We’ve already seen a few examples of cities adjusting rent levels for MiLB and summer-collegiate teams, and other cities are exploring ways to address ballpark debt and ongoing operations.
Last year was a rough one in Minor League Baseball and many summer-collegiate leagues that either totally or partially shut down. With MiLB totally shut down, MiLB teams for the most part have generated few revenues since August 2019.
Though many MiLB teams cut back and applied and received PPP loans, the usual financial cycle in Minor League Baseball was especially cruel when the season was shut down before the 2020 opener. Add to that the general slowdown in the economy, and specifically a slowdown in the travel economy. Decreased travels means decreased hotel and car-rental tourist taxes. And with travel sales taxes a popular way to finance construction of all kinds for municipalities, the decrease in tax revenues impacts debt service for all sorts of civic projects–including ballparks.
Those shortfalls are having an impact in El Paso, as the city addresses debt service for Southwest University Park, home of the El Paso Chihuahuas (Class AAA; Pacific Coast League). When the ballpark was financed, the expectation was that debt service would require general-fund payments though 2023, but after the debt was refinanced and higher-than-expected hotel and sales tax revenues, the city then projected an end to subsidies in 2021.
With COVID-19, a decrease in local travel and the cancelation of the 2020 season, those hotel and sales tax revenues took a dive. That means a city subsidy for the ballpark in 2021 (though whether it comes from the city’s general fund or another revenue source needs to be determined), and $5 million in ballpark improvements called for in the team’s lease will for the most part be deferred. From KTSM.com:
Early in the meeting, the City Council learned about a $1.3 million variance between revenues from 2019 and 2020 through hotel occupancy taxes, sales taxes, ticket revenues and parking, according to city documents.
City financial figures suggest a $1.1 million general fund subsidy was avoided through debt service savings of $581,400. Subsidies to support the ballpark have cost taxpayers more than $3 million since it opened in 2014.
Robert Cortinas, the city’s chief financial officer, said revenues from hotel occupancy taxes, which is a major source of revenue used to pay the ballpark debt, were affected by significant lows in 2020. In April, occupancy dipped to nearly 30 percent.
Hotel taxes have come back with occupancy reaching 60 percent. Still, given the prevalence of travel (hotel/motel, car rental) taxes used to fund sports facilities, the issue of debt service should continue in 2021.
In Winston-Salem, city officials are looking at a different issue when it comes to Truist Stadium: Billy Prim, a minority owner, says his Winston-Salem Dash (Class A; Carolina League) needs a rent reduction if his team is to survive and maintain MLB licensing. The Dash currently pays $1.55 million annual in rent, with the city receiving an additional $175,000 in a ticket surcharge, but the team is proposing cutting that annual rent payment to $750,000 and eliminating the ticket surcharge. There is about $20 million left on Truist Stadium debt service, but the city is worried that majority investors Chicago White Sox will just fold the team if a new acceptable lease isn’t approved. From the Winston-Salem Journal:
If that’s a blow, a bigger blow would be losing the team, Winston-Salem Mayor Allen Joines said.
“It came down to this: If we lose the team, the city would be responsible for the whole payment,” Joines said.
And the city would be left with no team and an empty stadium.
Joines also said the new lease is being structured in a way that will allow the city to more than recoup — over the long haul — the money lost from lowering the lease and eliminating ticket surcharge payments.
A complicating factor is that in the future MLB will be included as parties in MiLB team leases–so any changes to the Dash lease must be approved not only by the White Sox but Major League Baseball.
RELATED STORIES: Southwest University Park Subsidies to End in 2021; Report: Southwest University Park Subsidies Could End by 2021