St. Petersburg shares the tab when Rays play at the Trop

By Stephen Nohlgren, Times Staff Writer
Friday, November 26, 2010

Insurance costs are the main reason the city’s bottom line for Tropicana Field has failed to meet expectations. Last year, the cost was $1.7 million, down from a previous high of $2.2 million.

ST. PETERSBURG — For most Tampa Bay Rays games, police Officer Gary Gibson directs traffic at Fifth Avenue S and Dr. Martin Luther King Jr. Street. Extra duty helps the 24-year veteran put two of his three children through college.

His pay also is one small reason why Major League Baseball cost the city of St. Petersburg about $7.3 million this year.

Though city officials originally hoped the monetary benefits of putting on baseball games might defray the $6 million in annual payments for Tropicana Field, the opposite has occurred.

Operational costs have outpaced revenue, forcing the city to shell out more than $1 million a year on top of debt payments.

For one thing, the Sept. 11 terrorist attacks and killer hurricanes made sports venues all over the country much more costly to insure.

On the income side, early decisions on how to divvy up stadium revenue worked out badly for the city. Attendance figures that have disappointed the Rays have undercut the city's take as well.

Baseball could well draw 3 million fans a year, city staff members told the City Council in 1995 as it voted to lease the dome to original Rays owner Vince Naimoli. Such crowds are "achievable and can be exceeded, especially in the franchise's early years,'' a memo from then-Mayor David Fischer said, "and it can be sustained if a competitive team is developed."

An additional 300,000 people were projected to attend concerts, arena football and other nonbaseball events, which was consistent with the dome's history up to that point.

Such numbers would have netted the city more than $250,000 a year on operations, the staff estimated.

Everyone "had high expectations,'' Fischer recalled this month.

Tampa Bay had always drawn well during spring training, he said, and baseball backers had lined up 32,000 season ticket pledges to attract a major league team. The Florida Marlins had drawn 3 million in their first year.

Instead, Rays attendance barely topped 2.5 million the first season and dropped as low as 1 million as the team wallowed in mediocrity. The recession hit just as the Rays finally began to win.

"I don't think anybody expected us to make the playoffs and be 22nd or 23rd out of 30 teams (in attendance)'' over the past two seasons, Fischer said.

As for nonbaseball events, construction of the St. Pete Times Forum and the 1-800-ASK-GARY Amphitheatre consigned the dome to boat shows, graduations and senior forums.

The city's financial burden should ease dramatically in five years, when the Trop's primary construction bonds expire. Until then, here's how operational costs and revenue are breaking down.

Traffic police

The Trop contract requires the city to maintain smooth traffic flow around the dome. The critical threshold is 20,000 people a game, said Joe Zeoli, managing director of city development.

"Available parking spaces in the lot and surrounding areas get filled,'' he said. "We have to make concerted efforts to direct people to other parking venues, like the South Core garage. We have to make sure we don't have blockages at intersections.''

Before the Rays started winning, games with more than 20,000 fans were uncommon and traffic control expenses bounced between $300,000 and $400,000 annually.

Then the 2008 World Series run created a new dynamic. Season ticket sales jumped in 2009, creating 20,000-plus crowds even at midweek, with police and Rays officials monitoring ticket sales right up through game day.

Traffic expenses jumped to about $900,000, then fell to about $700,000 this year when season ticket sales slipped.

Property insurance

The Trop cost roughly $135 million to build, but St. Petersburg insured it for $274 million this year, said Gary Cornwell, who oversees risk management for the city.

A consortium of international companies wrote the policy, including Lloyd's of London. It won't pay for complete replacement, he said, but should cover a major disaster.

In the dome's early days, the city never paid more than $160,000 a year for property insurance. But after terrorists brought down the World Trade Center, the Trop's premium more than quadrupled to $760,000.

A few years later, monster hurricanes flattened the Southeast and premiums tripled to $2.2 million.

"You are looking at a global market,'' Cornwell said. "When there is an earthquake in Chile or a tsunami wipes out part of Indonesia, it all factors into my insurance premiums here.''

Last year, the Trop's premium retreated to $1.7 million.

Insurance costs are the main reason the city's bottom line failed to meet expectations — more so than even lackluster attendance.

Ticket revenue

Cities and counties that build stadiums typically claim a slice of revenue, whether from rent, ticket sales, concessions or parking. Leverage determines the take, and in the early 1990s, St. Petersburg's bargaining position was precarious.

The city had built its dome on spec and it was costing a bundle. County hotel taxes paid half the dome's construction debt, but the city still owed about $3.8 million a year. Management costs added another $2.2 million.

Meanwhile, prospects for baseball were shaky.

Miami and Denver had won one round of baseball expansion, and baseball's bosses had squelched an attempt by Naimoli to buy the San Francisco Giants.

"Another round (of expansion) came and this was our last gasp,'' Fischer said. "If we hadn't gotten a team, word was we would never get a team.''

Meanwhile, existing team owners jacked up Naimoli's franchise fee to $135 million — $40 million more than Miami had paid — and slashed his share of national TV revenue.

The city risked a permanently empty dome if it pushed too hard for revenue.

In the end, the Rays assumed the cost of dome management, which saved the city $2.2 million a year. But debt service rose $2.2 million to cover the cost of installing turf, building out locker rooms and otherwise bringing the dome up to major league specifications.

That left ticket revenue and naming rights to cover the city's operational costs.

Under the Rays' contract, the city would earn 50 cents from each ticket stub, with the first $250,000 each year going into a capital reserve fund for dome maintenance.

The contract originally pegged that 50-cent payment to the price of the average major league ticket. As average ticket prices rose, so would the Rays' payment. But after play began, the Rays said Major League Baseball did not keep average ticket figures, what with discounts and teams' varying bookkeeping methods.

Instead the dome contract was amended so the city's ticket share would rise according to the Consumer Price Index.

Since the Rays began play in 1998, the CPI has risen about 33 percent, elevating St. Petersburg's take last year to 66 cents per "stub,'' which is an actual fan through the turnstiles, not a ticket sold.

The original indexing provision would have dwarfed that.

Team Marketing Report, an online consulting service, estimates that average baseball prices have risen 96 percent since 1998, three times faster than the CPI.

That is just a rough estimate, based on ticket availability, not actual tickets sold. But it indicates that the contract amendment cost the city roughly $600,000 this year.

Naming rights

Orange juice maker Tropicana Products paid $1.38 million this year to plaster its name on the dome. The city's share was $167,000. That helps defray costs, but in retrospect, city officials may have miscalculated.

The original naming rights agreement came when Naimoli tried to move the Giants to St. Petersburg in 1992. His contract to play in the dome called for the team to earn the first $10 million from any naming rights, with the city claiming 60 percent of any overage.

When time came to negotiate a Rays contract three years later, the city agreed to a different split. The change would benefit the city if naming rights brought in $1 million a year or less, but would favor the Rays if payments came in higher.

When Tropicana later bought the rights, it pledged $1 million the first year, escalating to $2.3 million in 2027 — way more lucrative than city officials had anticipated.

Some provisions of the Rays' contract benefitted the city — like a 30-year term versus 26 years under the Giants deal.

But the naming rights switch proved costly.

Over the 30-year span of the Tropicana contract, the city will earn $5.7 million. The old Giants formula would have produced an additional $14.2 million.

Looking forward

The city's peak subsidy for baseball was more than $2.1 million in 2007, when property insurance was at its highest and attendance anemic. Even so, building a domed stadium was a worthwhile gamble, Fischer said.

In the 1980s, St. Petersburg's economy "sat dead in the water," he said, with tourists heading to Central Florida and retirees to cheaper housing in surrounding counties.

Baseball and the arts provided a lift and "now we have so much going for us.''

At some point, Fischer said, the region may have to decide whether keeping the Rays is worth the price of a new stadium. But not any time soon.

"It will be at least three years with this economy before we can even talk about a new stadium,'' Fischer said. "Cities and counties have cut dramatically — social services, arts and culture — and the voters have just turned down rail in Hillsborough County.

"They can't be in any mood to add any burden.''

Expectations versus reality

City officials hoped that putting on baseball games in St. Petersburg's domed stadium would create a small operating surplus that could defray debt service. Except for the first year of games, however, baseball has always required a subsidy on top of debt, largely due to insurance costs and lower-than-expected attendance. Officials thought baseball would draw 3 million fans a year. Based on that attendance, here is how projections for city revenue and costs compared to reality. In projections for 1999 and beyond, the city assumed that costs and revenue would rise at the same rate, which would have maintained a small surplus.