Shared ownership might be the ticket to new Rays stadium

Published Nov. 30, 2012

It is pretty clear the Rays believe they must have a new stadium if they are to remain a part of the Tampa Bay community. There are others who agree that the Trop is either poorly located or ill-suited to operate as a baseball stadium. So something must likely be done before the Rays' stadium contract expires in 2027. The question is what?

There is substantial antitax sentiment in the current environment, and even if taxpayers were to support a tax increase, there is a real question as to whether they would endorse using it to finance a private business when there are so many other needs. Neither was the stadium effort helped by the recent salary-dumping by the Florida Marlins shortly after having moved into their own new taxpayer-built stadium. Yet there are advantages to being a major league town, and most of us are baseball fans who like the idea of rooting for the home team.

So how can we build a facility that will probably cost $500 million to $750 million, all in? The plan released by the Baseball Stadium Financing Caucus last month suggests a financing plan that will have the Rays contribute as much as $150 million toward the project, with the taxpayers picking up the rest — at least $350 million and maybe as much as $600 million more. That amount may be too much to gain public support.

There is another way if we start with the premise that a new arena will be better located, add to the fan experience, attract larger crowds and ultimately add to the value of the baseball franchise. Forbes magazine estimated that the Rays are currently worth about $323 million and generate $160 million per year in revenue. 2012 attendance was about 19,000 a game.

The seven major league cities with smaller metropolitan populations than the Tampa Bay area averaged 27,000 per game last year, and it may be reasonable to expect that a new stadium can generate a similar number for the Rays. Forbes estimates the median value of those teams is $424 million. So we might expect the stadium to increase the Rays' franchise value by $100 million. And it could be a lot more because, according to Forbes, the Rays are much more profitable than all but two of those teams.

It seems reasonable then, if the stadium will enhance the value of the franchise by $100 million or more, that the Rays might be willing to share some of that increase with the community as an ownership position. To be conservative, let's say that amount is $70 million, or about 16 percent ownership.

There are two alternatives. One is to make a new stadium contingent on granting this ownership directly to the community. Another, maybe better, is for the Rays to sell shares in small amounts to many individual investors in the community. A lot of people would probably jump at the chance to own a piece of their ball club.

All of these proceeds would be used to defray the cost of a new ballpark. With the increase in franchise value, the Rays might also be able to borrow an additional $150 million to contribute to the financing package. That still leaves at least $280 million to be borne by local government, but it is a lot less than what is currently on the table.

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There are other requirements that should accompany local ownership. Any future proposal to move the team would require approval of a supermajority of the shareholders, maybe 90 percent. Further, any reduction in payroll below, say, that paid by the 25th-ranked team would also be subject to that same supermajority voting provision. These provisions should protect the community responsible for repaying any new stadium bonds.

This plan has additional benefits. Widely dispersed local ownership will generate a lot of interest in the team and its success and help support attendance. While the current team owners will find their percentage ownership diluted, they will maintain a controlling interest and their remaining portion of team value should be significantly greater than the current amount. And maybe whichever county has people buying the most shares might help determine where the new stadium should be located.

A little shared ownership might just make this thing work.

Richard Meyer is a professor emeritus in the College of Business at the University of South Florida. He wrote this exclusively for the Tampa Bay Times.