Pittsburgh Pirates

RESOLUTION NO.    7B  

RESOLVED by the Public Auditorium Authority that the Memorandum of Understanding with the Pittsburgh Pirates Professional Club in the form attached hereto, marked as Exhibit B, is accepted by thc Authority, and the proper officers and officials of the Authority are directed to prepare such forms of agreement and other documents as are necessary to effectuate the terms of said Memorandum of Understanding, and further that the Executive Director and the officers of the Authority, upon the concurrence of the Solicitor or his designee, are authorized and directed to execute such documents as are necessary or proper to effectuate the terms of the foregoing Memorandum of Understanding.

 

PITTSBURGH PIRATES
BASEBALL BALLPARK

PNC PARK: "PIRATES NEED CA$H"

MEMORANDUM OF INTENT

The Public Auditorium Authority of Pittsburgh and Allegheny County (the "Authority") has reached a basic understanding as to a venture with the Pittsburgh Pirates to build, operate and maintain a new baseball-only ballpark on the northern shore of the Allegheny River, across from Downtown Pittsburgh. The Authority and the Pirates are determined to proceed with this venture upon the mutual understandings contained in the attached Term Sheet setting forth the anticipated respective obligations and expectations of the Authority and Pirates.

Subject to the terms and conditions in the Term Sheet, the Pirates will exercise ultimate control over the design, construction, management and operation of the stadium, including the payment of all utility and insurance costs. The Pirates will contribute $40 million as set forth in the Term Sheet. Other sources of funding for a majority of the cost of the new ballpark will come from other sources such as: (a) a series of public/municipal bonds secured by various revenue streams; (b) the state; (c) the Federal Government (for certain infrastructure costs for the ballpark); and (d) the private sector.

It is anticipated that the Authority will arrange for the issuance of the various bonds to finance a portion of the venture. The cost of constructing and equipping the new ballpark (including demolition of and retirement of the bonds on Three Rivers Stadium) will also be funded from a variety of other sources including the state, Federal Government, Pirates and private sector.

The general structure for implementing the venture is outlined in the Term Sheet. Upon the approval of the Term Sheet by the Regional Asset Development ("RAD") Board and the Authority, the parties will negotiate definitive agreements reflecting the understandings in the Term Sheet.

               

PUBLIC AUDITORIUM AUTHORITY
OF PITTSBURGH AND ALLEGHENY
COUNTY

By: _____________________

Dated: ____________, 1998

cc: William R. Newlin, Esq.
Buchanan Ingersoll Professional Corporation

David L. DeNinno, Esq.
Reed Smith Shaw & McClay

 PITTSBURGH PIRATES

 

By: _____________________

 


The two law firms to the right are hypertexted to the Regional Renaissance Initiative's campaign contribution report.  Both law firms involved with this agreement were finanicial contributors to the "Stadium Tax".

CONFIDENTIAL

Pirates
Ballpark Terms

 

Pirates' Contributions The Pirates shall have the Option to provide their contribution as follows:

OPTION A

$8.5 million in front funding.. The Pirates will provide adequate assurance that such funding will be available

$2.9 million in annual payments toward bonds, derived as follows:

Beginning in 200l, during each season under the new lease, the Pirates will pay the Authority $1.5 million from ticket revenues and/or the ticket surcharge, which shall he set at 5%. From 2001 on, during each season under the new lease, the first $1.5 million will be placed in a lockbox account, and will be paid from the lockbox to the bond trust account, the remainder of the proceeds from the ticket surcharge will be released to the Pirates, subject to the contribution to the Capital Reserve Fund (see "Capital Improvements and Renovations"). The lockbox arrangement is not intended to interfere with the proceeds over. $1.5 million.

$1.4 million per year, derived for the first 20 years from a 20-year naming rights contract between the Pirates and the name purchaser, and for the next 9.5 years from a subsequent naming rights contract or other contract of equal credit to be entered into by the Pirates following the expiration of the 20-year naming rights contract (together, the "Rights Contracts"). Any amounts received under the Rights Contracts in excess of such annual SIA million payment will be retained by the Pirates. The Rights Contracts will provide protection in the form of language acceptable to the Authority so as to permit the use of such payment stream by the Authority as security far the bonds to be issued by the Authority.


OPTION B:

$8.5 million in upfront funding. The Pirates will provide adequate assurance that such funding will be available;

and

$31.5 mlllion to be paid as the last construction dollars.

Under both Option A and B the Pirates will also be responsible for construction cost overruns as provided herein.

Rent Annual rent:

$100,000 per year

A percentage of Excess Gate and Excess Concessions shall be paid in additional rent (see "Gate Receipts" and "Concession Revenues" below)

Lease Term 29.5 years (This term, short six months of thirty (30) years avoids paying the real estate transfer tax, in which the Pirates would have to pay $7 million)
Amusement Tax 5%
Facility Management Pirates will manage and operate all aspects of the Ballpark, subject to Authority's reservation of certain specified "public" uses.
Day of Game, Other Event Expenses, and Regular Facility Maintenance Pirates 100% responsibility, including utility and insurance costs
Capital Improvements and Renovations A segregated Capital Reserve Fund shall be funded with $3 million derived from the public bonds. Beginning in the first year of the lease term and in each year thereafter during the term of the lease to the extent that proceeds from the ticket surcharge exceed $1.5 million, the first $375,000 (in the first year, such amount to be increased by the increase for such year in the index known as the United States Department of Labor, Bureau of Labor Statistics,   Consumer Price Index, All Urban Consumers, United States City Average, All Items (1982-84=100) (the "CPI") or the successor index that most closely approximates the CPI, in each year thereafter) of such excess (or such lesser amount as shall have been generated by the surcharge) will be paid into the Capital Reserve Fund.

The Capital Reserve Fund will accumulate funds for payment of the costs of repair or replacement of capital items that would be deemed capital improvements to the Ballpark under generally accepted accounting principles (the "Repairs"), it being understood that the Pirates shall be responsible for all ongoing routine maintenance of the new Ballpark. To the extent that the Capital Reserve Fund is not sufficient to fund the agreed upon Repairs, the funding for such Repairs will be the responsibility of the Authority. The Capital Reserve Fund may not be used for costs related to the development or construction of new or redesigned capital items which designs or items are not included within the original plans or budget for the new Ballpark.

Office Space Free to Pirates
Naming Rights Pirates will be responsible for selling and will retain revenue therefrom as described in "Pirates' Contribution" above.
Gate Receipts Pirates retain 100%, net of amusement and ticket surcharge of 5%; provided that Pirates will pay 5% of all ticket revenues (net of amusement tax and ticket surcharge of 5%) over S44.5 million and 10% of all ticket revenues (net of amusement tax and ticket surcharge of 5%) over $52.5 million ("Excess Gate") to the Authority. Such thresholds are based on 2001 dollars, and shall increase each year by a percentage equal to the percentage increase, if any, in ticket prices for such year. "Ticket revenues" shall be deemed to include all regular season Pirate baseball game ticket revenues for all seating within the Ballpark, including tickets sold for club seats and luxury boxes, excluding the premium charged on tickets for such premium seating.
Depreciable Assets Program This term sheet sets forth terms on the assumption that the depreciable assets sale program in itself will not require the Pirates to make payments to purchasers of the depreciable assets resulting in adverse financial impact. In the event that this assumption is incorrect and the depreciable assets program is pursued, the Authority recognizes that some of the economic terms herein will be open for readjustment so as to result in a neutral financial impact on the Pirates with respect to such payments.
Concession Rights Pirates will be responsible for the selection and negotiation of the Ballpark's concessionaire contracts, provided that pre-approval of list of concessionaires for the Pirates to negotiate with is given by the Authority and the contract provisions affecting stadium construction shall be subject to approval by the Authority.
Concession Revenue Pirates will retain 100% of all revenue therefrom; provided (i) in the event that the Pirates’ concession arrangement yields the Pirates the right to receive more than 42% of the aggregate gross concession revenue, the Pirates will pay 5% of the excess above 42% and 10% of the excess above 45% to the Authority in rent, and (ii) the Pirates will pay 5% of receipts from gross food and beverage revenues net of taxes within the footprint of the Ballpark from regular season Pirate games in excess $9.00 per capita (in 1997 dollars, subject to CPI increases); provided, however, that to the extent that the per capita return under this formula to the Authority begins to increase as a result of declining attendance, the amount of that increase as a result of the declining attendance shall not be owed to the Authority (items (i) and (ii) to be referred to as "Excess Concessions"). Pirates represent and agree that there will no more than a nominal upfront contribution by the concessionaire as a part of the Pirates' concession arrangement,  however, to the extent that the Pirates, in their own discretion, decide to accept any up front contribution from a concessionaire, then the benefit to which the Authority would otherwise be entitled in accordance with clause (i) above shall be preserved for the Authority by the Pirates.
Non-Major League Baseball Events and Miscellaneous Revenues The Pirates will be responsible for marketing and scheduling all non-major league baseball related events (other than reserved "public uses") and will retain 100% of the revenue therefrom (including without limitation ticket revenue, rental revenues, concessions, merchandising, advertising, premium seating and reimbursed expense) and all other team and stadium-related revenue streams (including but not limited to merchandise, private clubs, permanent seat licenses, broadcasting fees, playoffs, retail stores and restaurants, some of which are addressed separately elsewhere herein).
Luxury Suites Pirates will be responsible for selling and will retain 100% of all revenue therefrom.
Club Seats Pirates will be responsible for selling and will retain 100% of all revenue therefrom.
Seat Licenses Pirates will be responsible for selling and will retain 100% of all revenue therefrom.
Outside Marquee Pirates will be responsible for selling and will retain 100% of all revenue therefrom. It is understood that the Depreciable Assets Program may have as a component a provision for recognition of the individuals who buy the assets. This may entail some reasonable identification of such individual on an outside marquee. The Pirates agree that to the extent that recognition is necessary as part of that program, they will not unreasonably withhold consent to such recognition as part of a limited marquee. Notwithstanding the foregoing, it is understood and agreed that the Pirates shall not be obligated to build an outside marquee. In the event that the Authority requires the building of an outside marquee solely to satisfy such a requirement and the Pirates have no plan to build such a marquee, the. Pirates shall not unreasonably withhold consent to the building of such marquee, subject to the Authority's sole expense and to the Pirates approval of the design and location of such marquee.
In-Stadium Signage Pirates will be responsible for selling and will retain 100% of all revenue therefrom.
Stadium Club Membership Pirates will be responsible for selling and will retain 100% of all revenue therefrom.
Ballpark Sports Bar, Restaurant, Microbrewery and Other Special In-Park Developments Pirates have 100% control over inside-the-ballpark development, will receive 100% of revenues, subject to Excess Concessions rent payments on all concession items sold at such venues. Developments not contained within the specifications of the original project will be paid for by the Pirates.
Parking It is understood that the Authority cannot deliver parking rights over which it has no control. Nevertheless, discussions will continue with the Pirates with the view that certain land or rights over parking revenues may be acquired. More specifically, the Authority will use its best efforts to attempt to provide the Pirates with the following;


· full year net parking revenues from the parcel on Federal and Canal Streets;

· game-day revenues from the new parking garage to be developed as the "North Shore Parking Garage" between Federal and Sandusky Streets;

· game-day revenues from a surface lot at General Robinson and Federal across from the new Ballpark or from an intermodal parking garage at that location, if any;

· game-day revenues on parking lots 4, 5 and 7; and

· game-day revenues on Fort Duquesne Blvd. and Sixth Street;

in each case subject to successful negotiations with the parties who currently control or may be entitled to parking revenues, and after payment of reasonable operating costs, current financing costs (for which the City, County or local authority is obligated) relating to existing garages and lots, new financing costs (for which the City, County or local authority is obligated) relating to new garages annd lots, and restrictions under applicable local, state and federal regulations, associated therewith.

It is further understood that in order for the Pirates to operate the new Ballpark, the Pirates will need not less than 5,000 spaces within 3,000 feet of the new Ballpark If any parking facilities that are used for baseball-event related parking or from which the Pirates derive revenues shall become unavailable as a result of development of the land on which such facilities are located, the Authority will use its best efforts to provide replacement parking facilities for use in connection with baseball events within 3,000 feet or of the new Ballpark.

Team Relocations

100% of Home games??  >

 Lease will require Pirates to occupy and play approximately 50% of their regularly scheduled games in the new Ballpark during the term of the lease (the "50% Requirement") and will provide for specific performance by the Pirates and injunctive relief in the event of a default by the Pirates. The franchise and the rights under the Ballpark lease must run to the same entity, and the Authority shall have privity under the lease at all times with the owner of the franchise.
URA Loan The URA Loan Agreement will remain in full force and effect, except that the current URA option agreement will terminate upon execution of the new Lease.

The URA (in cooperation with the County under the AIM program) loaned $20,000,000 to the Pirates in 1985; such loan rolled over under an amended loan agreement when the Pirates' equity interests were purchased by the McClatchy group in 1996, and Certain additional amounts were loaned to the Pirates at that time.

In the event of a default on the Lease by the Pirates resulting in a relocation of the Pirates’ franchise, the franchise is required to pay to the URA a "break-up fee", plus repayment of the URA loans as currently required under the URA Loan Agreement. The "break-up" fee which the URA shall be entitled to receive from the Pirates shall be the cumulative amount equal to:

· A pro rata share of the amount then necessary to defease the RAD Revenue Bonds (pro rata share determined as a fraction of the amount of the proceeds of the RAD Revenue Bonds identified at the time of funding as being used for construction of the ballpark, over the total amount of the bond proceeds);

· The amount then necessary to defease the Pirates Ticket Surcharge Bonds;

· A pro rata share of the amount then necessary .to defease the Player Payroll Tax TIF Bonds (pro rata share determined as a fraction of the annual average amount of tax paid by Pirates' players to the annual average tax paid by Pirates and Steelers players during the years up to the Lease default);

· The amount of the State financing provided to the new ballpark project, provided that such amount shall be reduced by 1/29.5 for each year which the Pirates have remained under the Lease;

provided, that the total amount of the foregoing payments (including repayment of the URA Loans) shall be no more that $140 million, such amount to be reduced by 1/29.5 for each year which the Pirates have remained under the Lease.

The "break-up fee" with respect to all nonetary damages to governmental entities funding the Ballpark, but shall not diminish the Authority's right to obtain injunctive relief against relocation in breach of the Lease.

The URA may allocate such funds among the applicable funding entities.

 

CONSTRUCTION

 

Construction Budget (Use Of Funds) $209 million to complete Ballpark for opening

Includes:

· Construction of ballpark, including all fixtures, furnishings and certain equipment (i.e. concession facilities, retail build-outs, scoreboards, etc.)

· Professional fees

· Contingency reserve

At the request of the Authority, the Pirates will assume responsibility for demolition of Three Rivers Stadium under a fixed price contract to be entered into between the Steelers, the Pirates and the Construction Manager (subject to reimbursement in full for the costs of such demolition by the Authority),
Site It is understood that the Authority shall be responsible, at its sole cost and expense, for all site acquisition costs, all off-site infrastructure improvements and all environmental and other costs associated with providing a "clean site" for the Ballpark and the Lease will provide remedies for failure to perform this obligation.
Control Over Construction The parties will develop a mechanism to provide Pirates with design and construction control, subject to approval and general fiscal and completion oversight of Authority and to provide required compliance with Pennsylvania public bidding/contracting mandates
Selection of Professionals, Contractors Construction manager and architect shall be selected by Pirates, subject to Authority approval; construction contracts would be subject to applicable bidding public construction laws. It is currently contemplated that the design/construction contracts will be entered into by the Authority (which contracts shall include traditional means for securing payment and performance, such as a payment and performance bond from a reputable entity) and that the Authority will delegate to the Pirates the right to implement such contracts on behalf of the Authority.
Responsibility for Cost Overruns Pirates will be 100% responsible for all cost overruns and project delays (other than those resulting from changes requested or required by the Authority), which shall be secured in a creditworthy manner with liquidity characteristics satisfactory to the Authority. For example, a letter of credit in favor, of the Authority posted by the Construction Manager (or a similar instrument acceptable to the Pirates and the Authority) in an amount sufficient to cover any cost overrun and/or project delay (other than those resulting from changes requested or required by the Authority), as reasonably determined by a consultant hired by the Authority, taking into account the Project’s cost and "time to completion" scheduling benchmarks, will be deemed satisfactory. The incremental cost, if any, of such letter of credit or similar instrument is the sole responsibility of the Pirates. This responsibility is subject to adjustment due to the effects of late delivery of the site to commence construction.

Return To Voice PAC