Sometime in 2011, the Public Facilities District that controls Safeco Field will begin paying a nearly $25 million debt to the Seattle Mariners baseball team.
That is the year that bonds sold to build the adjacent parking garage will be paid off. Under a deal signed in 2001, money from a 5 percent admissions tax will then begin flowing to the team.
The debt is for improvements the team made to the ballpark after the stadium was completed and after a truce was signed between the PFD and the team.
It means that rather than capping the public contribution at $372 million, the public investment in the building will be closer to $400 million.
That came as a surprise to me, and might be a surprise to most fans and taxpayers. But no one was hiding anything. We just stopped paying much attention after the team and the PFD signed a peace treaty of sorts in 2001.
Under that deal, the Mariners are on the hook for routine maintenance and for many enhancements that create more revenue for the team. But the deal means that the owners are entitled to reimbursement from taxpayers for items related to construction problems, for improvements and upgrades, and for repairs or replacement of items that wear out or break before their anticipated life expectancy.
“The Legislature was mindful that buildings need repair and enhancements to keep them up to date,” said Kevin Callan, executive director of the PFD, which represents taxpayers’ interest in the stadium. “So they always contemplated this source of money to cover repairs.”
Added Bart Waldman, the team’s executive vice president for legal and government affairs: “The Kingdome roof tiles had just fallen. The Legislature decided that ‘if you build this and in 10 years something bad happens, we don’t want to see you again.’”
Certainly some of the costs are due to disasters such as the Nisqually earthquake, and a lightning strike that damaged electrical circuits. Others, however, are for changes that make the ballpark more appealing and comfortable to fans and indirectly affect attendance and team revenue.
One example of construction issues is cracking concrete in the concourses, suites and club levels. Ticket buyers through the admissions tax will repay the owners for the cost of carpeting and flooring to hide the cracks.
An example of general improvements is the glass windscreen on the 300 level of the stadium that cut down on the cold winds that chilled fans in the first season.
And when the scoreboard screen failed before its expected life, the PFD agreed to put taxpayers on the hook.
Other things paid for with what the team terms a “user fee” on fans are improvements to the Hit It Here Cafe and the kids’ play area, and an additional center field staircase.
Taxpayers also will reimburse the team for things such as bullpen heaters, lighting for Terrace Club artwork, no-slip surfaces in the dugouts, suite-level restroom improvements, TVs in smoking areas and flagpoles for American League team banners and the Canadian flag.
Callan acknowledges that some of the improvements that will be paid by taxpayers were things that might have been “value-engineered” out of original construction. That means they were cut out to save money.
KEEPING A LIST
If any of these improvements had been installed before the stadium was completed, they would have been on the team’s tab.
That’s because the PFD and King County both aggressively rejected the Mariners’ July 1999 claim that taxpayers – not the team – should pay $60 million more for the stadium. The PFD maintained that the taxpayer’s contribution would not exceed $372 million – money raised from restaurant and bar taxes, rental car assessments and a small share of the state sales tax.
That changed a bit when the team and the PFD signed the closeout and settlement agreement of February 2001. In that deal, the team agreed to stop pursuing more money from the public and the PFD agreed to empower the team to pursue claims against the architects and contractors.
“We settled it,” said Waldman, the team executive. “At the end of the day we backed down.”
But also included was what Waldman called a quid pro quo. The team would pay for routine maintenance such as painting and cleaning and regular repairs. It also would pay for major maintenance and improvements. And so far it has paid $14.2 million for such items as painting structural steel, and for a $75,000 projection TV for the Terrace Club.
But the PFD would pay for other items, those so-called unanticipated capital costs.
That set up an annual process by which the team compiles a list of those costs that eventually would be paid by taxpayers. Since money wasn’t immediately available, the team was allowed to keep a tally of – and assess interest on – the cost of the improvements.
‘UNANTICIPATED’ COSTS?
When the closeout deal was signed, PFD Chairman Bob Wallace termed the concession to the team as something of a symbolic victory because there was no money in the excess revenue account and wouldn’t be for years. That’s because the money is first committed to paying the garage bonds.
Collections from that tax are dependent on how popular the team is with fans. During the record-setting 2001 season, the tax brought in $5.3 million. Last season, it dropped to $3.8 million.
But there should be plenty of money from the admissions tax between 2011, when garage bonds are retired, and 2018, when the lease between the team and the PFD expires. That means the team will be reimbursed in full.
(Across the street at Qwest Field, revenue from the sale of naming rights is used to pay for capital improvements, although the Seahawks football team has paid for other improvements.)
At least one baseball stadium board member has consistently objected to the reimbursements. Former King County Superior Court Judge Terrence Carroll has voted no, often on the short end of a 6-1 vote.
“I don’t believe they fall within the definition of unanticipated capital costs,” Carroll said. “This is a ballpark and we know some things won’t work. But I think unanticipated capital costs are extraordinary and off-the-charts kinds of things.
“But these are items that are items that are anticipated and the Mariners should be paying for them,” Carroll said.
This is especially true because the team gets all of the revenue from the stadium and pays only minimal annual rent – currently $834,000.
Since Safeco opened in 1999, the team has ended each season in the black and made nearly $150 million in total. The team maintains, however, that profits are not distributed to owners but are plowed back into the club.
Still, a King County audit of the fund said reimbursements had been approved in accordance with the lease and were “consistent with the purposes of the fund.”
FIGHT OVER ‘COST OVERRUNS’
This current arrangement between the team and the PFD came out of that nasty 1999 dispute over which entity should pay for the increased cost of the stadium.
The original stadium deal – passed by the Legislature in 1995 after King County voters narrowly rejected a funding plan – called for taxpayers to put up to $372 million into the stadium, with the team paying $45 million. Much of the team’s contribution would come from the sale of naming rights, but the team was on the hook for any overruns.
An expedited construction schedule enforced by a final threat by current owners to sell or move the team led to problems. Design and construction were often simultaneous, and changes were constant and expensive.
By the time Safeco Field opened in July 1999, the ballpark cost had reached $517 million, with the team’s share reaching $142 million. Owners then put a damper on the opening festivities by asserting that taxpayers should pay $60 million more for “unanticipated capital costs.”
(While the team thought it was owed $70 million, it asked for only $60 million because that’s all in the way of additional bond sales that stadium taxes could support).
In an April 1999 letter to the PFD from team attorney Waldman, the team argued that those $70 million in costs “were necessary to complete the facility as it was originally contemplated.”
“We emphasize that these are not ‘cost overruns,’” Waldman wrote.
But the PFD staff and appointed board rejected the claims, making no distinction between overruns and unanticipated capital costs. Anything above $372 million was the Mariners’ responsibility, the board argued.
Relations are better since the closeout agreement was signed, though not without some conflict.
Just last week the board required that the team remove a $10,000 request for railings around a wheelchair ramp that board members thought should be paid by the team, not the taxpayers.
The board did agree that another $495,000 in improvements be added to the taxpayers’ tab, collectible beginning in 2011.
Callan thinks the arrangement works pretty well for everyone – the taxpayers, the fans and the Mariners.
“All politics aside, they are taking good care of the building,” he said.
Peter Callaghan: 253-597-8657
peter.callaghan@thenewstribune.com blogs.thenewstribune.com/politics
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