Major League Baseball's relocation committee wants the expected move of the Montreal Expos to resemble the process that the NBA used in awarding an expansion team to Charlotte.
Before Charlotte was awarded a franchise to replace the Hornets, who moved to New Orleans this past offseason, the NBA negotiated terms of the construction and use of a new arena with city officials. Later, it picked Black Entertainment Television founder Robert L. Johnson to own the team, which will begin play in 2004.
Baseball would like to have a stadium deal in place with the District, Northern Virginia or Portland, Ore., before deciding which group is allowed to buy the Expos, officials from those groups have been told. As part of the deal, MLB wants the local jurisdiction to finance fully the $350 million to $400 million cost for a new ballpark.
The jurisdictions will present their formal offers to the relocation committee March 20-21 in Phoenix. After follow-up negotiations, the committee plans to send Commissioner Bud Selig the best offers from each jurisdiction, and he will make a recommendation to the owners. MLB has said it would like to choose the Expos' new home before the All-Star Game in July.
MLB wants terms similar to those contained in about 350 pages of contracts between Charlotte, the NBA and Johnson that were reviewed by The Washington Post. The overall deal enabled the NBA to extract a league-record $300 million expansion fee, surpassing by $175 million the previous record set for two teams that began play in the 1995-96 season. Nevertheless, Johnson, a billionaire, is aiming to turn a profit when the team starts play in the fall of 2004 -- a goal NBA Commissioner David Stern said he expects him to attain.
"I'm not mad at my money," Johnson said in a recent interview. "The NBA made certain three things happened."
He gets operational control of the building, allowing to him to act as landlord or promoter for non-NBA and WNBA events. He optimizes revenue by retaining 100 percent of fees from naming rights, broadcasting rights, premium seating, sponsorships and advertisements. Johnson also will not pay city taxes on the arena.
Johnson will cover all operating costs of the building and also pay about $4.33 million in rent for 25 years. He and the city will contribute to an account for major repairs.
"We got what we needed, but Bob Johnson got what he needed, too," said Charlotte City Attorney DeWitt McCarley, the city's lead negotiator. "There was a lot of give and take, and we really do believe it was a good marriage."
Without a team to replace the Hornets, McCarley said the city could not have afforded a new arena. It also gives the city an anchor for redeveloping its Uptown area, including 21 lots currently used for parking.
Stern said the NFL was the first league to negotiate with a jurisdiction before awarding a team when it held discussions with Cleveland in 1996 on the expansion Browns.
"The playing venue and the plan for it are crucial to any expansion or move application," Stern said. "It's just always been that way in sports. . . . There usually has to be a municipal interest or a corporate interest that moves the pieces correctly together."
David M. Carter, president of Sports Business Group, is among several sports facilities experts who doubt the Charlotte model would work in baseball. They cite the fewer number of event dates in an outdoor ballpark, which they estimate would cost twice as much to build as an arena. "It's like [comparing] apples and oranges," Carter said.
And experts do not expect MLB to get 100 percent public financing for a new ballpark because of a dire economy and the exponential rise in the cost of venues. All three jurisdictions are working on ballpark financing models that include no more than a 75 percent public subsidy, for which the District is aiming. Northern Virginia would pay two-thirds of the cost.
"That's the best-case scenario in this day and age," said Dennis Howard, a University of Oregon professor and expert in the financing of pro sports facilities. "It's about as good as it gets."
The current average public contribution is 70 percent for stadiums and 50 percent for arenas, according to Howard.
Gabe Paul Jr., executive director of the Virginia Baseball Stadium Authority, said, "You need a public-private partnership in order for the sides to be economically whole."
When Chicago White Sox owner Jerry Reinsdorf, the chairman of the relocation committee, broached the subject of financing when his committee greeted each jurisdiction in initial meetings last month, he indicated a 100 percent public contribution might not be realistic today.
"He mentioned that would be desirable in baseball's perfect world," said Bobby Goldwater, president and executive director of the D.C. Sports and Entertainment Commission.
That makes an arrangement between the jurisdiction and MLB all the more important, and the details in the agreement so vital.
"It's subject to negotiation," Goldwater said. "Everything is on the table."
Johnson, leader of one of the Washington area groups seeking the Expos, said he awaits what MLB and the jurisdiction agree upon. He would like the entire process to replicate the NBA's.
"Like I said in Charlotte, I will not be part of a bid process," he said. MLB "will have to come to me and say, 'This is how we justify our price for the team. This is the price.' "
The Charlotte deal had a $23.2 million shortfall in completing public financing of the estimated $200 million arena meeting current NBA standards. "The NBA stuck that with the team," said Johnson. So two large national banks headquartered in Charlotte loaned the team the $23.2 million at 2 percent interest over 10 years.
The price is unclear. MLB could seek to recover what it paid current Florida Marlins owner Jeffrey Loria for the Expos a year ago, plus losses for the two seasons. Or it could seek to maximize the price in moving to the nation's fifth-largest media market. It is unclear if the price would include a payment to Baltimore Orioles owner Peter Angelos, who strongly opposes a team in the Washington market.
One source with first-hand knowledge of MLB's thinking, speaking on the condition of anonymity, said the price would be set "off the deals made" with public officials and that no auction is planned.
"I think all parties involved -- the other owners, the league, everybody -- understand that this is a risk-return proposition," Carter said. "They really need not to maximize the amount of money they're going to make from the Expos but to optimize it based on taking other risks into account."
Charlotte eliminated its largest risk: the owner seeking to relocate the team, as the previous one did. With Washington having lost two MLB teams by relocation and elimination of teams on the table again after the 2006, the local jurisdictions seeking the Expos will protect themselves, too.
McCarley, Charlotte's city attorney, said the city council refused to approve any deal with the NBA that did not protect the city against a move. As a result, Johnson is bound contractually to pay the city $200 million if he decides to move the franchise during its first five seasons in the new arena, with the amount decreasing incrementally each year thereafter.
As the Virginia Baseball Stadium Authority's Paul said, "We certainly will protect ourselves that whatever happens, we are going to be assured we can re-pay our bonds so that the team doesn't move or is [eliminated] during that period."