In the Heat - Part one of an exclusive five-part series from Dunedin, Fla.

Major League Baseball’s (MLB) expansion in Miami and Tampa, Florida, has been a failure in the eyes of some people as the teams struggle at the gate and on the field. But many of the more than three million Canadians who flock to the state each year do so to watch 15 MLB teams in spring training, contributing an estimated economic impact of $867.1 million in 2018.

Canadian fans also track the progress of young Canadian players who enter professional baseball in Florida’s minor leagues and pay close attention to Blue Jays’ prospects playing there. In this exclusive Canadian Baseball Network five-part series called “In the Heat,” Jim Cowan and Scott Langdon report on some of the issues facing these players, their teams and the Florida cities that host them.

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Could the Blue Jays’ new Dunedin stadium defy the odds?

By Jim Cowan

Canadian Baseball Network

DUNEDIN, FL – When Toronto’s SkyDome, as it then was, hosted its first Blue Jays game on June 5, 1989 (a 5-3 loss to the Milwaukee Brewers), it was already a financial disaster that would, just four years later, see the Province of Ontario paying off the outstanding $400 million debt and selling the building to a private consortium for $151 million, and costing the Ontario taxpayers, when all was said and done, an estimated $262.7 million.

And the stadium, built on railway land now owned by a Crown corporation, would go on losing money. Sportsco International LP bought it out of bankruptcy for $85 million in April 1999, and Rogers Communications Inc., its current owners, bought it for just $25 million in November 2004.

SkyDome/Rogers Centre is just one of many horror stories about public investments in stadia and other sports venues that have gone wrong and, often as not, cost taxpayers millions of dollars. Who could forget the Montreal Olympic Stadium (“the Big Owe”), originally estimated to cost $134 million? When the games opened, the cost was already up to $264 million, and by the time the final payments were made, in November 2006, the cost was $1.61 billion.

In a 2015 Globe & Mail article, updated on-line last May, Barry McKenna looked at government subsidies for sports facilities in Canada. He quotes a 2001 study done for the Federal Reserve Bank of St. Louis, which stated: "The weight of economic evidence … shows that taxpayers spend a lot of money and ultimately don't get much back … (a)nd when this paltry return is compared with other potential uses of the funds, the investment, almost always, seems unwise."

McKenna also noted that billions of dollars a year in hidden subsidies flow to existing sport venues, citing Judith Grant Long, now an associate professor of sports management at the University of Michigan. In her 2012 book, Public-Private Partnerships for Major League Sports Facilities, Ms. Grant Long found that taxpayers are subsidizing 78 per cent of the average professional sports facility in Canada and the U.S.

None of this seems to have any effect on governments, who continue to subsidize sports teams and their owners.  A 2015 Calgary Herald article summarized nine sports projects in Canada funded either entirely or partially by public money since 2000. With total project costs of around $2 billion, the private sector provided about $400 million.

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All of which makes one ask, why is Dunedin Mayor Julie Ward Bujalski so happy with her city’s recent decision to provide $5.6 million to help pay for new spring training facilities for the Toronto Blue Jays, part of an agreement that will keep the Jays in that city for another 25 years?

Bujalski was first elected to the Dunedin Commission in 2006. She was elected mayor in 2014 and has been re-elected once since then. She is an unabashed Jays supporter: “My whole campaign was about the Jays,” she says. “The community needed someone to stand up for what we needed.”

The Jays have held their annual spring training camp in Dunedin since the team’s inception in 1977. Wooed there by then-Mayor Cecil P. Englebert, the Blue Jays actually use two facilities, Dunedin Stadium in the southwest part of the city and the Bobby Mattick Training Centre at the Englebert Complex, about a 10-minute drive northeast of the stadium. At one point in the negotiations, the Blue Jays were insisting that they wanted to consolidate the two facilities at the stadium site, but that demand was eventually dropped.

During the Dunedin Commission meeting on November 2, 2017, during which the Licence Agreement was approved, the mayor said the agreement is fair, affordable and protective not only of the city's budget, but of its youth. (The Jays will assist the Dunedin Little League with field improvements, and the high school team will have some access to the new Dunedin Stadium.) This agreement, she said, is greatly improved over the previous agreement; it is comparable if not better than the most recent baseball deals and Dunedin residents will gain an $81 million asset for an investment of just 7 per cent of its value.

“Florida cities understand we have to be more creative (about financing spring training facilities),” she says. “It’s not a give-away. It has to be a really good partnership.”

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So where, exactly, will the $81 million come from? The finances behind the agreement to keep the Blue Jays in Dunedin for another 25 years are, to say the least, complicated. The cost is generally given as $81 million – $33.3 million for the stadium and $47.8 million for the training centre, which is to incorporate a new sport science centre for the team’s high-performance department.

·         Florida will contribute $13.7 million from a permanent fund established to promote tourism in Florida. Much of the money flows to amateur or special events, but some is used for encouraging Major League Baseball teams to remain in the state.

·         The Pinellas County share of $41.7 million comes from a six per cent bed tax levied on hotel stays – known as the bed tax – and earmarked for tourism capital projects or marketing. The city and the team had to provide an economic impact study to demonstrate the value of the Blue Jay agreement.

·         The city portion, $5.6 million, comes from a program known as the “Penny for Pinellas.” This is a one per cent sales tax collected across the county with the proceeds divided between the county and its 24 cities, including Dunedin. It’s intended for long term capital improvements.

·         The Blue Jays contribution of $20 million will be paid to the city at the rate of $1 million per year for 20 years and the up-front costs will be financed by a 25-year municipal bond issue. The Jays are responsible for covering the costs of the bonds. The Jays will also impose a $2 per ticket surcharge on all tickets to spring training games, with the proceeds contributed to a city-controlled Capital Replacement Fund.

Trying to make the numbers add up can be confusing. For example, the $81 million cost is what’s known in accounting terms as the “net present value” of the money – that is, what the partners would have to spend if the project was to be paid for at the start. It ignores, for example, the interest costs on bonds that are issued.

Looking at the total cost of the project over the life of the agreement adds another layer of complexity. At the November Commission meeting, staff presented information showing the 25-year capital and operational costs totalled $155.4 million. The city’s share, including a credit for $9.2 million in property, is $21.7 million (14 per cent of the total), while the Blue Jays is $78.3 million. The county  and state’s shares remain unchanged at $41.7 million and $13.7 million respectively. The Blue Jays’ contribution increases not only because of its obligation to service the city-issued bonds, but also because the club carries most of the maintenance and operating costs of the facilities.

Mayor Bujalski also noted that the agreement replaces a number of old, cumbersome revenue sharing agreements with ones that create greater certainty for the city. While the Blue Jays retain all revenue from club events at the stadium, there are clauses that obligate the team to pay fixed proportions of taxes, to share revenue from naming rights, and to contribute to a Capital Replacement Fund. And unlike some other club facilities, the Jays new training centre will not include dormitories for minor league players, who will instead find accommodation in the city, to the undoubted delight of its landlords.

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While there is no outright opposition to the new agreement – it was passed unanimously at both the city and county commissions – there are some who are concerned about the complicated financial arrangements.

A Tampa Bay Times article from April 2018 said: “But the deal comes with serious risk, enough for City Attorney Tom Trask, hired financial advisors and the board of finance to warn against it.

“According to the staggered agreement, the county will split its payment over several years: $1.3 million is available now, $14.8 million will be paid Oct. 1 and $25.6 million in fiscal year 2020. The money is coming from the six percent bed tax paid by visitors in hotels, motels and other overnight rentals.”

Trask is quoted as saying that "it was always presented" to him that the county would pay the funds upfront. Staggered payouts in the contract pose serious risk if the county fails to pay up mid-construction, either because a sudden emergency like a storm or if state law changes to prevent bed tax dollars be used for stadia.

The same article, however, quotes City Manager Jennifer Bramley as saying that she has unequivocal assurance the county "has never reneged on a funding agreement and does not intend to do so now."

The county is not the only partner staggering its payments. The Jays will be making their payments over 20 years, which means the City will have to issue an estimated $33 million in bonds to cover construction costs.

In a recent interview, the mayor said she is not concerned about the bond interest, as the interest cost has been calculated into the overall cost of the project. The Licence Agreement itself commits the Blue Jays to covering the principal and interest of bonds issued by the city to fund the club’s share. The mayor admitted some concern of the State’s portion, and said she was relieved that it was approved before the upcoming elections this fall.

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Since much of the criticism towards agreements such as the Blue Jays/Dunedin partnership is levelled at the cost to taxpayers, it’s fair to ask, “Who is really paying for the Blue Jays’ new nest?”

Using the generally accepted present-value funding amounts, the city’s share of $5.6 million comes from the Penny for Pinellas one per cent sales tax. While this, obviously, is collected from both residents and visitors alike, the citizens in a 2017 referendum approved the continuation of the tax through 2030. The county says that one-third of the tax’s revenue comes from visitors, and if it weren’t in place, the average homeowner in the county would pay an additional $314 in property taxes per year.

The county’s portion of $46.1 million is funded from the six per cent tax on hotel beds. While some may visit the county from other parts of Florida, it’s probably not a great leap to assume much of that is coming from the pockets of Snowbirds flocking to see the Jays during spring training, or simply to escape Canada’s winters.

The state funding does indeed come from tax revenue, from a pot of money set aside for economic development. Although it’s quoted as a $13.6 million contribution, it’s paid out at $1 million a year for 20 years – hardly significant in terms of the overall Florida budget for 2018-2019 of $88.7 billion.

And the Jays contribution? We all know the answer to that: it will come from the fans’ pockets, through gate receipts (including that $2 per ticket surcharge) and other club revenues.

So, the answer to the question, “Who’s paying for this?” is probably, you are, if you are a Blue Jays’ fan or if you plan on visiting Pinellas County to watch spring training or just to enjoy the sun and the sand.

Next: In the Heat (Part 2) - What $81 million buys, and why there’s been so little opposition to the deal.