You're welcome. The Chair recognizes Councilwoman Tasco.
I think I just have one question I asked yesterday. Maybe you all went back and talked about it. I'm interested, as you know, as Chair of the Philadelphia Gas Commission, and recognizing that PGW is a City-owned asset, I want to know how you plan to heat both facilities.
Councilwoman, unfortunately, we are nowhere near that level in our development of our building, so I am not able to answer that for you, and I apologize. We just haven't -- we haven't even begun -- you know, all we've done is referred to as the programmatic design. We have not done any design beyond that, 259 12/1/00 STADIUM BILLS HEARING because the vast amount of time that we've spent has been involved in evaluating sites, some of which have been brought to us, as you know, by the Administration, some of which we developed ourselves. So I am not able to give you that answer.
Wouldn't you have to have some idea of costs in determining how much this project is going to cost, how much heating it will cost you?
I can -- we're a little bit further along, so let me give you -- we are to the point where I can tell you it will be both, and the exact ratios of which, we're not far along enough to tell you. In answer to the second part of your question, we, of course, do have kind of a plugged number right now and kind of a utility cost, and it reflects some kind of a blended of using both gas and electric in the building. Who knows if, three years from now, it will be right? It's kind of a best estimate based 260 12/1/00 STADIUM BILLS HEARING on experiences of other teams in our league and what it's costing them at this point on an annual basis and then increasing it by inflation.
Has there been any discussion with PGW on this issue?
Thank you. The Chair recognizes Councilwoman Brown.
Thank you, Madam Chair. Good afternoon, gentlemen. I would like to, if I may, briefly shift the discussion on the other side of the equation, and that is the potential -- one of the potential public benefits. And I would be remiss not to publicly thank you for hearing our requests around the Children's Fund, listening, and then acting upon that request on behalf of the City. I know that currently both teams are involved in a number of charitable efforts with regards to our city, so the questions are two. 261 12/1/00 STADIUM BILLS HEARING One, speak briefly to what they currently are; and now with this potential Children's Fund, will this $1 million per year per team supplant or supplement what you currently do?
I'll try to go first. I am -- I will not be able to provide the level of detail, but let me begin by saying that our, I guess, charitable -- and we don't -- we don't think of it as a responsibility; we think of it almost as a responsibility, Councilwoman. But one of the things that the franchises bring is great exposure probably exposure, probably exposure that far exceeds the values of our revenue streams and expenses, as Councilman Ortiz was asking about, because many people write about us, talk about us, et cetera, all the time. So we give what we estimate to be both cash contributions, and then we give a lot of what is really, we think, fund-raising opportunity options. For example, in our case, we will provide a number of tickets for organizations that say that they want to use those tickets to resell in the way of fund-raising. Also, the opportunity 262 12/1/00 STADIUM BILLS HEARING with merchandise, particularly if we have premium days and whatnot. So there is a value on that activity that I believe is a number that approaches $2 million a year, which is what I would call "in kind." In addition to that, we host a major fund-raising event with the Philadelphia Chapter 9 of the ALS Association. We've been doing this -- it's a function that we've been doing, I think, for years. I probably would be off if I tried 12 to indicate the aggregate funds raised on behalf 13 of that organization. I believe it's approaching $5 million over that period. But on an annual basis, I believe our fund raiser -- and last year on a net number -- in other words, after expenses -- contributed to that organization somewhere between 400 and $450,000 a year. In addition to that, we have a part of our organization described as Phillies Charities, and what we try to do in Phillies Charities is to support those organizations that members of our Phillies community -- for example if -- when Rico Brona (ph.) was with us, his charity of choice that he spent a lot of time on was spondylitis, 263 12/1/00 STADIUM BILLS HEARING and as a result of that, you know, we made a contribution to Rico's charity. And we try to support the work of all of our players and also members of our organization that come to us with a specific request. So our cash contributions in that area would be approximately half of what we're able to raise in that event, like a couple of hundred thousand dollars. Obviously, you've done a very good job in selling the importance of the children of this city to be saluted in this transaction. And it would be our intention that whatever we are able to contribute over the life of this tenancy, and you know what our commitment is, that that would be over and above the current level of contribution that our organization currently puts forth.
Yeah. I mean, our categories are pretty similar. We have a community relations department, which is what does all of the things that Dave referred to as kind of their in-kind donations; they're the ones that, 264 12/1/00 STADIUM BILLS HEARING you know, all our player visits to children's hospitals and all those kinds of things run through that kind of a program.
And in addition, we have a sizeable budget for just, you know, tables at dinners and small donations to local groups and so on and so forth like that. Our biggest component is the Eagles Partnership; it's a foundation within the franchise. It has received national notoriety. We've had many teams and many sports get in touch with us to try to ask us exactly what we're doing and consider replicating it. I think what's most unique about it is that we've actually created programs as opposed to just giving out donations or utilizing our name or our players' names. I will give you one example that's actually received a lot of visibility and literally has been covered on national network news shows. We have a player, Jermaine Mayberry, who's blind in one eye, and he grew up in a relatively poor environment and was never able to see an eye doctor as a child. And it was not 265 12/1/00 STADIUM BILLS HEARING until he was in college that they identified what it was that had caused him to go blind in one eye, and he realized that had gone to a doctor when he was a child, it was an easily correctable situation. So he's really blind in one eye for no 7 reason. So Jermaine, when he signed his contract in conjunction with the Eagles Youth Partnership, created the Eagles Eyemobile, and the Eagles Eyemobile is literally a bus that is wrapped with a picture of Jermaine Mayberry and the Eagles logo and so on and so forth. And it goes through the City, to different schools, in partnership with Wills Eye Hospital, who provides on a volunteer basis the doctors. And they go to schools and they give children eye tests, and children that need glasses get them for free and children that have eye diseases have even received surgery free of charge, courtesy of Wills Eye Hospital. So what we've done that's unique is not only raise money and contribute it to worthwhile causes, but actually create programs that have been unique and directly gone and made a 266 12/1/00 STADIUM BILLS HEARING difference in people's lives.
It's been stated on the record that the $1 million per team per year has to go to a nonprofit. And state again briefly for those of us who may not have heard that the reason is. . . and you can complete the sentence.
I think it's really driven by the City. I think it's a legal question in terms of the City's ability to issue tax-free bonds for this project. That means those funds can't be taken in a form that would be considered private payment; and, therefore, the need to funnel them into a 501(c.)(3) or something similar, I think, is created by the City need.
Okay, then. And what I will say in closing is though I may, and was, in some ways the engine behind this, the record should reflect that early in the spring, a resolution was introduced that was supported and embraced by a number of members of Council. And then, of course, it was held because it was thought in my thinking that there may be a different and better way to get this done, and at 267 12/1/00 STADIUM BILLS HEARING the end of the day, we got it done. So I thank you for working along with us.
Thank you. The Chair recognizes Councilwoman Miller.
Thank you, Madam Chair. This question is for both teams. Please help me understand the concession opportunities once the stadium opens. I know it's three years away, but how are you -- right now, the stadiums are run by the City and the City sends out RFPs. How will people know or what method will you use to notify people that they can have the opportunity to apply, or whatever it is that you're going to do around concession opportunities?
Councilwoman, are you talking about the opportunity to participate in the workforce? We have --
Not the 268 12/1/00 STADIUM BILLS HEARING workforce. Operator concession. I mean, how will that happen?
Well, our expectation would be that we would enter into a relationship with a --
-- with a concessionaire, and there are several of those that do operations around the country, including one that does business right here in Philadelphia, is housed here in Philadelphia. And we would -- we would then lean on their expertise to develop a program that would enable the type of participation that I think you are talking about. We have not entered into such an arrangement at this time.
Okay. So then if the Phillies or the Eagles probably won't basically be the people to operate that part of it, of the stadium; you will contract with someone else to do that.
Yeah. The experience that we've had, the only place that we've attempted to self-operate was, for example, our 269 12/1/00 STADIUM BILLS HEARING spring training home in Clearwater, Florida, which is a much smaller operation. We would look to the expertise of others in this area.
The only part of that that's different from an Eagles' perspective is that would be probably looking to -- some people under the definition of "concessionaire" include merchandise. We would probably be the operators ourselves in the merchandise area and, similar to what Dave said, would be hiring. In fact, we have a loose arrangement now, because in order to go through the design phase, we had to have a concessionaire's expertise in order to help us figure out, you know, where we needed what stands and where to put what restaurants. So we have kind of at this point a loosely formed relationship with a concessionaire. But the merchandise aspect of the concession arrangement would probably be operated by the Eagles themselves.
Merchandise, meaning like T-shirts and all those kinds of things?
Yes, T-shirts, caps, 270 12/1/00 STADIUM BILLS HEARING sweatshirts, those kind of items.
Okay. So if someone -- so then the person that you will give this responsibility to will be the person that's ultimately responsible for notifying or getting the word out that -- I don't know -- I don't know whether -- I don't know how this would operate through a private corporation. I guess I'm just more used to it being operated through City government, and I just want to make sure that people will have a fair opportunity to try and have whatever it takes -- a stand, et cetera -- at one of the two stadiums. So is that information that will be freely flowing back to Council or to the general public?
Well, I would imagine that the operation of stands -- there are -- I think there's two things that are probably important to point out. I think, first of all, when you're talking about a facility of this size and an operation whereby there is, I guess, a significant amount of exposure/liability, I would not expect in an area involving liquor that there 271 12/1/00 STADIUM BILLS HEARING would be any other than one liquor licensee holder. I mean, that's been the situation today at Veterans Stadium. So, you know, my sense is from a risk exposure standpoint, that would come under the heading of the main concessionaire. I think, as Joe testified earlier, one of the things that we have found to be successful currently, and something that we would encourage our concessionaire to continue, would be to take advantage of what I would call the flavor of Philadelphia food, and many cases, you know, there are establishments ongoing that have been very successful in developing that. You know, many times people -- I saw just the other night on a national TV show somebody asking, you know, where was the appropriate place in Philadelphia to get a cheese steak, et cetera? And, currently there's a relationship with a local cheese steak operator at Veterans Stadium. That type of, you know, authentic Philadelphia food, which we think could be enhanced by the relationship of an existing, ongoing business here is something that we would actively pursue. 272 12/1/00 STADIUM BILLS HEARING
Mm-hmm, okay, but whatever you decide to do, I'd appreciate -- I'm sure Council would appreciate knowing how that part of this whole thing is going to work out just for information for us to disseminate to our constituents. I just want to pick up and too state that I too appreciate the Phillies and their Eagles in their donations towards the Children's Fund, but I do have a couple questions regarding the Children's Fund. Whose responsibility will it be to set up the nonprofit? Will that be the City of Philadelphia's responsibility or will it be jointly that of the teams and the City?
Well, my understanding is -- and I'll ask Joe to correct me if I'm wrong -- that that would fall to the responsibility of the public sector.
Okay, all right. And in taking a look at a million dollars today versus a million dollars or the value of a million dollars three years from now, when the stadium -- when the Eagles will start, and then 2003 and then 2004, when the Phillies kicks in, certainly a 273 12/1/00 STADIUM BILLS HEARING million dollars then and a million dollars three years, four years from now or ten years from now is certainly different. Is there going to be an opportunity to amend the dollar amount to keep it there at that million-dollar level over the course of the 30-year commitment to that contribution? 'Cause in reading some of this report, every -- lots of items talk about the need to amend, you know, the need to amend. So can the Children's Fund be amended? And Councilman Nutter may have asked about the amendment of the dollar amount for the special services fund.
Well, again, part of the economics of the deal was in a discussion of what would be in an up front contribution, and I agree with your characterization that the buying power today and in the future is different. But in this element, it was the commitment of the teams to put in a minimum of $1 million each year, and that's the commitment that was made as part of the arrangement.
Okay. What about the opportunity -- I guess that's a question for 274 12/1/00 STADIUM BILLS HEARING Hankowsky or somebody at the City, to talk about the possibility of amending, since the deal isn't really closed yet, right? It's not closed, is it?
Isn't that why we're here, that's we're having the hearings?
Right, okay, all right, good. And, you know, this question is particularly for the Phillies. And I'm not trying to embarrass you or anything but I just need to know this. You talk about new stadium revenues, and when I look at that Anderson report, you know, the revenues just jump, it doubles in the year 2004. What impact does a team's record have on stadium revenues? It just seems like everything is being blamed on the fact that the Vets Stadium is 33 years old, but the reality is 30 years ago or 33 years ago, the Vets Stadium was brand new. And what was the Phillies record? I 275 12/1/00 STADIUM BILLS HEARING can't figure this out.
Well, actually, Councilwoman, you've helped me answer your own question. I think if you looked at the period from early 1970 through the mid-1980s, that was a very successful period of time for the Phillies both on the field and off the field, meaning both from a record standpoint and from an attendance standpoint. And the whole thrust of this has been to reestablish the strength of the Philadelphia sports market and not have the stadium situation diminish that. At that point in time, I think that a -- in a ticket sold in those days, we always reported attendance as actual paid admittance for purposes of -- in other words, paid attendees. And in the year 1980, when we were fortune enough to be in the World Series, we actually in tickets sold had somewhere in the neighborhood of 3.4 million. And what we have said, which is the essence of our presentation, is that we need to reestablish, through our stadium presence, the opportunity to take advantage of the strength of 276 12/1/00 STADIUM BILLS HEARING the market, which in turn, will give us the ability to generate revenues, which in turn, we can utilize to have a stronger player presence. It was the questions that Councilman Clarke was asking me about as far as our ability to increase our payroll. We believe that if we can do that that at the very least we will establish ourselves -- reestablish ourselves as we once were as the top of the second quartile within our industry; and, therefore, be a far competitive -- far more competitive club than we've been for the last few years.
So then the gentleman that stated yesterday that the Phillies had the worst records in a hundred years was incorrect?
Well, I -- I -- I can't go back to a hundred years. I know that our 30 years of occupancy, I think we've been playing since we've been at the Vet somewhere at around a 48 percent winning percentage for our 30 years of occupancy. I mean, I'm -- but we clearly have, you know, we've had a situation where in those 30 277 12/1/00 STADIUM BILLS HEARING years, we've been in the World Series times, we 3 have won it once. We have obviously been World Series losers on the two other occasions. If you take the number of teams in the National League, you would say on average, if there's teams, you 7 should make it once every 8 16 years. We've made it 3 times in 30, which is 1 9 out of 10. 10 So if you took World Series 11 participation as your measure of success, 12 obviously, we would be succeeding the exceeding 13 average. The fact of the matter is, I'm not 14 defending our one-loss record. I'm as 15 disappointed as our fans are about our inability 16 to win games this last year. Councilman Ortiz had his specific reasons as to why that happened. I think he was concerned about the performance of one of our pitchers. But, you know, what we are trying to do is to be in a situation where ongoing, we would not point to the lack of revenue associated from the stadium as a reason why we cannot win more games. And we believe that we will enhance our ability in that baseball cycle, which is greater 278 12/1/00 STADIUM BILLS HEARING attendance, generates more revenue, which generates the greater ability to pay players, which in turn should produce more wins, which in turn should produce greater attendance. And the cycle just keeps going.
Okay. I have one other question, my final question, Madam Chair.
When do you expect that the MBE and WBE plan will be ready for our review? Do you think it will be before Monday?
The teams could not independently answer that. We're actively having discussions with the Administration. And I know that we are acutely aware of the interest that Council has in seeing the specifics of that plan as soon as possible, and we share your desire, we understand your desire, and we know the Administration shares our goal to get that to you as quickly as possible.
All right. Thank 279 12/1/00 STADIUM BILLS HEARING you. But it will -- according to, I think, your testimony or someone's testimony, it will be ready before we take a vote on the 14th?
That's my understanding, absolutely. I mean, I think we're talking days here, Councilwoman. That's my understanding.
And, again, I'm only speaking on behalf of the teams rather than the teams and the Administration.
Thank you. Are there any other questions that -- the Chair recognizes Councilwoman Krajewski.
Thanks, Madam Chair. I don't know whether this question was asked or not, but who will be the controlling factor of the ticket prices at the new stadium? I believe research shows that there's an increase by an average of 35 percent in the cost of the 280 12/1/00 STADIUM BILLS HEARING tickets when they go into a new facility; is that true?
Well, let me -- I can't speak specifically to that level of research. I -- the only thing that I will say, as I said earlier, you know, baseball, because we play 81 games and because our goal is to draw -- we've talked about it extensively: Our goal is to draw in excess of 3 million fans in a year. We have to hit all price points and remain very committed to attracting families, as we do today. And I believe my testimony earlier indicated that our hope is that the opportunity to provide real additional upscale ticketing opportunities. In other words, you see in our description of our facility, we're anticipating somewhere between 75 and 80 suites, we're expecting 5,000 club seats. We hope that by pricing those in a manner which will be higher than we currently do today, we can leave the remainder of our ticket prices much more similar to the current pricing. Again, I think, as was made earlier, pricing in general by '04 when we open will be 281 12/1/00 STADIUM BILLS HEARING different from 2000, you know, last year, et cetera. In other words, there's --
Right, there's a natural progression. So when you layer on top the luxury seats, it may take the percentage up more than if you were to compare, for example, what the cost of a box seat today is and a similar box seat in a new facility. But the answer is that that's part of -- as far as the responsibility, it's the club's responsibility to set it and set it in a way that we maximize attendance. That's in our best interest every bit as much, if not more so, that it is in the interest of the public's side.
I don't have to tell you. We hear it all the time about the cost and when they take a family to a game what the costs are.
Well, again, and because Councilman Ortiz mentioned that. You know, we still have a $5 general admission price 282 12/1/00 STADIUM BILLS HEARING for children and a and $7 ticket price for adults, so the example that he stated earlier, what does it cost a family of 4 to come to a Phillies game? Now, that is our general seating admission, as we explained earlier, but that's $24, and I would suggest to you that you could not go to a movie as a family of four for anything less than -- that's --
Well, I think it begins all over with the vendors as well, the cost and the prices.
Absolutely. And as I said earlier, our goal actually on concessions would be to see if we couldn't produce greater quality for the pricing associated with concessions.
Well do you feel that maybe the sale of tickets will be capped at a certain number or what, so as to give the citizens a fair opportunity?
Oh, it would be impossible for us to commit to a cap because the cap would be tied to inflation. We're projection -- you know, have a lease term here of 30 years, 283 12/1/00 STADIUM BILLS HEARING and quite frankly, we're actually, we have the renewal options for a significantly much longer period of time past that. So our goal, again, is to price our facility in a way that we still remain attractive to the family audience. I think I indicated earlier that maybe the tickets that we currently reference general admission prices would probably be for us somewhere between 10 and $15, but when you talk about capping, you're talking about across all categories of pricing. And my answer to that is that would not be possible.
Well, do the Eagles or the Phillies plan to sell personal seat licenses or what?
Well, I think the Eagles have testified extensively on that subject. As far as we're concerned, the one situation where there's been an extensive personal seat program is the San Francisco Giants, and that's one of the reasons we did not want to take on an up front burden anymore than we were being asked to because we feel if we have to turn to extensive personal seat licenses, that what we're 284 12/1/00 STADIUM BILLS HEARING going to do is price ourselves away from the affordable seats that we want to provide our fans. In Pittsburgh, they have a limited number of seats that they've done. They're primarily these luxury seats, and it's an opportunity to make, I guess, what I would describe more specifically an up front commitment to buy those. So it's never been a part of our proforma, and whatever involvement we would have in that area would be on a very limited basis.
How many corporations currently hold some type of a season ticket package, excluding the luxury boxes? Do you know?
Oh, we have full-season packages, we have 16-game partial-plan packages, and we have Sunday game packages of 13 games. I'll try. I believe right now, our current season attendance is about 12,000 a game on a full-season equivalency, and I believe that in the -- about a little over 50 percent of those are full season -- actual full season -- more like 60 percent. The 285 12/1/00 STADIUM BILLS HEARING other are a combination of these mini plans. The composition of the first group is probably 70/30 corporate to individual. The composition of the smaller group, which is the 16- and 13-game plans, those percentages would be reversed; it's probably more or 30 percent 8 corporate and 75 percent individual. 9
Do we have 16 any other questions from members of the 17 committee? 18 The Chair recognizes Councilman Nutter. 19
Thank you, Madam 20 Chair. 21 Mr. Montgomery, you have mentioned on a 22 couple occasions, in response to a couple 23 different questions, the San Francisco Giants, and 24 I think most recently in response to a question 25 that Councilwoman Krajewski asked. 286 12/1/00 STADIUM BILLS HEARING Just for the record, can you tell us a little bit about San Francisco Giants stadium project and some of the components of it in terms of how that deal was put together, any similarities to the Philadelphia situation, and any difference.
Well, I think -- and I'm now not quite sure in whose testimony it was referenced, but I believe -- and maybe it was in Sam Katz's testimony earlier this morning. He indicated that San Francisco is a situation where there were at least three or four attempts at public referendums involving stadiums, and I think that's probably the nature of the state laws out in California, Councilman. And the -- the situation in Candlestick Park had become one that was not a good ballpark for the Giants. And at the -- as a result of that, they eventually undertook, which I've indicated on our charts, to make a very significant private contribution to the ballpark. And I think, as Sam Katz also testified this morning, that because of that, the amount of debt service that they have, or the amount of 287 12/1/00 STADIUM BILLS HEARING pre-selling of revenue opportunities such as to the extent that they heavily pre-sold personal seat licenses, that may have a dampening impact on their ability to raise prices in the out-years in order to service their debt. They have come up with what many in the industry believe is an extremely tight proforma, and some people have expressed concern, as Sam Katz did this morning, that they may not be able, as is necessary in our sport, to make incremental increases in player payroll over time, that they may be foreclosed from that opportunity because of the amount of initial contribution that they made. And so, you know, as far -- they definitely have picked a very attractive site, they've done an excellent of creating a fan-friendly ballpark. And as to the future of their economic viability as a result of what they've committed, only time will tell. Again, as I've said earlier, there are 16 examples of different ways that have been done, Councilman.
Sure. And I'm sorry, I did unfortunately miss some portions of 288 12/1/00 STADIUM BILLS HEARING Mr. Katz's testimony. The San Francisco Giants deal, though, I mean, if I understand it correctly, and you'll surely correct me. I mean, is that essentially a situation where the City of San Francisco made some acquisition of property on their own, turned over a cleared site, and the team basically built the stadium?
I'm not sure that I can give you a longer story that would be any more accurate than that, that's correct. I think that this was a site that was provided. I don't know about the specifics of the site. (Unintelligible) was a site that was -- it was land that was acquired by the City and provided. And I believe the site was prepared for then, and then the Giants undertook the entire construction costs. 289 12/1/00 STADIUM BILLS HEARING That's correct.
Okay. Not for -- not for the moment, but it has -- as we've kind of tried to deal with this situation, at times not always so well, over the past essentially two years, the differences between public ownership and private ownership in the either baseball, ballpark, or football stadium situation has been somewhat intriguing. And I would like to get from both of you, although not at this particular moment, your analysis of the advantages and disadvantages of public ownership and the advantages and disadvantages of private ownership of these various facilities. As you know, it appears, or at least is certainly the case here in Philadelphia, that the larger facilities, baseball and football, will, in this particular transaction, as Veterans Stadium is, ultimately is a publicly-owned site, although privately and even more so in this transaction, privately operated; whereas the Spectrum and the First Union Center, as best I can tell, are completely privately owned, although I think technically on public land. 290 12/1/00 STADIUM BILLS HEARING And I would be interested, as owners or representatives of owners, to get your perspective on the advantages of either and the disadvantages of either as well. What is the estimated useful life of either of these facilities?
I'll try that first and then let Joe give his perspective. Now, we have a couple of baseball parks that have really withstood the test of time very significantly. You know, clearly, Wrigley Field is an example, and although there's now talk of -- because they went through a phase of what I would call "modernization" of Fenway, and now there's talk of a new facility in Boston. They were two, I guess, "treasures" would be the right word as far as --
I believe it's 80-plus years in one case and 75 or so in the other.
One of the reasons that we asked for renewal terms of up to 50 years is that we hope and believe that if we do this 291 12/1/00 STADIUM BILLS HEARING right, we can create a ballpark that would exceed the occupancy periods that we've had at Connie Mack and will have at the Vet of 33 years each. I mean, we want the opportunity to see if we can't create a ballpark that would give us life, that would exceed the initial term of 30 years, but that's clearly -- that will remain to be seen about how successful we are in designing the facility, Councilman.
I think the examples in football are not as extreme but a little bit similar in that the couple of stadiums that were designed purely for football, say, 35 years ago, around the time of the Vet, which is primarily Dallas and Kansas City, are both stadiums that could go on for a period of time. We don't have any 70- or 80-year-old stadiums, although the Chicago Bears have been in that stadium a for a very long time. So it's hard to judge, but I think that everybody would feel confident that probably some meaningful distance, more than the 30, I think, that the Vet and Cincinnati and Pittsburgh type 292 12/1/00 STADIUM BILLS HEARING stadiums were anticipated to have lived for.
Again, for both of you, give me a sense of what happens 30 years from now. Are we in this same kind of discussion about facilities or --
Well, personally, I have been in this discussion for about eight years and I don't think I'll be around to have it then, Councilman.
But, again, I believe, that, you know, we -- we have always felt that the best place for us to play baseball is it same place that we've played baseball here for the last 117 years, which is in the City of Philadelphia. We've moved a few times within the City limit, but we've always played the game within the City limits and we would hope to be continuing that for the foreseeable future. And, again, at the end of 30 years, we believe we'll have a huge incentive to be putting 293 12/1/00 STADIUM BILLS HEARING the necessary capital dollars in and maintenance into the facility so that it will not show its age nearly in the way that the current facility shows its age. And if we can design it in a way that it has a timeless nature to it, our game hasn't changed much, it's still, you know, 90 feet between the bases, 60 feet 6 inches, and it's been that way for -- from the mound to the plate -- it's been that way for 117 years. So from a dimensions standpoint, it shouldn't change. We assume people will still want to be as close as possible to what's happening. And to the degree that the amenities of 2004 are the amenities of 2034, I'm not sure that I could go there, but we hope that we can create a ballpark that's flexible enough to enable it to still be in use at that time.
The only thing I'd add is since it takes eight years, we're probably talking years from now, right, instead? When I woke up 22 this morning --
I understand that. I think both of you, though, understand that -- and I certainly don't expect to be having this 294 12/1/00 STADIUM BILLS HEARING discussion either, but 30 years will come and go, and I guess part of the question was whether the City of Philadelphia will yet again be engaged in one of these kinds of transactions for a facility, which, under this particular circumstance, unlike the current Veterans Stadium circumstance, we will not have the responsibility over the next 30 years of taking care of that facility. And I understand the one-time capital payment at least to -- the one-time capital payment, I believe, is to the Phillies -- I'm sorry, to the Eagles not the Phillies; is that right?
So, I mean, we are contemplating a transaction that has us making a contribution to one, none to the other, but both teams having ultimate responsibility for the facilities. And, I mean, just in an anticipatory fashion, I'm trying to figure out whether this is really it for the City of Philadelphia in terms of changing the nature of our relationship to these facilities. We are clearly making a break from the Veterans Stadium model to a new model.
Well, again, and 295 12/1/00 STADIUM BILLS HEARING certainly when I -- in maybe the length of time that I've been sitting here, I certainly was in no 4 way making light of the serious nature of your question, Councilman.
But what I would say is that in the late '60s, and I understand why it was done, because the public sector was primarily financing the facilities and because both professional football had come along, it's a newer sport in comparison to baseball, had reached the point that they were looking for a facility as well as the Phillies were at that time. The compromise seemed appropriate at the time, which was to put the two in one facility.
I think that, unfortunately, what we've seen is that the wisdom of that decision has not stood the test of time, and I think -- I guess what I'm saying is that I believe by designing them appropriately for their individual sports, that you would have a much greater likelihood that the facility would last a lot longer than what we've just seen over the last 296 12/1/00 STADIUM BILLS HEARING 30 years.
Okay. In the course of your discussions leading up to this transaction, have there been any attempts or inquiries with regard to outside funding sources that apparently have been the case in a couple transactions across the country, whether private investor groups or entities, with, for instance, large sums of dollars that could be invested for whatever the return might be. One that comes to mind, and I think had some involvement in the San Francisco Giants transaction, was TIAA Kreff (ph.) Or, you know, other funding sources. Was there ever any discussion about that?
Well, I would just speak on our behalf. There were none that I'm aware of that there were inquiries that came to members of our organization; I was not aware of them. I think that one of the things that -- again, it's the contrast with the San Francisco situation because there was a lot of private money, as we've said, put into that. I'm not sure 297 12/1/00 STADIUM BILLS HEARING that they're their borrowing, when you get right down to it, will be dramatically different from the borrowing that the Philadelphia Phillies will have. And the reason for that is that they did some of this pre-selling of what I would call future revenue streams, and that's one of the reasons, again, why people are questioning the long-term viability plan that the Giants embarked on. And I fully understand why they did it; I don't think they had another choice.
We similarly had no 13 conversations with anybody; I'm not aware of any other situations in the NFL where that vehicle was utilized.
Okay. Councilwoman Miller raised the question, and I don't think I've expressed the appropriate level or any particular level of appreciation for the agreement of both of the teams with regard to the Children's Fund or the Special Services District. We haven't had much conversation about the pilot, and I'll kind of leave that to the side for a moment. The Councilwoman did raise at least an interesting question with regard to sustainability 298 12/1/00 STADIUM BILLS HEARING of actual value of that contribution, which -- I mean, a million dollars is still a million dollars and it's still a lot of money. But in all the other documents and materials that we have, there are naturally either built-in or anticipated increases, at least in most cases on the revenue side, of just about everyone's transaction. And so, in the Arthur Anderson study and I know in others, there's either an expected general inflation rate of 2.5 percent or a wage inflation rate of a little over 3. And, again, I would just ask in the more specific context, and I know what you agreed to, and obviously, I wasn't a part of those discussions, about whether there was any consideration given to some of ability to maintain the value over time of that particular contribution, and as other revenue streams and sources are growing, that there would be some adjustment as time went on.
I think from our perspective, we would have actually preferred a structure where maybe we started at $700,000 and had some kind of inflationary impact and it 299 12/1/00 STADIUM BILLS HEARING averaged out to similar kind of numbers over the course of the deal. But I think we're really backing into kind of a reasonable number kind of over the course of the deal. And you can either start low and then have some kind of impact like that or just start at that level and be flat. And the preference that was presented to us, we'd rather start higher. In the early part of the deal, it's the more strenuous time on the team economics, so we would have -- we prefer in all instances to have something that starts a little and then kind of grows. But it was presented to us that this was the preference on how to do it.
Well, the economic penchant of the deal is what it is, Councilman. I mean, you know, I think that when Joe testified earlier that we reached a point where the teams felt that they had made the maximum contribution that was available to them and the City felt that way, that's why we ended up with the need for additional funding, and I think that speaks for 300 12/1/00 STADIUM BILLS HEARING itself.
Gotcha. On of the bill, at least again for the Eagles bill -- I'm assuming that there's a comparable page in the Phillies, I think it's on -- it says: The team is to receive 100 percent of all revenues of every kind and description arising from and relating to the stadium, naturally with the exception of the Children's Fund. What are the estimates, I guess, on the magnitude of what that would be in a new stadium situation?
You'll have to help me. You mean as far as the total revenues associated with -- in a proforma associated with the ballpark; is that what you're saying? I mean, I think that's -- it's my understanding that that is what that is attempting to describe, which is the revenues associated from the ballpark?
Right. I mean, it's -- again, you do have the same. In your bill, it's on ; in the Eagles bill, it's on . It's under "Financial Terms," and the 301 12/1/00 STADIUM BILLS HEARING subheading is Team Revenues. And it says: Team to receive 100 percent of all revenues of every kind and description arising from and relating to the stadium, except as set forth below in fund for children and City and Commonwealth use day revenues. What does that mean, and can you give us some estimate of the magnitude of what's involved.
Yeah. In our case, that would be our gate receipts, the concessions associated with it, the advertising in the facility, dollars associated with premium seating; and in our case, a limited amount of parking revenue, which you see referenced elsewhere in the document. As I said earlier, the total revenue projections that were indicated by Professor Rosentraub yesterday, as your consultant, in the case of baseball, were within the range of our proformas. One of the things, remember, our proforma, unlike Arthur Anderson's proforma, has us drawing $3.3 million, unlike the sensitivity analysis which took us down to 1.9 million, which 302 12/1/00 STADIUM BILLS HEARING I believe was the first person from Commerce Bank. So every one of these revenue opportunities for us are very much attendance- related, but this would take our overall revenue to somewhere around 160 million, and probably north of 100 of that would be associated with stadium-related revenues.
I think the way Dave answered that question was all revenues, and I think the way you asked it was stadium revenues, which is easier for me to answer than some of the questions I was answering earlier. And you can kind of almost go category by category. Contrary to what was reported yesterday, I think I testified earlier -- sorry, just one sec.
Do you have water? Okay. I guess, one, let me say for at least my questions and my purpose, I'd like not to get confused by yesterday's activity. That was a long time ago for me, and I'd like to stay current and fresh with today's discussion. So I don't 303 12/1/00 STADIUM BILLS HEARING remember what the numbers were from yesterday.
Okay. The major categories for us -- see I really don't want to answer the question.
Thanks. I think I said earlier that we'd be building approximately 120 suites, and about 112 of those would be for sale as a City suite and an owner's suite, a few things like that. So the league average on suites is about $100,00, so that would produce about $11 million from suites -- that's a gross number, obviously. We would be hopefully selling about 8,000 club seats. The average premium on the club seats is about $1200, so you're in the 9 to $10 million range on club seat revenues. Naming rights plus signage and marketing and all those kinds of things in the 304 12/1/00 STADIUM BILLS HEARING stadium, I think we think is to $15 million in revenues. If you're great at it, it could be higher; if you're just okay at it, it could be a little bit lower. Our gate, which is 66,000 people for 7 games, on a gross basis, would probably be about 8 30 million, but in the NFL, about 40 percent of 9 that gets paid back out to the visiting team, so 10 maybe in the upper teens to 20s is kind of what 11 you net. I'm talking at the beginning; obviously, 12 as time goes on, prices go up. Merchandise sales are part of concessions that we think we would continue to run we think is about a million dollars a year. In addition to that --
That's really pretty much clothing. In our case, there will be some memorabilia, you know, autographed items, things like that. We think from concessions, using a per-person average, similar to what's happening now, that we would end up with about $3.5 million 305 12/1/00 STADIUM BILLS HEARING out of that revenue stream. That concession number includes whatever we would anticipate from like pre-game hospitality with corporations. And the others really are general revenues shared through the League, like our national television contract, local radio broadcasts. And those are really the only other categories.
Okay. Give me a sense of revenues generated by the stadium presently, Vets Stadium, as compared to the new Eagles stadium.
Well, our gate would be modestly less, just 'cause I'm talking three years later and some price increase, but not massively less.
Concessions we get hardly anything out of it now; I think it's like $600,000 a year, so there's a decent size increase there.
You're not anticipating your gate is going to go down with a 306 12/1/00 STADIUM BILLS HEARING new stadium, are you?
No, no. I said it would go moderately up. I mean, it's three years later, so inflation will push it up some, and we will have a price increase.
I'm sorry. I thought I heard you say it would be moderately down.
No, no. It will be -- it's actually a slightly smaller stadium if you don't include suites, so just -- I'm talking gate of the regular people purchasing the seats.
So I would assume it will be moderately up. Obviously, we don't have club seats now, so that's a completely new revenue stream. Although we do do some entertainment component of some private space in the stadium, so it's not 307 12/1/00 STADIUM BILLS HEARING quite a hundred percent, but almost. And I think we're -- depending upon the year and how many games we're winning, we're probably between 2 and $3 million in revenue on suites.
What's your sense of the total of all of those items? I wasn't -- I didn't have the calculator going at it. Your guy can --
Yeah, I'm not sure we covered every category, but let me put it in -- here's, I think, a simple way to get you where you're trying to get to, and if it's not, just ask me the follow-up question. We think that the -- by the way, the NFL has a loan prohibiting us from borrowing money for a term longer than 15 year. So the debt service -- and we've committed ourselves here on a 15-year basis -- will be about $37 million. We believe the difference in revenues from the Veterans Stadium to the new stadium will almost exactly match that number. So our ability to grow over time, make some money off other events, and hopefully by 308 12/1/00 STADIUM BILLS HEARING being good and having a chance to maybe build 130 suites instead of 110 and so on and so forth, is what we're counting on to have any return on this investment.
Are there any other questions from members of the committee? Councilman O'Neill?
Mr. Banner, the 15-year limit, is it an absolute limit? Or is it -- or does it have a rolling aspect to it? In five years, can you refinance for years? Is 14 that how -- how does it work? 15
Yeah, at any time you can't finance for more than 15 years. So if you had the ability to finance at a later date, you could. There is a formula by which you can apply for a waiver. We're actually going to try to do that. Nobody's ever gotten more than 20, and they reject most of them. But we go into this assuming that we're going to have finance our 15 years.
Okay. And you -- 309 12/1/00 STADIUM BILLS HEARING we have numbers that also assume a refinancing and what that would do in later years by stretching out your debt that way?
We really not have gone through that. It's too hard to predict kind of where interest rates would be and so on and so forth that would impact that.
But you can at least make an attempt. I mean, it seems to me that if I was in this situation, I would be looking at, Well, this is what it costs me in the 15-year scenario, but if I can borrow again -- I mean, we know that interest rates change, but we also know historically there's been some range, that, you know, maybe the $37 million a year that I've got to service this with can be spread out more because I'm not absolutely limited to a 15-year window. I just --
But the very simplistic way we look at it is, it's 2003, we've got a $37 million new item on our balance sheet, and 310 12/1/00 STADIUM BILLS HEARING debt on our stadium loan.
You know, are there $37 million or enough more than that that we're comfortable with covering it, and six years from now, if we can either finance it, either if it stretches it out or produces an opportunity for some greater profitability, I think we'll take advantage of it.
Thank you. Are there any further questions from members of the committee? (No further questions.)
Mr. Collin McNeil from Penns Rydell Council. 311 12/1/00 STADIUM BILLS HEARING UNIDENTIFIED SPEAKER: He had written testimony.
Okay, thank you. UNIDENTIFIED SPEAKER: He was with us earlier in the morning; I haven't seen him for a while.
Do you know if he left his testimony? UNIDENTIFIED SPEAKER: Yes, I believe he did, Council President. I -- he had it in his hand and said, I probably can't stay for the afternoon, would you suggest that I submit it? And I said yes, but I don't know who would have received that.
Mr. Vignola, thank you so much for your patience, and welcome back.
-- since I got that nice introduction from my former colleague. Yesterday, the Mayor was saying you're going to have another colleague come in and testify. Madam Chair, I've been a member of this body, so I know how long and ongoing these hearings are, and what I would like to do is submit my testimony for the record and not prolong the hearing any longer than it has to be this evening, knowing the lateness of the hour, and basically be prepared to answer whatever questions anyone may have.
Well, I'd like to ask you a question. We did get a copy of your testimony, and I would like to ask you: What is PICA's position on the proposed stadium legislation? Are you in support or in opposition to this legislation?
I think the answer to that is, you know, really neither. But having said that, let me just answer this way. The alternative --
First a lawyer, second a 313 12/1/00 STADIUM BILLS HEARING Councilman, Madam Chair. But, you know, I -- I guess on a personal note, what I have to say is that we all know that Veterans Stadium needs to be repaired or replaced, and we all know the effect that has on our franchises, both the Phillies and the Eagles, not to mention the other events of Vets Stadium, whether it's the Army-Navy game or, you know, Temple football. So I think that with all due with respect to MasterCard, I couldn't say whether there's going to be a $59 million surplus at the end of 30 years or a $300 million deficit at the end of the 30 years. But I think what is priceless for all of us to have is a sports district, a sports complex with four teams in there, with every facility that the major franchises use. You know, almost brand spanking new, although the First Union Center may be a little bit older than the other two proposed facilities. So, you know, I think I'm speaking personally that that's, you know, that is literally the way to go. We could argue over numbers, I guess. 314 12/1/00 STADIUM BILLS HEARING What I, as the Executive Director of PICA, say on behalf of PICA is that as long as we go into this transaction, knowing what the financial responsibilities of this City are in light of all of the other financial responsibilities that we have been incurring over the past years, especially in the last five months, and there have been witnesses that have talked about the Philadelphia Gas Works --
And the teachers' contract. We have to add, you know, the personal property refund or whatever revenues we get, you know, on that area. As long as we go in looking at those numbers and realizing that this is one part of the City of Philadelphia's financial picture over the next five years or over the next thirty years, you know, then whatever our votes are, or whatever your votes are as a member of City Council, is the appropriate vote.
Okay. Are there any questions for Mr. Vignola from members of the cheat? 315 12/1/00 STADIUM BILLS HEARING Councilman Ortiz?
Over here. Joe, these numbers that you've put down, because they differ widely from the Anderson's projections. You say -- and I haven't read it because I just got it, but the thing that jumps at me is the black letters on the bottom of in which it says that we estimate that this is projection's likely to likely to cost the City's general fund 296 million over the next 30 years. And even if we were to use the Anderson PIDC assumptions and the cost to the general fund, the transaction will cost the general fund -- the City's general fund $112 million over the next 30 years. Could you give me some details. And if your projections come true along this line, what is -- what is the general impact that it will have on the City's services, on the City's ability to deliver certain things down the line, and our ability to be able to balance our budget?
Councilman Ortiz, that's really two questions, because the first question is, what is the impact on the City's five-year 316 12/1/00 STADIUM BILLS HEARING plan?
And yesterday afternoon, towards the end of the session, because I did have an opportunity, though I wasn't here yesterday afternoon, I was watching the transaction -- excuse, me the testimony by way of cable. And Mr. Dubow set forth a five-year plan scenario and that -- I think that he talked about the financial impact on the five-year plan. And we --
They have changed it the numbers as the questioning gets more and more detailed.
And the impact on the five-year plan changes from one day to the next, so. . .
We -- based on the numbers that were submitted yesterday afternoon, we talk about the $17.3 million impact on the five-year plan, and basically that's PICA's focus, 317 12/1/00 STADIUM BILLS HEARING on the five-year plan. I think that if the hearing goes a little bit longer and Mr. Dubow has an opportunity to testify, even those numbers will change. But I think what you're driving at in the short run in the five-year plan is if revenues continue to grow at the rate that they're going -- and I say in my testimony, which you are glancing over, you know, there's no economic downturn and the $45 million PGW loan is repaid and the $18 million annual payment continues, we don't have a great impact in terms of net dollars of the personal property tax, you know, refund. The five-year plan, even with the employees' wage increases, will be balanced. Going beyond the five-year plan, we have to start looking at -- and there's where we get into the Anderson numbers -- we have to look at some of what are the assumptions of new money versus old money.
Right. You're accepting Mr. Dubow's assumptions right now with that statement.
The way he's presenting the five-year plan, we can argue over some nuances. But basically, he is going to show to you, I believe, that over the five years, the five-year plan would be balanced, and I don't think that we at PICA are saying it would be out of balance at that point. But then, again, we're also saying that there are -- you know, there are concerns. If there's a downturn in the national economy, if it turns out that we have to refund all of the $25 million for fiscal years -- for '93, '94, '95, the personal property tax and don't get the money back by reassessing the property tax for 1996. If PGW, you know, defaults on its $45 million repayment to the City, or if PGW's situation worsens, where the $18 million annual payment is suspended or not paid, you know, in a manner, then these things will obviously affect the five-year plan because you're talking about, you know, $45 million of repayment. And 18 million times 5 is another 90 million. Too, you're talking about $135 million. And that has 319 12/1/00 STADIUM BILLS HEARING nothing to do with what the stadiums are. That means you, as members of City Council, are going to have to make tough decisions how you allocate the remaining resources of the City. To get back further, once we get beyond the five years, once we get beyond the five years and we look at the flow of stadium -- the revenue flow from the new stadium, all PICA is saying is that the Arthur Anderson numbers, as the way they're used to affect the general fund, we have questions about some of the -- some of the assumptions. We do -- we have accepted and we do accept that the new stadium revenues, as stated in the report, are going to be, you know, as they stated, right. There are some -- we do question some of the revenue estimates. But not being clairvoyant, as I heard Mr. Banner and Mr. Montgomery testify, they talked about, Well, we're going to have -- in regard to the football, we're going to have 40 possible -- 49 events and we could hit all 49 and have all 27 of them. And basically what we say is, you know, we're just as, you know, certain as you are. 320 12/1/00 STADIUM BILLS HEARING So although we're questioning the $2.5 million of revenue a year, we're saying you'll probably get 1.5 million of that revenue a year.
And so what we lead up to is that assuming the Arthur Anderson numbers that were submitted to PIDC, that that is their best-case scenario, there is, over the life of the transaction, a $112 million general fund net impact, a general fund net impact --
We're saying there is a potential for a great impact than that, yes, we are. And we're saying that that could range upwards of $296 million.