Montreal Expos ownership group positioned for MLB relocation

The recent exhibition games played in Montreal have significantly re-ignited the talk of baseball in that City and Province, to the point where prospective owners have been forced to respond to endless questions about when and how - not if - the Expos will return to Montreal.

And who can blame them? They just watch the prodigal son of their hero, Vladimir Guerrero, hit a walk off HR in dramatic fashion, providing an entirely new generation of fans with a great baseball memory to hang onto.

But the latest few questions answered by Mitch Garber, who has a stake in Cirque du Soleil and is set to make an ownership bid along with fellow Billionaire Stephen Bronfman, is what has raised eyebrows and completely changed the course of how MLB may wind up returning to Montreal.

Team Financing

To set the tone, here’s what we knew before this week began about the financial position of prospective Expos ownership group, beginning with a sourced anonymous quote from CBS Sports:

“I can tell you we are no longer looking for investors and that we believe we have all the ingredients to be able to welcome a team, be it an expansion one or one that already exists,”

The ownership duo of Garber and Bronfman then met with Montreal Mayor Valerie Plante to get the basics sorted out, where afterward the Mayor proclaimed:

“We’re proud Montrealers. We like projects that are good for economic development and social development and, if getting a baseball team back is good for Montreal, we’re in.”

It was easy for her to be so definitive.

The pair of investors have taken the position that they will not be asking the city for any money, a claim that Garber confirmed this week on twitter:

So there you have it, the Montreal Expos owners will be funding their own stadium.

Of course, they will seek some form of incentives as they find the plot of land, which Don Macpherson of the Montreal Gazette got from one of the people at the meeting, which Garber then confirmed via social media as well.

That’s not a bad deal for tax payers. They give up a little land and their associated tax income (a common practice for many corporations who invest in certain areas), and they lock in some preferred loan rates. Done deal.

This stands in quite the contrast to what the Tampa Bay area is being asked to provide, as the team will likely require 50% or more in public funding for the stadium, and where land is being acquired through a non-profit due to contractual issues.

You also have to read between the lines here. If the future owners of any stadium in Montreal want complete control of its operations without Government or city interference, it becomes a lot easier to accomplish if they fund its build and own it outright. Considering that Mitch Garber could fill that stadium with other events, including his own Cirque du Soleil, during the offseason, it makes a lot of sense to finance it without any government funding.

Expansion vs Relocation

It’s also important to note the latest revelation made in the French newspaper (which I will translate):

MLB à Montréal: «On a besoin d’une équipe qui va déménager» -Mitch Garber

The translation:

MLB in Montreal “We need a team that will relocate” - Mitch Garber

Need?

Relocate?

This is a significant development, as it more than likely applies to the Rays and A’s, the two teams without present long term stadium solutions.

All of the sudden, MLB has a couple of Billionaires with Government support and financing - are on the sidelines, calmly waiting for a team to become available for relocation, and notably, this is the first time that the addition of a team in Montreal is noted as needing to come from relocation.

But why would relocation be required?

Here’s my deductive reasoning - which could be way off, spot on, or parts there of.

If you’re purchasing an expansion team, you need to shell out something North of $500M just to get the franchise. Then, if you’re the Expos, you need a new stadium, and you need to fork up all of the costs that go along with building up the minor league infrastructure and many other costs (setting up scouting departments for instance).

When the owners are talking about getting loans at preferred rates from the Government, purchasing a team and relocating it allows them to fund the entire acquisition at a much lower overall cost and in one lump sum vice the likely piece meal approach that setting up a brand new operation would take.

But that’s not the only advantage....

Jean-Yves Ahern-USA TODAY Sports

Consider the benefits of using Montreal as the relocation spot - if one is needed. They already have a usable stadium to use until they build the new location. Should other cities, say Portland and/or San Antonio, be chosen, they’d have to wait until a large enough stadium was built to make the move happen.

MLB knows that moving a team to Montreal allows for instant and least painful results. And potential Montreal ownership can benefit from MLB assisted financing in much the same way as Jeffry Loria benefited from when he purchased the Marlins. So instead of paying high rates for expansion, with fee included, they may be able to secure even better rates at a reduced cost in an all-inclusive deal.

Such a move can allow MLB to resolve either of their two current stadium issues as early as 2019 if required, and that puts Montreal in a strong position to land a relocation franchise - should there be one. While not ideal, the Olympic Stadium can still host MLB well for a few years while a new stadium is built. Expansion can still take place thereafter, with new stadiums being requirements before play begins at those locations.

Montreal A’s, or Montreal Rays?

The long term future of the Atheltics and Rays have each 180’d in the last few months.

The Rays situation has positive momentum thanks to the Tampa Bay 2020 non-profit’s efforts and the historic Ybor City location being selected. Add in the success of their 13th ranked market size in TV coverage, which recently resulted in a $1.2B television deal, and it seems fairly clear that Tampa seems to be the future for the Rays.

In contrast, the A’s had the rug pulled out from under them after they believed a location had been found for a self-financed stadium, and they still have to contend with being so close to the San Francisco, where they share a TV market area with the Giants (ranked 8th), where they enjoy a 25% market share.

Does that mean they’re giving up? Not according to their mayor:

Let’s remember that they’ve already lost the Raiders, and the Golden State Warriors are moving to San Francisco, so losing a third pro-sports franchise could be a fairly substantial blow to the city.

And to this end, they’ve pushed for exclusive rights to two sites where the A’s could build a new stadium, which helps their cause - even if Oakland does not retain the team.

For those unaware, the NFL situation in Oakland played out in similar fashion,

NFL Hall of Famer Ronnie Lott and his investment group entered into an exclusive negotiating agreement with the city and county in 2016 in a last-ditch attempt to keep the Raiders from moving to Las Vegas, and set aside acres for a new baseball stadium as well.

The Raiders are still headed to Las Vegas despite this, so is history going to repeat itself with MLB and the A’s?

Recently the Athletics ownership began trying to lock up one site - the Coliseum - in exchange for paying off $135M of county debt:

Within the embedded letter, they spell out that there are really only two remaining locations for a stadium build for the A’s - the Howard Terminal and the Coliseum site. But while the $135 million seems like a lot of money, and it frees up a lot of money for the city, is it worth losing control of the site over? Just how much value is held with that property, and what would the opportunity cost be (mostly in form of taxes) if it sits idle for years?

Of note, as spotted by SB Nation’s Alex Hall,

The phrase “privately financed” shows up five times in this letter, in case anyone had doubts about that

So there’s no real problem financing an Oakland stadium privately. Matier and Ross have more on that story here.

Yet on the negative side of things, it all came to fruition after the county has made public the fact that it wants to purchase Alameda’s half of the Coliseum site in order to hasten its development. As City Council President Larry Reid noted,

“The mayor, and I assume a majority of the Board of Supervisors, would like to have some control on what happens to that 130-acre site that the Coliseum sits on.”

This seemingly puts the A’s and City at odds. Although selling the Coliseum to A’s ownership would fulfill the county’s interests in hastening stadium development, but the major problem would be the control over what development occurs at that site writ large, particularly if the A’s leave town anyway.

The main reason that the Coliseum site is so vital to ensuring the A’s remain in Oakland lies in the same issue that plagues the Rays in St-Petersburg - traffic. If the Jack London Square option was decided on as the new stadium site, it would face major traffic woes to get fans to the site, parked, and out of the site. That’s led them as far as to consider a Gondola system - as the Oakland Zoo uses - to get up to 1000 fans per hour to and from the site.

As you can tell, both remaining viable sites have serious issues to consider.

MLB’s stance and motivation

Montreal’s competitive advantage over Oakland, from MLB’s point of view, may lie in TV market coverage (which includes access to over 8 million people in the province, most of which speak French), which overall holds it as having 2nd largest TV coverage area in Canada.

Not only would MLB be maintaining coverage of San Francisco-Oakland-San Jose with the Giants, but it would gain access to a Quebec population that generally doesn’t commit itself to the Blue Jays due to language and cultural differences. They would likely also gain support from the Maritime provinces which hold a population of approximately 1.8 million, and possible some portion of the bordering US states.

If Oakland relocates to Montreal, MLB could then concentrate on adding two more teams in areas where coverage is lacking (Portland 21st, Charlotte 22nd, and San Antonio ranks 31st in TV market coverage, for instance). This would put any of the three ahead of current MLB markets such a Kansas City (33rd), Cincinnati (35th), and Milwaukee (36th).

If there’s still significant profit to be made in TV money, there’s reason to believe MLB is motivated to make some changes. It’s worth noting an Oakland move increases MLB’s TV coverage area by three markets, rather than just two if Oakland were to stick around.

What’s most interesting about the latest developments, however, is the public proclamation from the potential Expos ownership that relocation is how they intend to get MLB back to Montreal.

MLB Commissioner Rob Manfred continues mentioning Montreal as being available every time expansion is raised, and Montreal fans have come to expect that expansion is how they’re going to acquire a franchise. However, you can also expect any prospective ownership group would be on the same page as MLB, and would tediously avoid stepping on MLB’s toes.

So what changed? What was it that got the Montreal group to flip the page from expansion to relocation? Was it the demise of the situation in Oakland which includes a recent visit to a potential sites from MLB Commissioner Rob Manfred?

Well, here’s what Manfred has had to say about the Oakland stadium situation at the time:

There’s a lot of work to be done in Oakland in terms of figuring out the more difficult issues … with respect to that site that would need some good, hard thinking and investment in order to make this site work to its maximum potential,” Manfred said. “I give great credit to John Fisher and Dave Kaval. I think they have approached the project of determining where the best site in Oakland is with a professionalism and energy that is really commendable. I remain optimistic that we can make baseball work in Oakland.”

That was in February, and at that time the tone from the Montreal group seemed focused on expansion and had even pointed to not wanting to operate at the Olympic Stadium for any period of time, per Bronfman:

“It’s always fun to come to the stadium,” he said. “(But) MLB has already told us the Olympic Stadium won’t work. I’d really prefer to start off new with a new stadium.”

“That’s pretty much the message we’ve been given by (MLB),” he said and which the MLB later confirmed by email.

“What we’ve always said is that we will not return to Montreal without a firm plan for construction of a new stadium, including its financing,” the MLB stated.

Well, which is it? Are they willing to relocate a team to the Olympic Stadium for a short period if the construction plans and financing for a new stadium are in place? Or, is it a no go from the start as Bronfman indicates above?

If you’re talking relocation and you intend to use a new stadium from the very beginning, that puts a long timeline on making it happen for many painful seasons - something Montreal is already painfully aware of. Therefore, there’s reason to believe the group had a conversation with Rob Manfred before making this relocation pursuit public, and that they may have even been asked to make public their focus on relocation - likely in part to add pressure on the Oakland and Tampa groups to get the job done.

In terms of MLB’s motivation, let’s remember that every season MLB spends with Oakland and Tampa Bay trying to resolve their stadium issues includes a major opportunity cost. There’s over $1B in expansion payments, years of new TV deals, years of ticket sales and concession income, and more in revenue sharing payments being delayed.

To that end, while the Rays only recently succeeded in adding a stadium search to their lease of Tropicana Field, MLB has recently prodded Oakland to get moving by making the revenue sharing situation much more significant in Oakland.

MLB’s newest CBA no longer classifies Oakland as a small market franchise, meaning that it’s set to no longer receive up to $34M on an annual basis in the form of revenue sharing. MLB taking a very strong approach to their situation, and it puts the vice grips on a franchise that is now scrambling to recoup that loss in revenue.

For 2018, the A’s are spending only $65M on their roster to begin the season - their lowest total since 2013 - which is $16M lower than when they began 2017. That decrease covers close to half of what they would have received in revenue sharing, and likely gets the club closer to their operating break even. But how long can they operate this way?

Susan Slusser summed up how and why this played out the way it has in Oakland well with the following:

Under the current deal, that largesse was set to end when Oakland got a new stadium. And therein lies the primary point of contention: There are many players, union officials and team owners who don’t believe that the A’s are pushing hard enough for a new home, happily pocketing revenue-sharing booty instead of hastening its disappearance.

“The view would be: They’re not really a small-market team, and they really have no place to go other than Oakland,” Gould said. “Revenue-sharing could be a club to say, ‘Start working on a stadium or you’re off the welfare.’”

Well, MLB’s just resolved the “no place to go” issue with an immediately available location, it seems.

If the A’s ownership group decides to sell, not only would it reap the rewards of a significant increase over the $180M they paid for the franchise just 13 years ago, but if they do sell to the Montreal group - who will be unlikely to want the A’s brand - they also get to retain rights to that brand, possibly selling it to another buyer in future years.

Montreal now stands in the distance, calling for relocation - not expansion - and has all of the ingredients required to make it happen very quickly: a stadium to play in today, and the financing and government facilitation to make a new stadium happen quickly.

Meanwhile, one of MLB’s two teams in search of a new baseball home recently lost its revenue sharing, its planned stadium location, and happens to share its television market with one of the biggest brands in baseball.

What do you think? How will it all play out in both Oakland and Tampa?