser, De­mery Grubbs, the city has taken on more of the debt bur­den.

After the credit down­grade in De­cem­ber, Rogers looked to re­fi­nance again. Grubbs told him there wasn’t a mar­ket. “That’s fine by me,” Rogers says. “We don’t need any of the fancy New York banks who don’t un­der­stand us. There’s plenty of Mis­sis­sippi banks that will be happy to have our busi­ness.” Grubbs says the town raised prop­erty taxes to pay back debt on the ball­park.

The down­grade is still news in Pearl. “As far as I’ve heard, this sta­dium is the town’s big­gest mon­ey­maker,” says Bruce Jenk­ins, an usher at Trust­mark Park. “We’re in the best shape we’ve ever been in.” Even Rogers says the sta­dium, de­spite his com­plaints about the fi­nanc­ing, has been good for the town. “How many peo­ple leave that ball­game and go down to the lo­cal con­ve­nience store and get gas and a candy bar and a drink, or, I don’t know, a six-pack of beer for the drive home?” he asks. Plant, too, says he was un­aware of the down­grade or the mil­lions com­ing out of Pearl’s gen­eral fund to cover the sta­dium bonds. “It’s the first time I’ve heard that,” he says. When pre­sented with de­tails on Pearl’s fi­nan­cials, he says the “num­bers don’t add up” and points to the rev­enue the team pro­vides. (It pays $100,000 to $200,000 per year in rent.) He main­tains that the Pearl deal has been a suc­cess for ev­ery­one. “The so­called sports econ­o­mists,” he says, “are just wrong.” Pearl, he notes, now has tax­pay­ing busi­nesses where 162 acres of swamp used to be. “We em­ploy a lot of peo­ple,” Plant says of the Braves as a whole. “Those jobs be­come con­sumers. We have peo­ple that cre­ate eco­nomic im­pact by go­ing to the restau­rants and shop­ping for the day.”

After Pearl, Plant went to work get­ting a sta­dium for the Triple-a team. In Jan­uary 2008, the Gwin­nett County board of su­per­vi­sors an­nounced a plan to spend $45 mil­lion on a new sta­dium to lure the team from Rich­mond, Va., to Lawrencevi­lle, just north­east of At­lanta. “We an­tic­i­pate it pay­ing for it­self from Day One,” then-County Ad­min­is­tra­tor Jock Con­nell said. (Con­nell didn’t re­spond to re­quests for com­ment.) Costs quickly rose to $64 mil­lion, with the county draw­ing $19 mil­lion from its gen­eral fund to cover over­runs. Like Pearl, Gwin­nett pledged to make up any rev­enue short­falls. In­stead of pad­ding the city’s bud­get, the sta­dium has so far drained $1.6 mil­lion, ac­cord­ing to J.C. Brad­bury, a sports econ­o­mist at Ken­ne­saw State Uni­ver­sity.

Plant had a hand in the Cobb deal, too, which came to­gether quickly and mostly be­hind closed doors. “There was no trans­parency,” says Lisa Cupid, one of the county’s five com­mis­sion­ers. By the time the com­mis­sion got the chance to see the doc­u­ments, the de­tails had al­ready been ne­go­ti­ated. Her fel­low com­mis­sion­ers, she says, “were all just ex­cited to be asked to the dance.”

Ben­nett, the mid­dle­man in Pearl, has no re­grets. What­ever the cost, he says, the sta­dium helped to put the city on the map. “That deal was suc­cess­ful for me per­son­ally,” he adds.

His mil­lion-dol­lar finder’s fee helped keep him afloat while he worked on his most re­cent project: a $36 mil­lion mi­nor league ball­park, paid for in part with set­tle­ment money from the BP Gulf oil spill, for the Biloxi Shuck­ers, the Dou­ble-a af­fil­i­ate of the Mil­wau­kee Brew­ers. The Shuck­ers paid Ben­nett with a piece of eq­uity in the team, and he’s got an of­fice over­look­ing the field and the Gulf of Mex­ico. “It’s not a bad gig,” he says.

On open­ing night at Trust­mark Park this

year in Pearl, the Mis­sis­sippi Braves can’t score a run for the first six in­nings against the Pen­sacola Blue Wa­hoos. It doesn’t seem to mat­ter much to the fans. It’s $2 beer night. The air is warm and the sky is clear, per­fect for a lazy evening of base­ball. In the third in­ning, Kathy Ann Foy sits bounc­ing her in­fant daugh­ter on her lap. She’s come straight from her nurs­ing job at a lo­cal hos­pi­tal, still in her bright pur­ple scrubs, ID tag around her neck. Her three boys are scram­bling for foul balls near the wall. They have an en­tire sec­tion to them­selves along the first base line. “The kids can just run around,” she says. “It’s like I have the night off.” Of­fi­cial at­ten­dance for the night is 4,101, a lit­tle less than half­full. A few hun­dred strag­glers stay for the fire­works show after the Braves lose, 3-1.

The big-league Braves started the 2016 sea­son with nine losses in a row and cur­rently sit at the bot­tom of the Na­tional League East. Like all bad teams, they’re re­build­ing. The club is count­ing on tal­ented prospects work­ing their way from Rome to Pearl to Gwin­nett to Cobb County when that sta­dium is ready. The de­ci­sion to leave At­lanta proper was con­tro­ver­sial, but the team says the sub­urbs north of the city are where most ticket buy­ers live any­way.

Like Pearl and Gwin­nett, Cobb thinks it can come out ahead. The county ex­pects the new sta­dium to gen­er­ate about $24 mil­lion per year, $3 mil­lion more than the an­nual debt ser­vice re­quire­ment, ac­cord­ing to Moody’s. The plot where the sta­dium and sur­round­ing 57-acre mixed-use devel­op­ment will go, Plant says, cur­rently gen­er­ates $305,000 a year in prop­erty tax. In 2018, the Braves’ first full year in the sta­dium, he ex­pects the project to gen­er­ate $28 mil­lion in prop­erty and sales taxes. As with Pearl and Gwin­nett, Cobb’s tax­pay­ers will be on the hook to make up the dif­fer­ence if rev­enue falls short of es­ti­mates. Ac­cord­ing to bond doc­u­ments, there’s no cap on how much the county may have to spend.

In April, in a char­ac­ter­is­tic Malone move, Lib­erty broke the Braves off into a pair of track­ing stocks, sep­a­rat­ing the team from the rest of the com­pany’s bal­ance sheet so in­vestors could bet on the team by it­self. After a week on the mar­ket, shares were sell­ing at prices that put the value of the Braves at about $ 775 mil­lion. If Malone were ac­tu­ally to put con­trol of the team up for grabs, says Rob Routh, an an­a­lyst at FBN Se­cu­ri­ties, that num­ber would likely dou­ble overnight. That’s be­cause team own­ers tend to reap prof­its only when they sell. In the mean­time, fran­chises don’t usu­ally make much money. The Braves spend just about ev­ery dol­lar they take in, with op­er­at­ing in­come of $3 mil­lion on $243 mil­lion in rev­enue last year. Dur­ing a ques­tion-and-an­swer with share­hold­ers in April, Malone shrugged off the Braves’ slow start. “Keep in mind,” he said, “the Braves now are a fairly ma­jor real es­tate busi­ness as op­posed to just a base­ball club.” <BW>

“In gen­eral, it doesn’t pay off. You can look at the num­bers up and down and side­ways”

Fos­ter

Ben­nett

Rogers

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