Sunday, December 14, 2014

How the Rays Are Playing Hardball...and Winning

Great piece from the Trib's Chris O'Donnell this morning on how the Rays were able to negotiate the price of "making St. Pete whole" down to somewhere in the $20-30 million range (less when you factor inflation), despite a fairly ironclad contract with a whopping 13 years left on it. 

The story points out how Seattle ultimately got a $45 million settlement when the Sonics left their less-ironclad lease just two years early.  But this week's deal has been considered "fair" because St. Pete seems ready to move past baseball and the Rays weren't going to budge:
The amount of compensation is a compromise, Kriseman said — less than the city asked for but more than the Rays wanted to pay. Sports economists say the Rays bargained well.
“We have immense challenges ahead of us,” said Rays President Brian Auld. “Had these payments been significantly higher, they would prohibit us from being able to do a new deal; they could be crippling to whatever business needs we had going into a new ballpark.” 
Indeed, the more the Rays ultimately pay to taxpayers, the less money they make...and they more they'll need to ask of taxpayers in a new deal.  But "crippling" is poor descriptor given that MLB just hit $9 billion in revenue this year.

Judging from previous reports of what the Rays and former mayor Bill Foster were negotiating, it would seem the team's hardball tactics worked well.  The current mayor, Rick Kriseman, acknowledged at Tuesday's press conference that he would have loved to have gotten more, but he didn't feel like he had the leverage.  He couldn't even get the team to pay for the right to look at stadium sites in Tampa, one of his original campaign promises.

Reaction has been mixed: the Times' John Romano said the money stinks, but the deal was necessary.  SaintPetersblog's Peter Schorsch wrote St. Pete is basically getting screwed.

Of course, the revelation that the Rays won't consider a single change to the negotiated deal only bolsters the idea that they're going to keep playing hardball.  They're basically giving an ultimatum that they won't re-negotiate anymore and if council rejects this deal, they won't keep trying to make a new stadium happen over the course of the next 13 years?!?

That's silly.  Which is why the city may not realize it, but it still holds all the cards in this negotiation.

I've written ad nauseum about Kriseman's tough challenge of satisfying both his taxpayers and a team that doesn't want to compensate them.  He could have waited the team out until they caved to better terms...but the team played its public relations cards well and forced the city to bend.

How should council vote this Thursday?  I cannot say.  It's a big decision.

But this may be the last time a municipality has the upper-hand in negotiating with the Rays.  Even Tampa Mayor Bob Buckhorn acknowledged what's coming next:
You have to wonder if the Rays' setting their price, playing hardball, then letting public opinion turn in their favor will repeat itself in Hillsborough County too.

If the team/league finds a piece of land they like in Tampa, will they threatmonger and fearmonger because the city and county aren't immediately willing to hand over hunderds of millions of dollars?

It wouldn't be MLB's first time.


  1. Noah, why do you say "fairly ironclad contract" and not "totally ironclad contract"?

    1. Because there is no definition of what "damages" the Rays will have to pay to break the contract of using what was a previously idle building. I've said it before, the only "damages" even in the scope of this contract would be a prorated portion of the updates they demanded from city before agreeing to the lease. Some 70 million in improvements.

    2. Scott - because we don't know how courts would ultimately rule.

  2. Because in court, Rays could argue that the damages are offset by the value of the land/taxes and the economics of a development project (creating jobs, generating taxes, generating more business in the area, ...). So yes, by leaving (the Rays), the city will loose some money but they will also get some by developing the land.

    Also, the value of the damages are bound to the number of years left on the contract (this is my interpretation of the contract). Imagine if the Rays decide to sit down on the contract until 2027 and then move away. Rays/MLB could potentially request damages because the stadium is empty and such contract does not generate the same revenues (TV broadcast, sponsorships, ...) that a Canadian TV deal (and related sponsorship deals) could have generated (nothing can stop the Rays/MLB to sign a deal with Bell Media and/or Videotron on TV rights if the team is playing in Montreal before 2027).

    So ironclad is a very strong word that do not apply here considering all the strategies Rays/MLB can use to demonstrate that they too, have damages considering the terms of the contract. And to avoid very high legal fees over years, such contract can be renegotiated in 2017-2018, when the new stadium project fail or does not materialized.

    Remember, the clock is ticking for all counties in Tampa Bay. A land, financing and a viable business case before then end of 2017. After so many years (at least 5 if I understand well) circling around, it's time to move on!