We love baseball, but we love St. Petersburg more.
What’s proposed?
The Tampa Bay Rays, the Hines development company and the city of St. Petersburg are currently asking the City Council to approve a deal to redevelop the 86 acres Gas Plant, currently home to Tropicana Field. The deal would include a new baseball stadium with parking garages, and the rest of the land would be developed for offices, residential properties, community assets and other uses.
As structured, the city and county pay for a significant part of the cost of the stadium and the infrastructure, and the city sells the developable property to Rays/Hines.
What’s the status?
The city is providing information about the deal to the St. Petersburg City Council for their review. The next meeting is scheduled for June 12. Any vote will not occur until August.
What’s wrong with the deal?
The cost to St. Petersburg - $1.4 billion – $6,000 for every person who lives in the city.
The city pays for ¼ the cost of the new stadium (and the county pays for another ¼) and most of the cost of the roads and utilities for the whole property. With interest this will cost the city $700 million. but they don’t share in any revenue from the stadium, or profits if the team is sold.
Because the team rents the property, the city loses $400 million in real estate taxes.
The land for development is being sold for an estimated $500 million under value.
The city is relying on an appraisal that is old and flawed.
The proposal sells Rays/Hines the land at $2.5 million/acre while all around the site property is selling for $12-20 million/acre.
The agreement to develop the land does not have reasonable terms.
The city cannot terminate the 30-year contract for any reason.
The city does not know who the buyer will be – it is a partnership and the partners have not been disclosed.
The buyer can transfer the development to anyone they want without city council approval. The city may not be doing business with Hines or the Rays.
No guarantee of any affordable housing being built.
No guarantee that the Woodson African American museum will be built.
No guarantee there will be sufficient parking, resulting in gridlock from stadium traffic that will hurt local businesses.
No assurance of dealing with environmental considerations.
The city loses control of the property.
Why not get a better deal, saving $1.6 billion? There is no reason.
St. Petersburg is in the driver’s seat – not baseball.
Baseball is not a factor in St. Petersburg’s economic growth.
The Gas Plant property is very valuable and ready for development – with or without baseball.
St. Petersburg can successfully develop the property with or without Hines and the Rays.
St. Petersburg can save $1.6 billion to address the priorities that really matter most to the residents of St. Petersburg.
The Gas Plant site, in many respects, would be better developed without baseball.
The Rays would do better in a more central part of the Tampa Bay area.
What would a better deal look like?
The developable land is sold for its current market value, paid now – by Hines or another master developer, or perhaps better yet the city acts as the master developer.
While in many respects, it would be better to develop the property without a new stadium, if a stadium is to be built, the Rays, like any private company, either:
Pays market value for the stadium land, pays for stadium construction, and pays fair taxes, or
If St. Petersburg is going to provide financial assistance to build a new stadium, the Rays pay rent to offset lost real estate taxes, and the Rays share profits from operations and any team sale.
The agreement to develop the rest of the land must be arms-length and reasonable.
What is making the process for the City Council so difficult?
Mayor Welch and the St. Petersburg administration has spent more than a year behind the scenes in negotiations. Now there seems to be a rush to a conclusion with too little time for the public and City Council to digest all aspects of the proposed transaction. While it is unclear why, it appears that the city is rushing the process, potentially forcing the Council to rubber stamp the deal. There is an impression that the city does not care what the City Council thinks.
City Council members do not have enough time to do their job.
City Council members do not have the experience to effectively evaluate the economics of the proposed deal nor the experience to review lengthy and complicated legal documents.
The City Council members are subject to the Florida Sunshine Law. They cannot meet to discuss the proposal unless it is in a public meeting setting - Committee of the Whole (COW) meetings.
o There has been only one COW since the deal was proposed in October 2023. At the meeting, only information about the land development was discussed.
o The information provided to the City Council members for this meeting was incomplete.
o The city and their attorneys did not respond to the concerns raised by City Council members.
Another COW is scheduled for June 12, but only to discuss the stadium proposal.
o The information provided to the Council for this meeting is incomplete.
The Council hasn't been told:
o Who are the members of the partnership in the land development agreement.
o Who are the owners of the entity in the stadium agreement.
o Who is guaranteeing the Rays contribution to the cost of the new stadium.
What should the City Council do?
Hire independent counsel to:
o Review the legal documents – but only after the documents are complete.
o Advise the Council regarding the documents - at a future COW.
Hire a qualified third party to do a complete analysis of the deal, and present their findings at a future COW:
o Can the property be developed successfully with or without the Rays.
o The reasonableness of the city’s share of infrastructure costs.
o Evaluate the costs and revenues with and without a stadium, and with and without Rays/Hines.
o Can the property be developed in partnership with other highly qualified developers at a lower cost.
o Is it feasible for the city to employ outside experts to advise on development without a master developer, with the city acting as the master developer.
o A comparison of city financial/revenue outcomes for the Rays/Hines deal versus the “Do it Ourselves” concept outlined in our Analysis.
Require a new appraisal
Require a parking and traffic study.
Review the city-provided report listing all significant unfunded city priorities, and their costs.
Review the partnership of the entity entering into the development, including the partners and terms for changing the partnership members.
What if the Council and City cannot agree to do what is required for the Council to have sufficient information to make a decision?
The St. Petersburg City Council Members should vote no. It is not the duty of the Council to attempt to negotiate on behalf of the city. Under the City Charter, that power belongs to the mayor. It is their duty to vote 'No' on a motion to approve the product of the negotiations to date if they are forced to vote on these proposed agreements before they have had adequate time and resources to determine (a) the impact upon the citizen’s whose earnings and savings will ultimately pay most of the city’s share of the cost of these projects, (b) the risk these projects will not yield the city a sufficient payback to cover the debt these agreements would require it to immediately incur, (c) whether your constituents will be able to afford to live in our city while subsidizing the Rays and, in addition, facing $5 billion in capital improvements to the city’s water, sewer and stormwater systems, (d) whether the Historic Gas Plant District Development Agreement price and terms are reasonable, and, (e) the feasibility of alternative solutions that might better meet the needs of all parties while keeping the Rays in the Tampa Bay area.
ADDENDUM
There is no reason for St. Petersburg to have negotiated the proposed deal – costing taxpayers $1.6 billion. St. Petersburg is in the driver’s seat – not baseball.
Baseball is not a factor in St. Petersburg‘s economic growth and in St. Petersburg, baseball is not a significant source of tourism.
o Per Visit St. Pete/Clearwater survey, 40 % of visitors come for the beaches, the pier, the museums, and the restaurants. Only 3% come for sports events. (Why would tourists come to Florida in the very summer to watch baseball?)
o St. Pete growth is driven by knowledge-based industries – financial services, tech, health care, marine sciences and universities.
o The Rays low attendance for every year they have played, and the fact that there was no economic growth around the stadium for at least its first 20 years, is additional confirmation that baseball does not drive economic growth.
o Economists from across the political spectrum all agree – professional sports teams have little impact on local economies. Read Stadiums Are Bad Deals for Communities Like St. Petersburg, on hohomerun.com.
The Gas Plant property is very valuable and ready for development – with or without baseball. St. Petersburg is one of the fastest growing urban real estate markets in the whole U.S. The St. Petersburg skyline is already filled with cranes. People are moving here from the region and from the North because of the live-work-play environment, the amenities, the quick travel time to the beaches and the Tampa airport, and so much more.
St. Petersburg can successfully develop the property with or without Hines and the Rays. The city can come up with a new plan to include all components important to St. Petersburg. There are many other highly qualified developers to partner with the city. “Every major developer in the US would be doing summersaults to get in the deal – and at fair price and terms.”
St. Petersburg can save $1.6 billion to address the priorities that really matter most to the residents of St. Petersburg:
o $5 billion of storm water and sewer repairs.
o Affordable housing.
o Education for our children.
o Jobs.
o A reasonable cost of living.
The Gas Plant site, in many respects, would be better off developed without baseball.
o The stadium land is very valuable and could be sold for private development, generating significant revenue to the city as well as on-going real estate taxes.
o While not sufficient, parking garages for the stadium will also take up valuable land.
o Stadium attendees will generate significant traffic congestion, negatively impacting the area’s live-work-play attractiveness, as well as reduce parking for the many restaurants in the area.
The Rays would do better in a more central part of the Tampa Bay area.
o Attendance has been among the lowest in all of baseball.
o A location closer to the center of the Tampa Bay population would help attendance.
o A location with better access to reach the stadium would help attendance.
o A location with surface parking would help ease congestion.
A new appraisal is necessary to determine fair value and the land should be sold at fair value.
The existing appraisal is not current, in light of the quickly rising land values, and the appraiser was instructed to value the as unimproved, “land only”.
Current property sales and the last four properties in the appraisal make it reasonable to believe the current value for this property is as much as $700 million, perhaps more.
The existing appraisal is not based on recent land sales all around the site
The existing appraisal is not based on the value of the parcels after the city pays for infrastructure – roads, etc.
The development deal structure – Risks –
Article 5 Affordable housing – no requirement unless the city provides additional subsidies.
7.8.5 - Hines gets others to pay its share of infrastructure – raising their costs and raising rents.
Article 9 – No parking plan until after the deal closes.
15.2.b - The Developer can transfer all of the interests to Stu Sternberg or anyone else the day after the deal closes
16.9.5 The city CANNOT terminate the agreement no matter what the developer’s defaults.
16.9.6 - City can’t sue for specific performance.
There is no discussion as to what happens if the team is sold.
There is no information as to any guarantees from Hines, the parent company.
Who is guaranteeing the stadium construction costs.
Stadium financing assumes 7% growth in taxes – no guarantee.
Misconceptions
Stadiums act as anchors for commercial development. They don’t.
o Why would office or residential developers think that tenants would want to locate next to stadiums?
A stadium will be used throughout the year.
o Besides the fact that the city does not share stadium revenue in the current proposal, studies show stadiums are used for very few days besides for baseball. The current stadium is an example.
What makes St. Pete big league – it's not baseball. It’s the beaches, the pier, the museums, the restaurants and the great live-work-play environment.
Jobs? Stadiums create low paying jobs.
Issues with the current proposal
The City Council is being rushed to vote on the proposal but has not been provided with final documents to review.
The land is being sold significantly below current value.
o Notwithstanding the below market value sales price, the developer does not pay upfront for the land, but instead only $50 million by 2026 and no set dates for the balance. There is no adjustment for inflation, and appreciation, especially after the project commences.
The city is paying $130 million for the infrastructure – parks, roads, etc.
o Developers usually pay for this.
City loses control due to a defective Development Agreement
The Development Agreement is between the city and a partnership. The city does not know who they are dealing with – is it Hines the parent company, is it Stu Sternberg. The city needs:
o Guarantee of full faith and credit of Hines parent.
o A copy of the partnership.
o A review of the conditions for its amendment.
o A review of the partners and for each partner, a financial statement of net worth.
o A review of the conditions under which partners can be removed, and conditions under which new partners can be added.
Rays/Hines can delay development. Rays/Hines don’t have to develop anything – they can sell off parcels – the city will have no control – they decide when and how everything is built.
Rays/Hines don’t have to buy all the property. They can delete any parcel from the purchase for virtually any reason! They can flip a parcel (or the whole deal) to someone else at any time. And that entity can sell it to another party.
Rays/Hines are getting a purchase option for thirty years that they may or may not exercise. But they have gained complete control of the entire property.
o Hines can wait and watch land appreciate and not sell - so no development
Rays/Hines can transfer the development rights without city council approval.
Assuming the Hines parent organization is the partner (we don’t know the partners in the proposed development agreement), there is nothing that requires Hines to stay in the development. Ray/Hines can assign their development rights the day after the deal closes to anyone they want – the city has no say.
The city cannot terminate the agreement for reasonable cause.
There is no requirement for a parking and congestion study prior to closing the agreement.
The Rays ownership can sell the team, keep their share of the 64 acre’s profits and the city gets nothing. Their increased profits will be the result of a new stadium. And they get 64 acres with free infrastructure.
The city might have to wait 10 or 20 or 30 years before seeing any development.
Rays/Hines control the development, but it is unplanned, uncoordinated and the city is left in the dark and at the whim of Rays/Hines.
The Rays don’t have to pay anything to the city (interest or taxes) for the stadium property.
The City has lowered the required green space from 25 to 10 acres.
o Not enough green space – no guarantee for more.
If the team leaves after 30 years or before, this development will wind up with a huge hulk.
o In 30 years, the team will want another stadium and the city is stuck with this big empty building.
No guaranteed 16th street entranceway will happen.
No guarantee for disadvantaged workers.
No guarantee - Conference, or library.
No guarantee – affordable housing.
o Except for 100 units to be started by 2028, other 500 units might not be developed for 20 years.
o Unless the city provides more subsidies, there is no required affordable housing.
o Rays/Hines can pay a small penalty and not build any afforable housing.
o They can segregate the affordable housing stand-alone buildings in one location
o Affordable housing not included in stand-alone buildings has only a 30-year commitment.
No guarantee about details of day care and can be delayed for 11 years.
No guarantee of museum.
No guaranteed small business participation
Rays/Hines pays nothing for infrastructure - it charges a special assessment when it sells parcels. This means the buildings cost more and rents will be higher
Tax money coming in will be tiny compared to outflow for many years.
No specific requirements for building childcare facilities.
No requirements to hire apprentices in construction of buildings.
Very little commitment to important environmental considerations.
Traffic congestion –
o No surface parking.
o There is no study done yet – the city has not analyzed.
o We don’t know how many spaces are offered in parking garages and where the rest will park - it is not reasonable to assume they will park in the office buildings.
o No parking plan required until vertical construction
No requirements for using minority-owned businesses.
Grocery store – not for 11 years.
$50 million in community benefits – with outs and paid over 30 years.
o Rays/Hines won’t pay for a part of the Museum unless certain conditions are met.
o What happens to the $10 million for the Museum if the Museum is not built?
Deadlines for developing the property are imprecise and stretch to far into the future.
