The Mariners Are Bucking a Trend

We’ve talked a lot in these pages about stadium deals. We’ve talked about the Marlins and how Miami’s deal with the team deteriorated into a lawsuit. We’ve talked about the Diamondbacks and how their search for a stadium deal resulted in a lawsuit. And in recent years, teams like the Braves and Rangers have decided to construct new stadiums even where the existing buildings were relatively young. Leave it to the Mariners, of all teams, to buck the increasing trend. Per the Associated Press:

The Washington State Major League Baseball Public Facilities District has approved terms of a new 25-year lease with the Seattle Mariners for Safeco Field.

Combined with options for two three-year extensions as part of the agreement approved Wednesday, the new lease could keep the Mariners at the stadium through the 2049 season.

As part of the lease terms, the Mariners agreed to pay 100 percent of maintenance and operations costs at the stadium and “contribute to ongoing capital improvements that will be needed in the decades to come.”

The new lease is five years longer than the original 20-year agreement when the ballpark was constructed and opened in 1999. The current lease was set to expire at the conclusion of the 2018 season.

There are a couple of interesting facets to this deal. Remember when we talked about the Diamondbacks’ lawsuit? That was about stadium maintenance costs, with the team arguing that Maricopa County was responsible for maintaining the facility. But here, the Mariners voluntarily agreed to assume all of the maintenance costs and 80% of required capital expenditures. On one hand, it seems like a great deal for the Washington State Major League Baseball Stadium Public Facilities District (PFD), which owns the ballpark. On the other hand, it’s worth remembering that Safeco Field cost about $520 million, of which $390 million was paid by taxpayers. Unlike some teams, however, the Mariners are making a legitimate effort to repay taxpayers for their initial investment, as Ryan Divish explains:

• Rent — $55 million over 25 years ($1.5 million per year with CPI escalation), at least $10 million of which will be applied to ballpark capital improvements;
• Capital Expenditures & Improvements – The Mariners will contribute $120 million to a new Capital Expenditure (CapEx) Fund for ballpark upgrades and improvements necessary to keep Safeco Field in first-class condition ($3.25 million per year with CPI escalation);
• Maintenance & Operations — The Mariners will continue to pay for all ballpark operation and routine maintenance costs, estimated at $250 million over the life of the lease. Over the last 19-years, the Mariners have invested over $350 million in maintenance, operations and capital improvements and repairs at the ballpark;
• Taxes collected on admissions and parking for ballpark events – An estimated $175 million will be generated from taxes collected on parking and tickets sold for Safeco Field events. The Mariners will direct these revenues to the PFD for contribution to the CapEx Fund;
• Revenue Sharing – 1.5-2 percent of revenue from ticket sales guaranteed for each year. This could provide over $50 million for the CapEx Fund;
• Neighborhood Improvement Fund – The Mariners will contribute to the newly created Ballpark Neighborhood Improvement Fund to be used at the discretion of the PFD to support various projects that enhance the communities surrounding Safeco Field.
• Over the life of the lease, 80 percent of the costs of capital expenditures, operations and maintenance will be paid by the Mariners through direct contributions to the PFD and taxes generated by ballpark events./li>

So the Mariners are essentially guaranteeing that taxpayers will realize at least some profit from the initial stadium construction investment. What’s particularly notable is that the Mariners and PFD, while negotiating the lease, hired the architecture firm Populous to examine Safeco and determine what upgrades, if any, would be required over the term of the lease. That study was extremely thorough, as Forbes explains:

The study by Populous includes 400 separate line items. That list includes systems such as HVAC, electrical, plumbing, elevators, escalators; Safeco’s retractable roof; new seats; restroom fixtures; exterior painting, and cable/fiber modernization that will soon need to be repaired, maintained, or replaced after being in use in the nearly 19 years the ballpark has been in use.

The dispute over Chase Field, remember, was over the HVAC and plumbing systems. Here, the Mariners agreed to take on the bulk of those expenses voluntarily.

So the obvious question, then, is why? The Mariners may be a more socially conscious franchise than some of their MLB peers, but it’s still a for-profit corporate partnership. At the same time, we’ve increasingly seen studies showing that public funding of new stadia simply doesn’t provide the economic benefits claimed by owners seeking taxpayer subsidies. As one study from the Center for Public Policy and Administration at the University of Utah noted in summarizing the current state of academic literature on the subject:

Few fields of empirical economic research offer virtual unanimity of findings. Yet, independent work on the economic impact of stadiums and arenas has uniformly found that there is no statistically significant positive correlation between sports facility construction and economic development.

It gets worse. The Utah study also found that new stadia funded by taxpayer dollars actually “had a negative impact on the level of per capita income” and that, “in the 30 metro areas where there was a change in the number of stadiums, 27 areas showed no change in per-capita personal income growth and three showed a negative change.” In other words, there is some data to suggest that not only does public financing of stadia have no economic benefits, but it may actually make per-capita income — i.e. an area’s annual income per person — worse. That’s because the public funding is only recouped by taxpayers if the stadium generates tax revenue sufficient to repay the initial taxpayer investment, whereas the economic growth from the stadium is a benefit which accrues to the wealthy team and business owners who occupy the stadium. As Jeffrey Dorfman explains in Forbes, “stadiums can only justify public financing if they will draw most attendees from a long distance on a regular basis.” Given Seattle’s location, that’s particularly unlikely for Safeco.

So this stadium deal may be the bellwether in a change in how stadia are viewed moving forward. Mariners chairman John Stanton said on the signing of the new lease that “[w]e want this ballpark to be our home for the next 100 years.” But while most sports stadia don’t last longer than 30 years — or less — that’s not due to structural concerns. Instead, an increasing trend is that a team simply builds, or seeks to build, a new stadium when its current lease expires. But as public financing becomes more unpopular, the Mariners’ Safeco deal may become the new normal, particularly as cash-strapped municipalities increasingly balk at paying for short-term venues in the face of public resistance. And that’s not a bad thing; after all, ballparks can’t become classics if they’re younger than the players they house.