What to Make of the Mariners’ Lease Negotiations

[Editor’s note/disclaimer: Tim is a real estate lawyer who sees these types of issues regularly, and has devoted an immense amount of time to studying, researching, and working within this field. None of this is legal advice and he is not your lawyer.]

The initial wave of reporting on yesterday’s news surrounding the Safeco Field lease has mostly missed the details of the story in favor of a sensationalist narrative that doesn’t really fairly describe what’s going on with the stadium. Let’s dive in with some questions about what happened, what’s going to happen, and what it means for the Mariners at Safeco.

What... happened?

As I’m sure you all recall, just a hair over two months ago the Mariners and King County announced they had reached a deal to replace the existing Safeco Field lease, set to expire at the end of this year, with a new 25-year lease. At the time of that announcement, a few terms leaked. One of those terms was that the County would spend $180mm over the 25 years of the lease to fund capital improvements at Safeco Field. You can read the term sheet of the lease renewal here, and note that the Mariners’ “CapEx Fund” contribution will dwarf the county’s. I say that not to claim that the Mariners are the good guys here, just to give context for the $180mm. At the time of the May announcement, King County Executive Dow Constantine announced a proposal to allocate approximately $180mm in lodging taxes (the “hotel/motel tax”) to satisfy the County’s obligations under the new lease deal with the Mariners.

While various members of county government have claimed that the lodging tax funds need not be allocated to Safeco Field—a statement that is, on its face, true, as the lodging tax can be spent in a variety of ways designated by the original county law—that’s also a little unclear, as under the agreed-on terms, the county absolutely does have an obligation to pay these capital improvements under the lease they’ve negotiated. There’s a split in county government as to whether that money should come from the lodging tax, or if that lodging tax should instead be spent on increased affordable housing measures.

Today, Seattle Weekly published a story claiming the Mariners would not sign a new lease unless they got $180mm from the County. As you can likely see above already, this is a true statement but a poor framing that conflates two issues. The Mariners have not demanded new money—and the Seattle Weekly was reasonably clear on this point, but others such as the Seattle Times were not—but are instead willing to sign the lease as originally agreed upon. If they believe the County does not have the money to fund the obligations it negotiated, they will seek to renegotiate the lease on other terms. In the meantime, they would exercise one of their three five-year extension options to buy time to reach a new deal.

Does this make the organization more evil and money grubbing than any other professional sports org?

Not really. Sports stadium deals—new or existing—across the country are in such varied situations that it’s very difficult to do an apples to apples comparison, but the Mariners’ deal has generally consistently ranked as one of the best deals for the government around—as publicly funded stadium deals go (more on that in a minute.) The Mariners aren’t making a last-minute demand for new money here; they’re asking that the County pay what the County said it would pay as a condition of the Mariners signing a new lease.

How angry should we be about this? At whom should that anger be directed?

This gets into a long and wide-ranging conversation about where stadium money should come from. On the one hand, a long-term body of research generally concludes that stadiums built with public money are a bad deal for taxpayers. On the other hand, as I said above, the Mariners have generally had one of the best of those deals for taxpayers. The best of a bad lot is not too bad; but given the overall realities of stadium-building, I’m not sure being angry at the Mariners is particularly necessary.

Everything said above about publicly funded stadiums can be and is true, but I think it’s a misleading characterization of this particular discussion to say that’s what this is about. Safeco Field is a county-owned asset. They lease it to a private enterprise that does most or all of the day to day payment of expenses and operation thereof, but they still own it. Under any lease, governmental or private, the owner is generally the one obligated to make capital improvements—and that is what this $180mm is for. It’s not at all uncommon, under commercial leases, for parties to negotiate the payment of certain capital expenses, and that’s generally what happened here. Since the Mariners need Safeco so much, and do so much of the day-to-day work of running the stadium, they have taken on a pretty substantial share of these capital improvements, but the remainder are still going to the owner of the property in what appears to me to be a pretty normal arrangement.

To the extent you’re angry about any of this—and again, I’d characterize it as separate from the “publicly funded stadiums” argument to a large degree—I think the correct frame for the discussion is on the King County (or City of Seattle, or State of Washington, or United States) taxation regime and how much money we’re raising for what. That’s taking this far too deeply into the field of politics to continue, but I do think that’s the correct frame for the issue. If you want to step back to the beginning of the discussion, you can argue Safeco should never have been built with public money, but again—it’s not particularly germane to the situation the county is in now with an asset it already owns. There are echoes here, if you’re familiar, with the KeyArena debate—what to do with a city asset of questionable utility outside a single purpose?

Is this a normal arrangement?

I think by now you can see I clearly think the answer to this is yes. There are a specific and distinct subset of issues raised here—because it’s owned by the government, because the facility itself is so unique that there could essentially be no other tenant, and so on—but this is underneath it all a pretty typical commercial leasing arrangement, subject to those things. One thing to note here is the Mariners and the County are very much lashed to the same barrel—in the current climate there’s relatively little appetite for publicly funded stadiums across the country, so it would be very difficult for the Mariners to make a credible relocation threat, and the County won’t have much to do with Safeco beyond periodic Pearl Jam concertinas if the Mariners pull up stakes.

If you want to peruse some ownership details and terms, here is an old question and answer with a good chunk of information about who owns stadiums and on what financing terms.

Is this going to get resolved?

I’d be shocked if it didn’t. This only came out because Seattle Weekly obtained emails—no public announcement about it was made—and nothing about the exchange or the situation seems out of the ordinary at all for a complex commercial lease negotiation.