The rub was that someone ultimately had to pay. A facility that cost over $80 million to build in 2000 is reportedly worth just $31.3 million today. The holder of the defaulted bonds was threatening foreclosure if a sale could not be brokered.
I spent several hours watching the live feed of the Memphis City Council Meeting as the 13-member council considered citizen and peer comments – pro and con – as they came to a decision whether or not to purchase the ballpark for $19.5 million plus $4.5 million in capital improvements. (Total City indebtedness is initially reported at $36 million.)
The final vote was 8-4 with one abstention, as the Council approved issuance of $24 million in bonds for the project.
The St. Louis Cardinals' commitment will include a lease of 17 years through October 2030 with two five-year options. Annual payments will be $300,000, with another $100,000 each from the Cardinals and AutoZone Inc. pledged if there is a shortfall in sales tax rebate revenues.
Lease termination fees generated considerable Council discussion. Cardinals general manager John Mozeliak was present at the meeting and made it clear the Cardinals want to stay. He said the club will sign a four-year Player Development Contract binding them to Memphis on "day one."
The owner of the defaulted bonds, Fundamental Advisors, is making $5.8 million return on the sale. They paid $24.4 million and will be receiving $32.2 million after 3.5 years. Their six percent internal rate of return is considerably lower than they could have achieved in the open market, reported an independent financial analyst who spoke.
Mozeliak said a Triple-A team is typically worth $20-30 million - if it has a clean balance sheet, which this team does not. The Cardinals are reportedly paying $15 million for the franchise and will spend another $5 million in improvements to AZP.
The Cardinals are committing $100K per year to the RBI Program (Reviving Baseball in the Inner Cities) for the full 17 years of the lease. Mo also mentioned a commitment of four suites, 80 seats per game, for underprivileged youths to attend games, with intent for more.
Mozeliak believes the Cardinals can improve operating results. He wants to ultimately increase attendance by 100,000. (The club drew just under 500,000 in 2013.) One meeting participant mentioned a 5-7 percent per year increase target.
A proposed tax to be imposed on game tickets was not included in the final agreement.
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Brian Walton can be reached via email at email@example.com. Also catch his Cardinals commentary daily at The Cardinal Nation blog. Follow Brian on Twitter.
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