NYC teachers pension fund drives deal to keep PGE Park afloat
The primary lender to Portland's minor-league teams drove the renegotiated deal that will keep baseball and soccer in the city for at least another season.
Representatives from TIAA-CREF, the New York City-based teachers pension fund that doled out some $26 million to team owner and PGE Park operator Portland Family Entertainment, spurred the bargaining last week in meetings with PFE's limited partners, the group's operators and officials from the Pacific Coast League and the city.
As part of the arrangement, PFE's Peter Stott and Scott Thomason will form a new group, Metropolitan Sports LLC, which will operate the stadium and own the teams. The new owners reportedly will pay at least $11 million to TIAA-CREF.
While the teachers pension fund already has agreed to the deal in principle, city commissioners gave mostly good marks to the proposal during a work session Thursday. The restructuring includes several changes in the operating agreement between the city and the park's operator.
'Without (Stott and Thomason) coming forward, the future of baseball and soccer in Portland was really in jeopardy,' said Mark Schuster, the former PFE president who'll also head Metropolitan Sports. Neither Stott nor Thomason was available for comment this week.
Thomason recently retired from the Thomason Auto Group, while Crown Pacific, Stott's company, is facing mounting debt and declining earnings.
Losses are predicted
Sam Adams, Mayor Vera Katz's chief of staff, said Metropolitan Sports definitely will lose money again during the 2003 season. PFE's limited partners lost more than $10 million on the venture in its first two years, including an estimated $2 million last year when Schuster's management group took over.
'We're budgeting it on a very conservative basis,' Adams said. 'We think it's going to be a rebuilding year, given that the past two years were so tough.
'But we're still going to have baseball and soccer and other events that have a strong fan base. Our collective job is to build on that strong foundation and turn this into a profitable operation.'
The group owns the Portland Beavers Triple-A baseball team, the Portland Timbers Class A soccer team and the Tri-City Dust Devils baseball team of the Class A Northwest League.
Adams said TIAA-CREF representatives met in Portland last week with, among others, Pacific Coast League Commissioner Branch Rickey III and city commissioners. Adams said the group ultimately convinced the pension fund that it needed to reduce PFE's debt in order to see any return on it.
'It took a longer time than we would have wanted, but it was nice to get the parties to agree on a revised package,' Adams said.
'Nothing's going to change for the fans. The fans are not affected by PFE's financial woes,' said Schuster, who added that ticket and food and beverage prices probably won't be raised.
The primary changes in the new operating agreement include:
• The city will not increase PFE's annual rent of $982,000 during the next two seasons Ñ eliminating the planned 4 percent a year increase
• Reducing ticket tax to 6 percent, down from 10 percent
• Elimination of a $52,000 capital reserve payment
• Elimination of a $216,000 building reserve payment
'Profit' is a nebulous term
The city also reduced a 'share of net profit' payment from 18.7 percent of revenues generated over $10.7 million to 10 percent of revenues over $8 million. PFE earned close to $8 million in 2002.
The city would continue to collect 25 percent from the profit of any sale of the teams, an issue that could arise if Portland attracts a major league team. Adams said the two sides are hammering out a firm definition of the word 'profit.'
The deal also calls for stadium rent to be reduced by half if a major league team comes to town. Adams said studies show that the season before a big league team relocates, its new city experiences dramatic minor league attendance decreases.
The city also would collect a surcharge on food and beverage fees (from PFE or the vendors) that would go toward the first $182,000 of Metropolitan Sports' annual rent.
Finally, Metropolitan Sports will repay the $864,000 that PFE owes the city. Of that, $200,000 will be repaid this year, with the remainder paid one year from now.
The city says it expects to generate a small profit, $21,000, in 2003, before seeing possible losses in 2004 ($45,000) and 2005 ($102,000). Tim Grewe, who heads the city's office of management and finance, said the projected losses stem from advertising and ticket contracts that are set to expire.
Metropolitan Sports plans to operate other PGE Park events, including Portland State University football games, local high school sports and concerts.
The city will supply one representative to the Metropolitan Sports board. The city representative will ensure that the city gets paid on time and that Metropolitan Sports fully discloses its numbers.
It's unclear what will happen to money owed to PFE's vendors. Metropolitan Sports said in a release that while it will not assume the debts, it will 'be contacting PFE's vendors to settle these bills on a negotiated basis in order to maintain good will with vendors and the community.'
Schuster wouldn't say how much the vendors are owed.