And how many concerts do you anticipate having on a yearly basis?
Well, I will tell you that, you know, our hope was to not have it be limited. In Foxboro and in Giants Stadium, where they have these kind of facilities, they are have having nine or ten concerts. We were told that was unacceptable, which we have accepted. I think the collective wisdom at this point was that since there have been running four, five, six concerts a year in Veteran's Stadium, that 143 STADIUM HEARINGS if we were to agree to five concerts per year as a limit, that that would be kind of a good balance of our needs to generate some revenue and the community's desire to have that activity limited.
I think somewhere it is written that you anticipate five rock concerts a year. I am sure it is not just five rock concerts.
Right. No. In fact, I think our preference would be to be in a different direction, but I think it says five concerts. I mean, I think just a couple of years ago --
So getting the Three Tenors here would be one of the five?
Certainly. That would be a great event to have in Philadelphia. And if they were on tour, we would be going offer that.
And, Mr. Banner, you are working with Mr. Hankowsky, and I hope you are, too, Mr. Montgomery, regarding the multiple events?
Yes. I mean, we had a version that was 144 STADIUM HEARINGS literally started a year ago, and then we just stopped. And over the last three or four weeks we have had a series of meetings. And I think we are very close to something that -- I think we are close to finishing that negotiation.
Thank you. I don't want to dominate the questioning. Councilman Clarke, I believe you had a question.
Yes. Thank you, Madam Chair. Mr. Banner, will I be allowed to bring my George Forman griller to the Rib Fest?
Thank you. I have a portable one. Mr. Banner, in your earlier testimony --
I may bring him. He is going to cook. Earlier in your testimony you 145 STADIUM HEARINGS indicated, I saw, a $120 million figure associated with the upgrade of the Vet, if you had to stay in the Veteran's Stadium. Where did that figure come from?
It is a combination of two sources, really. As we read the existing Ewing Cole report, it calls for $82 million that are identified. It also includes a list of items that are not included; things as kind of undebatable as the cost of inflation over the three years that the plan is implemented. We also believe that there are some items there -- for example, they only water-proof portions of the stadium, as opposed to all of the stadium -- that we believe, in addition to the 82 they have quantified, need to be done. So Source No. 1 is, we took their 82, plus some specific things that we could identify that we think need to be done. Source No. 2 was, when we were interviewing some of the firms who wanted to be the architects for our project, they were the same firms 146 STADIUM HEARINGS that had done analysis of Pittsburgh and Cincinnati, similar dual-purpose stadiums that had been built at about the same time, for what would it cost if we don't build new stadiums to fix this stadium up. And they told us their preliminary estimates in those ballparks was in the 110 to 130 million dollar range. So between the Ewing Cole report that was actually done and the work that those people had done in a more detailed evaluation of a Cincinnati and Pittsburgh similar building, similar age stadiums, that we believe that 120 is a more realistic estimate of what it would cost.
Was a document produced as a result of that study, or was it just --
There may have been a document produced in those cities. I don't know really whether they were just loose studies or a document actually produced. But we did not have any document produced with respect to Philadelphia.
Okay. Is there a salary cap currently in the NFL? 147 STADIUM HEARINGS
No, there is not, Councilman. We do not -- we probably would very much enjoy that from our perspective. Our last labor negotiation ended up with there being a luxury tax on salaries above a certain level. However, that is far from the restrictive nature of an actual cap.
Can you tell me about how -- well, Mr. Banner, in your case there is a salary cap in the NFL. How you can increase the salaries of your players? I mean, I don't know what sport it is, apparently in some sport there is an opportunity to exceed the cap if you sign your own players?
Talk to me about that. Because a lot of this discussion is based on the premise that there will be an increase in salaries; i.e., wage taxes. Talk to me about that.
Well, first of all, there's two aspects to answering that question. 148 STADIUM HEARINGS One is the NFL has now through the 2005 year its television contracts negotiated. And it is predetermined that 63 percent of the revenue from the television contract goes into the cap. So as the increase in revenues which are scheduled through the remainder of that contract go into the cap, our cap will automatically go up quite significantly. In fact, we negotiate an eight-year television deal where most of the payments come in the last three years of the contract. So literally in 2003, 2004, and 2005 there will be very, very significant jumps in the salary cap due to the television payment. That's part of our collective bargaining agreement with the players, that mandates that 63 percent of the revenue that we get from television must go straight into players' salaries. In addition to that, there are a number of new stadiums that are opening. The increase in the revenues in those stadiums, also a similar percentage goes into the cap. So there are projected caps through 2005 for the NFL that reflect the increases there. 149 STADIUM HEARINGS The second part of your question is, we have what's not considered a hard cap. In other words, it is not a year by year, here's the cap, in any given year you can't spend more than that. It is what in sports is called a soft cap. Which means that there are ways that you could actually spend in cash more than the cap and still be in compliance with the league rules. In our league, we believe that, over time, the cap serves to be an equalizer. What you can do is, if you have average spending over a cap about 5 to 10 percent per year, and did you that every single year, you would still technically be able to stay, over a period of time, under our cap. Now, what some teams in our league have done, the Washington Redskins did this this year, for example, they went out and they spent almost 100,000,000 in one year, when the cap is only 63. Now, over time you cannot continue to spend that far above the cap and not have what we call a cap problem. But with a cap of 63, you could 150 STADIUM HEARINGS easily average, say, 70, 71, 69. When the cap gets to be 80, you could easily be at 88, 90 on a regular basis and still be functioning within our cap rules.
The cap this year in the NFL is $62.6 million. Our cash payments to players this year will be about $66 million. So we will be in that about 5 or 6 percent this particular season in cash over the actual cap. And one thing I would like to reference here, because some of the information that was provided yesterday was kind of distressingly incomplete. For example, if you look at Dr. Rosentraub's testimony, he testified that the players' salaries for the Year 2000 for the Philadelphia Eagles were $54 million. Well, in fact they are $66 million. But one thing that was also omitted is that, as part of the collective bargaining agreement, in addition to the salary cap, we have a large number of categories that are called player benefits that the teams pay for that is in addition 151 STADIUM HEARINGS to the salary cap. That number in the Year 2000 is almost, just a few bucks, literally, short, of $10 million for our 53 players. So between the salary cap and that category, this year we will spend about $76 million on our players. In the analysis you saw yesterday, that number was listed at $54 million. So similar to what Dave was able to say about the Philadelphia Phillies, in that one category in the testimony you heard yesterday, it was underestimated in fact, not in theory, not in future projections, the projection, the numbers he gave you for the Year 2000, underestimated that one category by $22 million.
Mr. Montgomery, with respect to the Major League baseball people who know about the industry, pretty much say as long as there is no cap, the New York Yankees will continue to be the Major League Champions. I am assuming that at some point the owners will force a cap or request a cap? I mean, is that going to continue and require that we continue to build new stadiums to increase players' 152 STADIUM HEARINGS salaries, to keep pace with the New York Yankees, who has the largest media market? I mean, how far is this going to go?
Well, you have correctly identified a key issue within our industry. But the problem is that the only way we can create any more what I would call restriction on salaries is through a collective bargaining process. In 1994 and 1995, we actually had hoped to get through that process with establishing a minimum payroll, establishing not only the luxury tax that we talked about that is currently about 35 percent, but at one time the talk was that would be at high as 50 percent; instead of that threshold being at a floating amount, that it would be at a fixed amount. We are facing collective bargaining discussions beginning at the end of the 2001 season, Councilman. And, as a result of that, it is difficult for me to predict what success or lack thereof that we would have at the bargaining table. It is a goal of Major League Baseball 153 STADIUM HEARINGS to reduce the disparity between clubs for the very reason that you stated. And that disparity is, in my mind, a three-fold problem. It is the revenue disparity that we are hoping this opportunity gives the Phillies a chance on stadium revenue to get our situation back to be on a par with the type of fan support that this market, you know, can enjoy because of, A, the population base; B the media market. It is not New York, but it is a significant media market, as was testified to yesterday. And if we can get our stadium revenue situation more on a par, then we believe we can reestablish our franchise where we believe it should rightfully be based on market size, which is somewhere around the top of the second quartile as far as Major League Baseball is concerned. So there is the revenue disparity that needs to be addressed. That's why I referenced a few minutes ago the failure of the analysis yesterday to compute the additional revenue-sharing expense. And on the revenue sharing plan 154 STADIUM HEARINGS that's in place today, we estimate that we will be paying approximately $10 million in revenue sharing in the Year 2004. There is then the disparity as a result of that, which is the analysis that we have shown you, the correlation between revenue and payroll. So if we can reduce the disparity in revenue, that will have some effect on the significant disparity in player payroll. And one of the goals and objectives -- and I should be careful, I don't want to characterize it in a public setting necessarily what will be the discussions going forward by an entire industry -- but I know that at least in a Blue Ribbon Panel report, it was suggested that there be established a hard minimum salary, so that the disparity which today is about a multiple of seven -- you have some franchises payer payroll exceeding $100 million and some less than $20 million. And, actually, I think as a result, it is a seven-to-one ratio today. So our goal would be to establish a hard minimum, to put some more restrictive nature 155 STADIUM HEARINGS into going forward above a certain amount. The amount mentioned, interestingly enough, in that report was 84 million. That's very similar to the number that we have suggested and Arthur Anderson has suggested, where we would be in our pro forma. Now, keep in mind we were talking about in 2004, and that number was referenced earlier, I think, as 2002, Councilman.
Okay. You just made a statement that kind of caught my ear, when you talked about not wanting to talk about this issue as it relates to the industry in a public setting. That concerned me. We are talking about --
No. No. No. I am happy to talk about the Philadelphia Phillies. You totally misunderstood, Councilman. So let me just correct, for the record. What I was speculating about would be the objectives in our labor bargaining going 156 STADIUM HEARINGS forward. And I, as one franchise, I don't want to characterize -- you know, there are different views in our industry. For example, the New York Yankees would have a different view than the Pittsburgh Pirates and the Minnesota Twins. I am just, for the record, stating --
What's your view? Because I asked this question because, I mean, the person on the street, you know, without having participated in these hearings and read documents, they essentially believe that we are subsidizing millionaires. Right? And when you are talking about a public infusion of cash, although in this particular proposal it indicates that it is being generated by the stadium, but, you know, we increasingly feel like we have no wherewithal to impact upon that franchise discussion, that it keeps increasing the cost of these players, right, and ultimately it ends up being a burden on us. And at some point owners, I mean, you 157 STADIUM HEARINGS know are going to have to hold forth and just bring that discussion that we have here today to the discussion that you have as owners of these franchises.
Well, let me try to satisfy, to answer your question, and then you please follow up where I am incomplete. And the Philadelphia Phillies believe very strongly that, for the good of our industry, it is important to reduce the disparity that exists. I mean, one of the things that has been talked about, it is part of the comments, is that right now payroll dictates who the winners are in Major League Baseball, much more so than, for example, other sports that have different systems. So we think for the future interest in our game and the good of the industry at-large, our franchise's position is that we would like to see the disparity in those three areas be reduced. So clearly what that would do would be that there would be a system in place that would mean that the salaries paid to players would be more in line with the revenue going into the industry, and that that revenue would be more equally divided 158 STADIUM HEARINGS between franchises. I cannot sit here and predict how successful in the next negotiation, or the next two or three negotiations, that would probably -- or maybe four or five, for the life of this relationship that we are talking about, as to what that system would be. I think that it is important to note where we are today. Our salary-only commitments, and that's a big point that Joe just made, our salary-only commitments last year were approximately $48 million. Our pro forma going forward indicates that that's going to jump up by at least another 30-some million dollars. And we think that will result in a deeper talent pool for our club. And the reason we haven't been able to go more is the restriction that we have based on our current revenues. So one -- excuse me?
So, one, we think there is significant opportunity for payroll growth for our particular franchise, without even touching 159 STADIUM HEARINGS this area of, you know, caps or anything associated with that. So we would like to, A, take advantage of getting our club back to where we believe it would belong. Two, that if there was a relationship that was more directly tied to revenue going forward than exists in major league baseball, I think what would result is exactly what Joe described. That as the industrywide revenue goes up, that probably then the public sector would enjoy the commitment by our franchises and others, in other markets, to put more dollars into players as a result of that.
Councilman Clarke, I am sorry. We have any number of members who are waiting. Can we do a second go-around?
And I hear it. And I just wanted to indicate that I clearly understand the disadvantage that your franchise 160 STADIUM HEARINGS suffers as one of the lower paid teams as it relates to salaries. But it would help for me if you would be more public as it relates to this salary increase across the league. I think it is getting out of hand.
I am happy to be as public as I personally can be about our franchise. Just, again, I want to clarify that my only reluctance was, I didn't want to be characterizing on behalf of 29 other franchises what their particular clubs' bargaining objectives may be going forward. That's for others to say, rather than for me to speak on their behalf.
Thank you. Mr. Banner, I think I was sidetracked by the issue of the barbecue and I forgot to ask you a question.
You mentioned about 161 STADIUM HEARINGS the gap. In your view, what is the latest date that that $54 million gap could be filled?
The answer for the moment is, I don't know. We are, in about the next week to ten days, going to begin meeting with our banks. Obviously we cannot proceed with a financing deal and close it unless that gap is done. We will learn from them exactly, in order to -- if we were going to start working on the T warehouse site in February, and we are really going to be building a stadium in May, you know, when we will need the financing in our hands, and, therefore, when we will need to complete the financing deal. And that will really drive the answer to, you know, what's the last possible moment at which we either have to commit to the financing and stay on track for 2003, or it's too late. So I don't know that answer now. I don't think I will until we meet with the banks. I feel comfortable we have some time. It is not months; it is weeks. 162 STADIUM HEARINGS But, you know, we will not know, you know, literally, is that the 15th of December or the 25th of December or the 2nd of January? I mean, we are somewhere in the next three or four weeks until we are able to sit down with the banks and identify that.
Thank you, Madam Chair. Most of my questions will be pertinent to both of you. So if I make reference to one team's situation or the particular bill that I am holding, only because the bills are rather large and a little on the unwieldy side, but I am making specific reference to Bill 000721, which is the Eagles' ground lease bill, and I believe the Phillies' comparable bill is probably 722. I believe, though, at the back most of these items are pretty much the same. In Bill 000721 -- and I am again making the assumption that 722 says the same -- there is a sheet all the way at the back that says, "Eagles Lease Terms." It is Exhibit B, Eagles 163 STADIUM HEARINGS Lease and Development Agreement Terms and Conditions. And there is language at the top -- this is a document dated November 16, when the bills came in -- it reads, "Key terms of this agreement are subject to change due to finalization of the transaction and funding structure, as well as the requirements of state and local law and the requirements of tax exempt financing." Can you tell us at the moment what of these items -- and there are about eight pages -- what of these items are not final, which are final, or is everything final, and is it the expectation that these, what are, in essence, bullet points, although detailed descriptions for the most part, are you expecting that these items will turn into the ultimate leases? (Councilwoman Blackwell assumed the Chair.)
Yes, we are assuming that the terms identified in here will be ultimate leases. And I am just trying to read through quickly. I believe in the Eagles' term sheet, 164 STADIUM HEARINGS that everything in this term sheet is as it is at this moment and as we expect it to stay in the final document.
So for purposes of today's hearing, if this term sheet did not have that somewhat italicized type at the top, and what in essence is somewhat of a disclaimer, are you saying that, on behalf of the Philadelphia Eagles, that this term sheet is the term sheet, and this language at the top literally could be removed -- and obviously this language has to be turned into lease-type language -- but is this the deal?
I think with respect to the issues that it addresses, which I would consider kind of the main deal points, that it is an accurate reflection of what we have agreed to.
I think you have been very careful to say for what it addresses, which then naturally means there are things that are not addressed here that are somewhere else. And what are those items, and what are the outstanding issues that are not addressed by way of these lease terms?
I mean, there are not 165 STADIUM HEARINGS any, what I would call, major business terms that I think are not included here in addition to this. There is a tremendous amount of detail, aspects of enforceability, consequences of deviating from these kinds of things that exist in the, you know, lease that will be completed. You know, as I flip through here, the things relating to the size of the stadium and the limits in the contribution and whose obligations go forward with respect to operating and maintenance and capital repairs that are identified here, which I would call the primary business terms of the deal, are all consistent with what the final deal will be.
Again, just by way of the specifics, if you could give me, I guess, a little better understanding of some of the items that are not in either of these documents that are a part of Bills 000721 and 722. Tell me about the things that are not on these lease terms or ultimately will become the lease agreements that we don't have.
Councilman, my response would be that, as far as the details 166 STADIUM HEARINGS associated with it, again, I would agree with Joe's testimony, that they would be an expansion of that. Our understanding is that, for both parties, we don't expect the substance of the deal points to change. As far as my quick look in reflection on your specific question, I know, for example, some of the specifics associated with parking, as far as our broad responsibility north of Pattison, and exactly what the availability of all those parcels may be, the number of spots, for example, there may be a clarification ongoing on that, but I don't think it changes substantially what is presented to you, as far as the basic business terms associated with that relationship.
So, Mr. Montgomery, from your perspective, there are no 19 other lease terms or conditions that are not in this particular document in Bill 000722?
Well, Councilman, again, I believe that the elements that constituted a commitment that our club made to the Administration on going forward is captured in the document that you see. 167 STADIUM HEARINGS And our intent would be that, on behalf of the Phillies -- and as I am sure this is the Administration's intent -- would be to be consistent in going forward in developing this into a full lease. What I don't want to characterize is saying that when you look at definition of areas on the left-hand side here, I would not want my testimony to say, well, you know, in the full lease there were examples of other subheadings that do not exist here. At this moment I think this captures the relationship between the Administration as projected and the team. And, in essence, that would be my understanding of the situation.
And, again, still even with a moment to think, the only thing I would add is, obviously there's things that aren't specifically addressed here that need to be addressed. Like, well, what happens if the team can't get funding? What happens if the city can't acquire the properties either at all or in a timely manner? 168 STADIUM HEARINGS And those kinds of actions and consequences are not in the term sheet, and obviously will need to be in the lease. But with respect to who is responsible for what --
I thought I read, for instance, somewhere in here there was a provision that talked about, if the team didn't get its financing, for instance, you were able to terminate this agreement? Or if the city did not come forward with its dollars, you would be able to terminate the agreement? I thought I read that in one of these many items somewhere.
Well, I am where you are. That is the understanding. And whether or not that's actually included in the term sheet here or not or, it is just something --
Okay. All right. Why don't we go through the document, because I do have a few questions. And maybe we will even find a few things that we have been looking for. 169 STADIUM HEARINGS With regard to the Eagles' stadium, excuse me, the basic stadium elements, the document reads that premium seating initially consisting of approximately 120 suites and 8,000 club seats. Can you tell me whether the use of the term "initially," does that mean that there is opportunity for expansion of either the suites or the club seats? Or by way of "expansion," I mean an increase in those numbers.
Yes, that's exactly what it means. We are hoping, and we think we are pretty much there, to have a design that if the demand turned out to exceed this, there would be ways to accommodate it. We have done some market research and think this pretty much reflects where we should be, but we are trying to do something to provide some flexibility in case we have underestimated it.
So you are saying the way the stadium will be constructed is in such a way that if you wanted to add 10, 20, 40 -- I mean, I don't know what the ultimate number could be, naturally that would be the next question -- the 170 STADIUM HEARINGS stadium is constructed in such a fashion that if you needed to or wanted to increase the number of suites, you would be able to do so?
Yes. I think we are far enough along in design that I can be fairly specific with you. There are some areas that we are designing for uses that will be open to more of the general public, although for a fee, that if you wanted to, at a future time, you could build out into suites, if you felt that either there was the demand or the economics of the two warranted that.
We haven't finalized it. But, for example, we were just in Washington. And in an area that I think they originally actually conceived as being suites, and then they didn't sell them -- and they do this in Green Bay, as well -- instead, they just opened the front of really what amounts to a whole corner of the stadium, created a small restaurant and bar in the back of this, and then just sold the regular 171 STADIUM HEARINGS seats at somewhat of a premium. Almost like you were buying individual suite seats, but with not quite the level of amenity you would have in a suite. So individuals could purchase them, as opposed to corporations, who generally buy suites. So we may have some of those when we initially open the building.
It is a somewhat enclosed area? For inclement weather, you get a glass or something, sliding glass, or something like that?
Tell me a little bit about the suites, at least the initial 120. Is this kind of the condo kind of suite? I mean, will people -- maybe inarticulate terminology -- but essentially people will buy these or they will rent these at some particular amount, they get their name, I guess, on the outside, that's their box?
They would rent them on an annual basis. Most of the new buildings -- and I 172 STADIUM HEARINGS think we will be consistent with this -- have somewhere between five- and ten-year leases that they ask people to sign for their suite in the new building. And, yes, their name would go on it. They would own that suite, so to speak, for the events in the building. And they would pay an annual --
That's really a marketing decision. And, frankly, as we determine whether we have an MLS team and the arrangement with Temple football gets finalized, and so on and so forth, we will determine whether it is even an option for it to be all events, and whether we think that is what the market would prefer.
So far that decision-making process is, you could be a suite, quote, unquote, owner, but it is your suite for the Eagles season, and it could literally be someone else's suite for soccer season?
Yes. Or be sold on an individual-game basis for other sports, for 173 STADIUM HEARINGS example.
Can you give me a sense of the cost of such a suite? And are they pretty much the same across the board, or is that also a function of, I guess, a suite on the 50-yard line has got to be more expensive than a suite in the enzone?
Right. In football, the value of the suites is pretty much driven by what yard line they are on. We haven't finalized the low range to the high range. I will tell you this: Around the NFL, the average price for the suites, in other words, if you took the lowest and the highest and averaged them together, is about $100,000. So we will probably have some that will be below that and some that could even be significantly above that. I don't envision us being radically different than the norm, and that's what's going on in most of the new stadiums in the country.
A club seat is a prime seat. It is generally a very good located seat. In our building, it will be at the mid level, what people think of as kind of the 400 level in Veteran's Stadium. It includes a significant level of amenities. There will be a club built on both sides of our stadium that will be, basically, private to the people that purchase those club seats. It will include things like a pregame brunch, indoor restaurant opportunities. Indoor space, if the weather is louzy and you want to go indoors and sit down at a restaurant and watch the game on a big-screen TV, it will all be right there. If you want to go in for 15 minutes and get dry on a rainy day, it will be there. So the primary benefits are the location of the seat and the amenity opportunities in terms of this club that will have, you know, restaurants and food services that won't be available otherwise.
So it is kind of, in the positive use of the words, it is creating kind of a segregated area to which only club seat 175 STADIUM HEARINGS people are allowed to be, or it is kind of a mezzanine level? I mean, it is a place you can't get unless you have the right ticket, card, or something like that?
And the amenities, if you will, are not necessarily in the suite or in the box, but they are in the area.
If you are allowed in that area, you have access to all of those things?
Exactly. If we build 8,000 club seats -- and theoretically there will be 4,000 on each side of the stadium -- in our instances there will be about a 45,000-, 50,000-square-foot club, which will really include some of the basic hot dogs and hamburgers, we will also have some upgraded kinds of foods, and indoor space that people can utilize.
A PSL is the same as -- PSL is kind of traditional term for what we are 176 STADIUM HEARINGS calling a CSA. We are calling it a charter seat agreement. The more traditional terminology out there is Premium Seat License. And it refers to what the Council President asked about earlier, where on 29,000 seats in the stadium we will at least have the right to charge people a fee for which they will own the right to acquire that seat for the full length of our lease.
All right. So walk me through that. At some point in time you are going to start marketing this. I want to be out at the stadium. And I pay a CSA fee in order to have the right to then have, what, a season ticket in that particular seat?
Yes. And to say it clearly, so I don't mislead you, to purchase a season ticket for that particular seat. So if, for example, you were someone who was a die-hard fan, and you said, "I don't really care what it costs, I want the seat at the 50-yard line in the 15th row," you know, that -- if we do this, that particular seat will have a price. 177 STADIUM HEARINGS And if you are willing to pay that price -- and theoretically in this instance if you are the first person -- what's more likely to happen is, if you are the person who owns that seat right now, and we assign a price to it and say to you, "Look, if you want to keep that seat, you can purchase this or not. We can relocate you, and you don't have to buy a CSA anyway. Or you can get one at the 30-yard line in that 50-yard-line price is too high," then you will control the rights to that seat and the right to purchase a season ticket for that point.
Well, again, we are going to do some market research. Well, first we are going to meet with our banks to see whether we need to do it or not. We have taken a very conservative approach to this. We are the first team in our league to agree to a limit on the number of seats. I think we are the first, or one of the first, to agree that the revenues from this can only go into stadium construction, so people understand that we are not 178 STADIUM HEARINGS using it for any other means. So if we need to do it, I think the next step will be kind of a judgment as to what the market will bear, especially since we are selling such a small quantity of them. The only thing that I can give you more specific than that is, as I said earlier, the range in Pittsburgh on the lowest price was $600, and the highest $2700. I think the highest is in Carolina, where the lowest price, I think, was either 1000 or 1200 dollars, the top price was $5400.
And you mentioned later on in this document, or another document, the money from the CSAs is actually being deposited in a special account that is for stadium construction purposes?
The way we have structured this is that literally the fund would be to PAID, and then paid for by them into the construction project. So that it is uncomplicated and assures anybody who is purchasing one that our commitment that the money will go into stadium 179 STADIUM HEARINGS construction has to be kept.
All of the concessions, and in this same section it talks about retail spaces, restaurants, video score boards, and I am assuming that there are potentially would be advertising opportunities on these various score boards in between other action, the teams will control all of that?
And in terms of the retail space or the restaurants or concessions and the like, you also determine who the actual vendors are?
Yes. And, in a broad sense, it will hire kind of a general concessionaire. Again, because we are further along, we have literally done this, or at least we have an arrangement. It is not actually executed until the deal is done, but we really kind of have a mutual commitment. In that arrangement, it also allows us, though, if there are local vendors that maybe have food that's unique to this community, or particularly popular in this community, or that we 180 STADIUM HEARINGS think would add to the feel or even kind of the ambiance of the facility, we have the right, even within the contract, to insist upon those concessionaires being allowed to come in under the umbrella of the general concessionaire.
All right. So you are -- what is this entity called? If you haven't completed your deal, if you are comfortable saying who it is, fine. For the moment, I don't necessarily care. But what are they called, a concession manager?
So your statement is, the concession manager, even though they are ultimately responsible for who is in the stadium and in what spaces, within that you have some right to influence, if not dictate and determine, which restaurateurs or which commercial retail people or anyone else can be in the stadium? They can't just put together their own game plan and kind of go have a party and do whatever they want to do?
I think to be completely 181 STADIUM HEARINGS accurate, obviously they can, to some degree. But we have carved out some opportunities for ourselves so that they don't just have uninhibited control without our being involved at all.
NBBJ is an architectural firm out of Los Angeles, California. They are a group of individuals that formerly worked for one of the larger architectural firms that does stadiums. In fact, the lead principal was involved in the design of the First Union Center. And they have recently designed the Cincinnati Bengals Stadium that just opened, the Seattle baseball ballpark, and a couple of other recent projects. And they are our designated lead architect on the design of our stadium.
As I listened to the tail end of the statement, when you say, "lead architect," does that mean there are other architectural firms involved in this? And are there any local Philadelphia firms involved as a part of this larger architect team? 182 STADIUM HEARINGS
This is Dennis Biggs, who spoke a little bit earlier. And he can give you much more specific answers to those kind of questions than I can.
Yes. Councilman, the team of architects and engineers that's been assembled and have been working now for several months on the project is led by NBBJ out of Los Angeles. However, we have a local architectural firm of Agoos & Lovera, is the associate architect on the project. We have the lead structural engineer is a firm by the name of Ov Arup, A-R-U-P, who is an international structural engineer familiar with stadiums of this type, who has also done many football, soccer, and baseball stadiums. However, they are also in association with Ang Associates here in Philadelphia.
Ang Associates, A-N-G. They are the associate structural engineer here on the project. 183 STADIUM HEARINGS
Yes. Structural engineer. From the mechanical, electric, and plumbing engineering, Flack and Kurtz, again a firm who has done many arenas and stadiums around the country. However, we are using the firm of Spectra Engineering here as their associated mechanical, electrical, plumbing engineer. And we have --
Now, is this still all associated with the architectural team, or is this more into the construction?
No, this is all architecture. This is all the architectural and design team. We have Hunt Engineering, who is doing the civil engineering on the project. That is a local firm here in Philadelphia. We have Sentera Limited, it is also a member of our design team working on landscaping and site design issues. We have -- we haven't talked about the construction team. But the construction team is 184 STADIUM HEARINGS made up of Turner construction, Keating Building Corp., and McKissack & McKissack. Again, those firms are all here locally in Philadelphia.
What do you anticipate the architectural contractual work to amount to dollarwise? And what are the dollars that have been expended to date?
The total architectural fees for design, running through the observation phase, if you will, looking over the construction along the way, will exceed $18 million.
And do you have any charts or documents that indicate what the breakout is of the $18 million by way of the different firms that are on the team?
Currently those participants in the projects are exceeding 20 185 STADIUM HEARINGS percent of the design amount.
Currently the local business participants from the minority sector are exceeding percent of the total design amount. 7
Well, we have only hit 13 the first level. So we are at the construction 14 management level, between the Turner Keating and the 15 McKissack & McKissack Group is responsible for 16 16 percent of the construction management agreement. 17
What's the total 18 amount of the construction management agreement? 19
Well, they are 20 responsible for the total project, which will be the overall construction cost.
That number includes soft and hard costs. 186 STADIUM HEARINGS I think we think we are in, we are hopefully in, about the 310, 320 range on hard costs.
I am sorry. I may have cut you off on the construction manager team. Or maybe you gave me the first tier, and then there are others that have not been determined?
What are the other positions that are undetermined at this point?
Well, all of the construction trades, the contractors associated with that, are undetermined at this period of time. We still have not gone out for bids on the project. That will be taking place just after the first of the year, assuming the project is moving forward.
And is it to that group that the goals that were discussed earlier get applied? 187 STADIUM HEARINGS
Yes. As I mentioned earlier, historically -- not that we are going to be overly weighted on that -- historically on the design side, many of the projects in the city have been in the 7 to 15 percent range, on the combination MBE/WBE 8 plans. 9 And indicated to us was we wanted to 10 raise the bar here and get into the 15 to 20 percent range in that category. And, as I say, we are at about 21 percent. So we have actually exceeded the high end of the range, and significantly above the project. The construction end of the project relates to the 35, 12, and 2, or 49 percent goal, that we are committed to doing everything we can to achieve. And we have not hired anybody in that category, as you said, other than the construction manager. We are still finishing design. But we will in about the next four weeks beginning to go out to bid on those areas.
Okay. On , in the heading Stadium Complex Project Budget, 188 STADIUM HEARINGS letter B talks about, "The team is responsible for 100 percent of costs associated with the construction of the basic stadium elements within stadium site, including any and all cost overruns on stadium budget other than overruns that result from post-approval design changes requested by PAID not mandated by generally applicable laws and codes, if agreed to by team." I guess in somewhat more explanatory language, can you tell me what situation or circumstance would end up invoking this particular clause?
If the city insisted upon a change in the design that pushed us over budget, that they said we had to do, that was other than to meet code, then we wouldn't be responsible for it.
Give us an example of something that PAID would possibly require. These are things that generally have already been approved as a part of a design, and somewhere, while they are --
I honestly think in our 189 STADIUM HEARINGS project, where we are at, the chances of this happening got to be virtually zero. But I will tell you there have been instances, for example, in other projects where cities created an architectural oversight group, and maybe the stadium was designed, and the team had $300 million to spend, and they budgeted it, and they designed it, and the contractor said, "Oh yes it is 300 million bucks." And then somebody on the architectural design team said, "Well, wait a second. We want a roof on it. Or we want 50 more bathrooms in the building." It wasn't required by code; it was just the preference of that group. I can't see that being applicable here. But there is, obviously, oversight and permissions needed. And we didn't want to be in a position where the city would arbitrarily make some design choices that increase the cost of the project that we just were obligated to do, no matter what the cost.
Madam Chair, I am trying to be aware of my time. You have been most gracious and didn't even put the little timer thing 190 STADIUM HEARINGS into the microphone. I am well aware that some other colleagues may have questions, and I have a few more. So I am more than willing to relinquish and come back.
Let me ask, before we call my next colleague, it is our understanding that when it comes to site preparation and construction costs, that you are responsible for the cost overruns. However, in the information you provided, I see that we are providing 10 million of bond proceeds towards a maintenance reserve fund, and holding an additional 10 million for site work contingencies. And I want to ask about site work contingency money and environmental concerns. If construction does lag and costs increase, is it your intention to tap into these funds? 191 STADIUM HEARINGS If so, wouldn't that mean we are paying for cost overruns?
I am always ready, Councilwoman. I will reintroduce myself today. I see we have a new stenographer. Bill Hankowsky, President of the Philadelphia Industrial Development Corporation. Councilwoman, the $10 million line item in the budget that is contingency is the city's contingency, it is not the team's contingency. So it can cover a couple of different elements that might happen. As we covered yesterday, if we have to spend a little bit more money to acquire the properties, we can use that contingency line item. We do have one site responsibility, which is the demolition of the Navy Hospital and the creation of interim parking on that Site. If that costs more, we can use the contingency. We also might have just, you know, 192 STADIUM HEARINGS legal fees or consultants we would have to have, traffic studies, or something like that, and we can use it for those. It is not available to the teams. The $10 million capital reserve is meant to go to the Eagles for the ongoing capital maintenance of their facility. It does not go into the initial cost of construction. And I think, Councilwoman, that addresses those two pots.
I wanted to question you about the children's fund. It was explained that for tax purposes the city cannot directly receive these proceeds. Have you developed a plan on your portion of the fund? If not, how do you see your role in Administration of this fund?
I think that both teams have had discussions with the city on this. And I think the city is determining for its purposes what the best way to receive this would be. I think the latter part of your 193 STADIUM HEARINGS question, I think we really would love to be involved in how those funds are utilized. If there were to be a Board created on some kind of a charitable organization, we would certainly love to have some representation. But we fully recognize the intent of this is to create a fund that the city and this Council can utilize as it sees fit. But as we are making the kind of contribution we are, if there were a Board on this organization, or something like that, we would certainly love to have a voice on it, at least.
We are very, very concerned about this fund. And we want to be involved and need to be and intend to be closely connected with every aspect of it. This is very, very important to us, and very important to the future of our students. And so we want to make sure that we underscore that. So that it is understood we want to use this a special way, and we are really concerned about how this will be administered and through whom. 194 STADIUM HEARINGS My next question goes to minority participation. On the President's staff we have a gentleman, John Macklin, who will be back in town next week. And we are requesting that you be in touch with him. As well as, certainly, my colleagues, Councilman Clarke and others have raised many issues with regard to minority participation. But we are asking that you also keep Council fully informed and fully integrated into all discussions through Mr. John Macklin.
Thank you very much. Madam President, I have three more, but I will defer.
Thank you. Councilman Nutter, I know you yielded to Councilwoman Blackwell.
Actually, no, Madam President, it was not so much a yield as I thought that I had used my time.
I think you have. 195 STADIUM HEARINGS So if you don't mind...
So it was in the pure spirit of confession that I yielded for a next round.
Thank you, Madam Chair. Mr. Banner and Mr. Montgomery, I just want to say at the outset, I appreciate your testimony and I appreciate all the patience that you have shown throughout the course of this process. I know that for at least two years, and probably for longer, you have had to deal with this, and either by direction or by design have really not been able to say much about it until recently with the press conference that the Eagles have had. One of my concerns about this entire process -- and understand the critical questions that we ask in this process is not necessarily about the deal itself. Because I don't have a lot of problem with the financial aspects of this particular deal 196 STADIUM HEARINGS and the contributions of the teams to this process and the shared risk and investment that the city and the teams will participate in hopefully December 14, when we pass this legislation. I guess my concern is, the time frame which we're in, the situation of the city as we speak today, as it relates to our five-year plan and to our unanticipated expenses over the last or 10 months, and kind of on the edge that we are on being 11 totally solvent in our government, and then a bad-case scenario being presented to us with a bad economy, with other problems at PGW, our schools, and those kinds of things, that in the context of this discussion, taken alone, this is a slam dunk and we can move forward and should have moved forward six months ago. But I want you to understand as corporate citizens, and good corporate citizens that you are, it is the city's entire fiscal picture that gives some of us pause and concern and a need to question. And it is nothing to do with your efforts to bring these two new facilities to our city. 197 STADIUM HEARINGS
Certainly appreciate, Councilman, the magnitude of the task that the Council has to evaluate our deal not only on its individual merits, but in the context of the city at large.
You know, the only thing I would say in addition to that, and I share that view, is, really, by virtue of the NFL loan, we were able to at least do a little bit in helping that problem. Because by taking our payment and an O & M payment, as opposed to an up-front contribution, none of that money, at least, needs to be start to be paid until 2003. I know it is a portion, and there is a very significant amount of money in addition to that. But at least on really what amounts to one-quarter of the contribution that the city is making, we were fortunate, by virtue of this NFL loan program, to be able to structure it so that we have kind of a delay before that kicks in.
And I know the Eagles have always had the site of the T warehouse 198 STADIUM HEARINGS for their potential site for their new stadium, their new. And the Phillies I do empathize with. Because from the last Administration through this Administration to date, it seems that the process has moved forward atypical than what's happened in the rest of the country; in that, these franchises and the cities who build these facilities start out a year, two years in advance, beginning to evangelize the community, try to get a ground swell of support of labor and business and community people; and to kind of make people understand that this is good for them, it is good for the city, it is good for the city's image, and it is good for the city's tax base. We didn't do that. You know, the Phillies ballpark basically got dropped into Broad and Spring Garden without much discussion or much prework going into the community and trying to talk them. It was rejected there, and then was dumped, without much ceremony or much work, in South Philadelphia. And then the Mayor, Mayor Rendell at the time, decided he couldn't get it done and walked 199 STADIUM HEARINGS away. We start over again with the new Administration, and basically Chinatown gets the same experience that Broad and Spring Garden received, and had typically the same reaction that Broad and Spring Garden residents had. Now we are back to South Philadelphia again, with very little time or discussion with the community there. Although the Council President, as the District Councilperson, is doing her best to kind of deal with the neighborhood issues that have been going on for 30 years. And you are, at least Dave, I know, is well aware of some of the complaints that have gone on down there. Our frustration, as least I will speak for myself, my frustration is the time frame with which we have to do this and to understand and analyze and do our due diligence and basically to do our jobs. Mr. Montgomery, when I first met with you about a South Philadelphia site last year, I believe, you had shown me a schematic and a plan 200 STADIUM HEARINGS that was a North Lot scenario. And at the time you had indicated you were very proud of the design. And it indicated to me that you believed that it could be done, with enough time to deal with the neighbor's concerns and suspicion, I say. Do you still believe that we could have done that, given more than time than we have today to convince and to win over the community?
Well, Councilman, you are correct that I think your reference -- and we have had a number of stadium siting discussions through the years -- I think the one you are referencing was probably around this time of year last year, where we had felt that the initial characterization of the North Lot site, which was really depicted first originally in the paper, I think, inaccurately. Somebody had chosen to draw it --
Well, they put it, yes, at least one of the sitings that was just in general indicated -- had it all the way up in the northeast corner of what is referred to as the North 201 STADIUM HEARINGS Lot. And that was never planned, never contemplated. And I think, as a result, the neighbors that were north of the Walt Whitman Bridge access felt that we were all of the sudden moving towards them. The original siting that we took to some of the leadership was one that had us really adjacent to what I call today to be the existing practice fields for the Eagles, which are the two football layouts in the North Lot parking lot. And then as a result of the reaction, because, frankly, we are very proud of what our building is going to look like. We think that it, you know, with a stone or brick exterior, and a lower facility, it is going to cast a far different shadow, I use the term, than Veteran's Stadium does. So we really thought we were giving the neighborhood an opportunity to choose between having the attractiveness of this building nearby or parking. We got a very clear indication, at least from a few of the members in that meeting -- 202 STADIUM HEARINGS others have said that I was incorrect in my assessment -- that they would rather it to be parking near by, as opposed to building. And I think that's a specific reference you made to us moving the ballpark over to the adjacent to 10th Street position that I showed in that North Lot site slide that we showed.
Absolutely, yes. Right. But instead of being closer to the cluster of homes there, it was as close as we could get it to 10th Street. So that is correct. We still believe that the characteristics -- one of the tough things to communicate has been the characteristics of the ballpark, as opposed to a stadium. The fact that one can fit inside the other, the size, and the exterior attractiveness -- at least that's the term I will use -- of a ballpark, as opposed to the existing significant amount of ramps and concrete that are associated with Veteran's Stadium. 203 STADIUM HEARINGS I did reference that there were two subsequent moves in the sports complex since then. But you are correct that we felt that that was certainly something that we believed, you know, with the opportunity to discuss more fully with the neighborhood, gave us a chance of being sited there. I think the other level of understanding that we were not able to break through was the attractiveness of what we have always referred to as a "buffer state," Councilman, which is the 150-foot area that would be between any homes and any either ballpark, parking, et cetera. And we always felt that if you could create a gentle hill in that area, that if people found the view of the parking or whatever objectionable, that at least anybody at street level -- and even over time utilizing the trees that are there now, and enhancing them greatly -- that you could pretty much block, in essence, the view with the facility.
The move across 10th Street to the Jetro site, which is what we are deciding on now, is about a 700-foot difference from 204 STADIUM HEARINGS the last Phillies location on the North Lot. I think it was 490, was your last location?
About a 700-foot difference. What would have been the Phillies' response if they would have been asked to absorb the cost of the three parcels that they would have had to acquire in order to move that site to the Jetro site?
Well, it is tough to ask that just in the abstract, Councilman. What has happened, if we are asked to compare then and now, probably then I wouldn't have said that we could enhance our contribution at all. And, in our estimate, the difference between the Phillies' cost associated has gone up, combination of factors, associated with site, associated with a year later, et cetera. And then some of the additional 205 STADIUM HEARINGS contributions that we were asked in this negotiation, that didn't come up a year ago, has changed our contribution, we believe conservatively, by about $50 million. So to some degree we think we have participated in those parcels that you are referencing. We do think that this presentation of a site is an enhanced site. And I have said that, and I mean that very much. Because I think that some of the pressures on that whole neighborhood have been primarily parking, traffic, and access. And I really believe that what we have developed now by enhancing the parking, by taking the facilities, in moving them away, we have actually been able to, as I identified earlier, more surround each of them with parking. So I think for the benefit of our fans and our patrons, we will have greater adjacent opportunities for reserve lots, et cetera, than we do today. There are some very significant advantages beyond that from a layout standpoint. 206 STADIUM HEARINGS We feel the ability to have an open ballpark exists on the Jetro site moreso than, frankly, it did. Because it's now open to what I would say the vast majority of the North Lot parking. And that gives us probably a greater, you will know this term, Utah Street opportunity, Councilman. In addition, the fact that we have an address now on a street -- we were kind of stuck in the middle of parking before -- but the fact that we now have a street address we think is an advantage. So I do believe it is an enhanced layout, but it would be very difficult for me to characterize the cost benefits associated with that.
That enhanced layout is at substantially enhanced cost?
Well, I think that clearly the club believes it, yes. But part of that is also the timing associated with it. I mean, you correctly identified that this has been a long process. I know it is difficult to ask this body to consider it on what you perceive to be a 207 STADIUM HEARINGS short time frame. From the perspective of some of us that have been -- when we resited in Jetro, one of the things we did was to go back to some of the initial site work drawings, layout drawings, we had done. And I think it was interesting to note that one of those was dated December 1993 and the other January 1994. So, Councilman, we have been at this a long time.
Let me shift gears for a second. And as I look through the lease terms, I noticed an item that said, "City Suite." Could you describe what a City Suite is, and how it came about? And the other question I have is, is there a history or do other cities provide a City Suite in their ballparks?
I'm not sure that I could answer for around the country. I am sure it happens in some instances and doesn't in others. As you know, there is a history of this in Veteran's Stadium.
Do you know the 208 STADIUM HEARINGS history? Because you may have been around; I wasn't.
Yes, I have been around, unfortunately, Councilman. I have been around 30 years. Yesterday I was accused of being around 100, I thought, based on some of the testimony. But the fact is that, because it was a city-owned stadium, Veteran's Stadium was, and because of the location of the city offices, there has always been an area on the 400 level that was designated, it's been commonly referred to, as the Mayor's Box. It was a suite on that level that's been in existence since the opening of the facility in 1971. We have only yet begun to design what our suites would look like. They are probably going to be 12 to 14 seats in nature. And, hopefully, unlike the current situation, they will be closer to the action. They will probably be on the mezzanine level. But because of the general shape of 209 STADIUM HEARINGS the facility, we believe they will be closer than any of the super boxes we have today. And we have indicated that one of them will go to the city for its use.
We did not get into specifics on that. And I am going to leave that to the Administration and this body to have those discussions.
Mr. Banner, are you aware of items like City Suites anywhere else?
City Suite, I'm sorry. I meant City Suites around the country, but this particular City Suite.
I am really not familiar in terms of NFL stadiums whether those exist or not. We really were reflecting the status of the situation here and continuing at some level.
You are just 210 STADIUM HEARINGS continuing the status quo?
There are no 5 specifics from your end, since you are further along in design, where it would be located, who would control it?
Well, I think, I mean, we are slightly further along in the sense that I think we have at least been asked to make a commitment that it would be on a side line, as opposed to in an enzone. And I think it will be like all the other suites, we will be responsible for maintaining it. I think the food service would be the responsibility of the user.
Do you guys have, in your own deliberations and trying to figure out your revenues, have you assigned a value per suite to the layout in the Phillies facility and Eagles facility? Is there a number that's associated with each suite that the return or the profit that's made after its leased maintained? And I understand also is it 211 STADIUM HEARINGS anticipated that the teams would get part of the -- or all of the profit from food and beverage service within the suites themselves?
Well, let me, because I probably have less information on the subject, maybe Joe has more. First of all, we have neither priced the sale of our suites nor has our construction work progressed to the point where I could tell you what the cost would be, Councilman. As far as food and beverage for the facility, yes, part of this agreement is that that would flow to the team. And then the team would have the responsibility, unlike the current situation, of having a direct relationship with a concessionaire or concessionaires. Again, because of where we are in the process, we have not, we have not established any of those relationships at this point.
We have not priced our suites specifically. But, as I said earlier, the average suite in new stadiums in the NFL cost is about $100,000, just a little bit below. 212 STADIUM HEARINGS And we expect to be fairly close to what -- it could be a little higher, could be a little lower. We will be in those kind of ranges.
So if an individual who purchased one of your suites and then used that as a business, which I think a few do now in the 400 and in the sky box level, could perhaps be a lucrative or at least a profitable business to operate, once you pay your debt service on the cost of the lease and then factor in your mark-up on food and beverage and ticket sales and other things?