Rays’ St. Pete stadium deal locks team’s future costs at today’s prices

After winning a bid early last year to redevelop the land around what they hope is a future stadium, Tampa Bay Rays officials assert that their offer for that city-owned land — $105 million — was higher than any other group.

More than a year of negotiations has yielded proposed terms between the Rays, St. Petersburg and Pinellas County that also include a $1 million licensing fee, which the team would pay every year for 25 years to play at the stadium, and $50 million for public benefits, such as an African American history museum and job programs.

These amounts mean one thing in 2024, as public officials consider whether to sign these deals. But much of the money wouldn’t be paid for years or, in some cases, decades. Thanks to inflation, that money will be worth less than it is now.

The public contribution toward the stadium — $312.5 million from Pinellas County’s tourist tax fund and $287.5 million from leveraging St. Petersburg’s future increased property values downtown — would be paid up front. The city would also pay $142 million in infrastructure for the Historic Gas Plant District around the stadium. Those costs, funded through bond sales, would grow as the city and county pay interest on their debt.

The Rays’ obligations to the public, by contrast, would be locked in when the deals are signed and would not rise. City Council members and county commissioners are expected to vote on the proposals this summer.

The land sale

The team would buy the 65 acres around the new stadium in chunks, a process that could take well over a decade. But the price tag would remain the same even as land values increase.

Experts say that when it comes to accounting for future values, long-term deals like this are a mixed bag. Still, because of the deal’s structure, the city estimates that inflation would shave off about a third of what the city would receive from the sale of its land. So, according to Assistant City Administrator Tom Greene, when it gets paid $105 million over the coming years, it would be about the same as getting $66 million for it today.

If the team and its development partner, Hines, buy only some of the land for $50.4 million by the end of 2036 — the minimum required under what’s now proposed — it would be about the same as the city getting $38.2 million for that land today, Greene said.

“I think that if you are not accounting for inflation in the agreement, we’re not getting the value that it says there,” said Lisset Hanewicz, a City Council member who has been critical of the proposed deal. “You’re not getting $105 million — you’re getting less than $105 million.”

Greene, who responded to questions for this story by email via a city spokesperson, did not directly say why the deal doesn’t include inflationary adjustments or escalations. He emphasized that the Rays would be responsible for maintenance and insurance costs on a stadium, as well as construction overruns.

A Rays spokesperson said Thursday the team had no comment.

The license

While residential rents increase, the Rays would pay the same for the licensing agreement — similar to a lease — in 2057 as the club would pay in 2033.

Brian Scott, a first-term commissioner with a background in business, has found himself stuck on the details of the licensing agreement. It would kick in five years after the stadium opens, which the Rays are targeting for March 2028.

“You know player salaries are going to go up every year, price of concessions are going to go up every year, ticket prices are going to go up every year,” Scott said. “It’s just logical sense that the lease rate should go up every year. There’s just no argument that makes sense to me why it shouldn’t.”

Scott has generally spoken positively of the proposal even though he’s no fan of using public dollars to subsidize private businesses. He said he sees the county’s investment in a stadium as a way to turn tourist tax dollars that can only be spent to boost tourism — including by building sports arenas — into property tax revenues. But he said he doesn’t “see why the city or the county should take it on the chin” when it comes to inflation.

County Administrator Barry Burton, who led Pinellas’ behind-the-scenes negotiations, said the $25 million payment from the Rays was meant to balance out the city and county contributions to a stadium.

“That was a negotiated piece, where they can pay that a year (at a time),” he said. “It was fine with us.”

Geoffrey Propheter, a University of Colorado Denver economist with expertise in sports facilities, said it’s not surprising that the proposed agreements don’t include inflationary adjustments. In general, he said, governments don’t account for inflation when preparing their budgets because it’s hard. The true cost of hiring, training and employing a teacher or cop, or of building a road, is more complex than discrete goods with fairly reliable price indices.

Likewise, escalations aren’t incorporated into many parts of stadium deals. But there are exceptions, he said, most notably in the lease or licensing agreement. Here, governments and teams often recognize that rent must grow to sustain value; otherwise, reduced cash flow puts more pressure on taxpayers.

“So $25 million, that’s completely misleading,” Propheter said. “It overestimates what the true value is of that money. It’s much less.”

The latest draft agreements do nod toward economic change, though they’re not tied to inflation. The stadium operations agreement includes a reimbursement for the St. Petersburg Police Department’s traffic management duties, starting at $400,000 and increasing by 5% every year. Propheter said he was surprised at that adjustment, given the lack of one with the licensing fee.

The penalties the Rays and Hines would face for not building affordable housing as promised also increase over time. Those fees range from $25,000 per unrealized unit in the first phase, which is supposed to be under construction by 2030, to $75,000 for each unrealized unit in the last phase, which would be underway by 2047.

Hanewicz said she considers it a failure to the public not to speak of these deals in terms of their present-day value.

“At what point are we giving too much?” she said.

Times staff writer Colleen Wright contributed to this report.