Rays can learn from Oakland A’s new privately funded stadium

The Oakland Athletics, whose Coliseum is the one MLB stadium that gets as much grief as Tropicana Field, are moving closer to a new home.

The team recently launched a website that provides some information about their process, and also includes a survey to help guide site selection and stadium design. (The Rays also have a similar site.) What caught our attention when perusing the Oakland website was this line:

Our new ballpark will be privately financed.

At a time when even the wealthiest franchises are turning to taxpayers for construction funds — $615 million of the $850 million for Citi Field and $1.2 billion of the $2.3 billion for new Yankee Stadium was publicly financed — are there teams that really pay their own way?

If anything, the Athletics should have had a strong negotiating position. Oakland is losing the Raiders to Las Vegas, and the Warriors are moving to San Francisco. The team ought to have some leverage with a city government seeking to hold on to its last major professional team. Instead, they claim to be taking no taxpayer dollars.

From an MLB perspective, this changes everything.

Privately-funded stadiums — they do exist!

There are a few examples of privately financed stadiums. Levi Stadium, home of the San Francisco 49ers, was built without direct public subsidy, as was the San Francisco Giants current home, now AT&T Park. The Chargers and the Rams will be sharing a privately-funded football stadium in Los Angeles.

The Oakland A’s plan continues the Bay Area trend.

Andrew Villa-USA TODAY Sports

The A’s ownership group has some experience in this area. They also own the MLS San Jose Earthquakes, for which they built a privately-financed 18,000 seat stadium, at a cost of about $100 million, a few years ago. This trend is continuing in the MLS, as soccer star David Beckham is currently assembling land to build a stadium in Miami that would be home to an MLS expansion team, and the funds would all be private.

I could not find any information about where the A’s ownership group got their funds for the San Jose construction project (although they do have a $20 million naming deal with Avaya), nor have they shared any thoughts about sources of private financing for a proposed Oakland baseball stadium, which would probably cost at least four times more. Avaya Stadium is part of a larger economic development area near the San Jose airport; some of the proposed sites for an Oakland stadium also anticipate additional residential and commercial development.

Why Privately Finance?

Professional sports franchises are owned by investors who are looking to make a solid return on their investment. Those who pay for their own stadiums don’t do so because they are seeking to be charitable -- they have concluded that the additional upfront costs will yield benefits down the road. There are several reasons why some team owners would build with private funds.

• City or county financing sometimes requires a voter referendum to approve public spending. This creates a great deal of uncertainty about the outcome, and the campaigns can be costly to the wallet and the reputation.
• Direct public funding usually comes with constraints such as using union construction workers or abiding by public hiring and purchasing requirements.
• California cities like Oakland and San Francisco have been especially inhospitable to the public funding of stadiums, so owners in that area may realize they have little to gain by pushing this issue.
• Finally, teams that have received subsidies often agree to various revenue sharing arrangements with their government partners. Revenue from parking, concessions, or other events may be committed to city or county agencies. Team owners may prefer to keep control of these revenue streams, which they can do if they finance the stadium themselves.

And of course, even privately financed stadiums are likely to have some kind of public contribution. Note that the newspaper articles about the stadiums discussed above generally say that these stadiums have received no “direct public contribution.” Cities may abate property taxes, for example.

Many new stadiums require some degree of infrastructure upgrades, and these would often be borne by the public sector. Teams and cities may work together to leverage state and federal grants towards items like brownfield cleanup or mass transit improvement.

It is nearly inconceivable that a project as large and complex as a baseball, football or soccer stadium would be built without the public sector having some skin in the game.

When is private financing likely?

Private financing is a viable option in situations where the potential revenue streams from the stadium are high enough to cover the investment costs in a reasonable period of time, and it is a more likely option in cases where political pressures or fiscal/legal limitations on local government make public financing difficult to secure.

Some of the key financial variables would be the cost of the land; the value of naming rights deals; and the potential for auxiliary revenue from parking or other real estate development.

Could we see a privately financed stadium in Tampa Bay?

My assumption is that Tampa Bay would not be a likely site for a completely privately financed stadium, but that doesn’t mean there are no lessons to take from some of these California cases.

Many of the costs of stadium construction are somewhat similar across cities while the potential for revenue, whether from ticket sales, broadcast rights, or naming rights, are dramatically different in a smaller market metro area. Even the relatively small stadium the Rays are proposing will still cost $400 - 600 million, not much less than a Suntrust Park or Citi Field, but the value of the Rays franchise and its potential revenue streams are well below those of a team in Atlanta or New York. This makes it much harder, although not impossible, to put together a largely unsubsidized deal.

A stadium site that gave the Rays significant auxiliary development opportunities could provide incentives for additional private investment, but public financial involvement in some aspect of the project would seem quite likely, given the limitations of the Tampa Bay market.

We should note as well that politics and precedent here in Florida are different than in California. Just about every stadium in this state was built with a large infusion of both state and local tax dollars, with county tourist taxes often underwriting some construction costs with the (often contested) argument that sports facilities draw overnight visitors. Even spring training stadiums that double as minor league facilities have been the beneficiaries of public largesse, with Dunedin as the latest example.

The current state legislature, however, has been extremely hostile to the use of state funds for stadium development, so the sorts of deals that enabled the construction of Marlins Park are surely history.

The cases from the “other” Bay Area suggest that there can be creative ways to leverage both public and private funds toward new stadiums that are integrated into broader redevelopment schemes.

As the Rays will most likely have trouble leveraging state dollars, and local tax revenues are limited, understanding the multiple channels through which stadium development can be supported becomes increasingly important.

For more on the Tampa Bay Rays Stadium Saga, you can find all our work here.