When the Tampa Bay Rays pulled the plug on development of a new Ybor City ballpark, the stated rationale was a lack of specifics about a funding and site-development plan. But by opening a search for a new site, team ownership may just be delaying inevitable headaches.
Right now we are in a construction boom. With interest rates low, we’re seeing every development plan under the sun gain approval. Though steel tariffs are impacting the pace, they’ve not been completely slowing things down. But the cost of construction is rising, both for goods and labor, as a low unemployment rate impacts availability of both skilled and unskilled laborers. Witness the price tag for the KeyArena renovation in Seattle, where the price tag has risen from $600 million to $850 million.
Given these factors, it’s no surprise the Rays decided to withdraw from a process that had not yielded a firm financial plan so close to a Dec. 31 deadline. With no final budget, no final commitments for financial support, some iffy development commitments and a lack of specificity on season-ticket sales, the Rays decided to walk away.
Which shouldn’t be a surprise given owner Stuart Sternberg’s background as a Goldman Sachs partner. He’s in a profession where he regularly makes bet on the future of the economy. In this case, he decided to fold, rather than roll the dice.
But by folding, he essentially made a bet that the future economy will be close to where it is now. Interest rates, while inching up, remain historically low. Tax revenues are generally up across the board. His bet is that both trends will continue.
But what if they don’t? The Ybor City ballpark proposal carried a price tag of $892 million, and one of Sternberg’s criticisms—and one shared by MLB Commissioner Rob Manfred—is that the current budgeting didn’t include a firm number for the Rays’ contribution. That’s fair, but Sternberg’s bargaining stance has been to start low–$150 million—and presumably increasing based on the final numbers. So let’s say the Rays braintrust internally sees $250 million as a reasonable contribution. (No, no insider information: just a number to use as an example.) The bet here is that inflation will remain low, interest rates remain stable, and construction costs level off while the team searches for a new ballpark site. If any of those trends do not hold true, then the $250 million buys a lot less ballpark than today. On the other hand, if we enter a recession and construction costs plummet and local governments see spending on projects like a new ballpark as economic stimulus, then that $250 million will go farther.
(A potentially more intriguing plan has emerged where private investors would have paid for the new ballpark as part of a larger development plan. Tampa pulled the plug on that plan, but it could be revived—which would bring down the Rays’ share to zero.)
It’s an interesting bet. Of course, it could all be moot if Tampa or St. Petersburg acknowledge the very real possibility of losing the Rays in eight years and decide to turn on the effort on a new-ballpark proposal. And it could be moot if the aforementioned development deal is revived. But as it stands right now, Sternberg and crew have gone all in on economic trends that may or may not remain stable.
Rendering courtesy Tampa Bay Rays.
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