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Minnesota Twins Presentation PresentationPresentation toto GovernorGovernor Pawlenty'sPawlenty's StadiumStadium ScreeningScreening CommitteeCommittee January 6, 2004 IntroductionIntroduction (Jerry(Jerry Bell)Bell) 1 PresentationPresentation OutlineOutline WhyWhy nownow isis thethe rightright timetime forfor aa newnew ballpark.ballpark. IndustryIndustry andand teamteam improvementsimprovements sincesince 20022002 legislation.legislation. CharacteristicsCharacteristics ofof aa workableworkable proposal.proposal. Twins/MLBTwins/MLB importanceimportance toto Minnesota.Minnesota. OurOur visionvision forfor aa newnew ballpark.ballpark. 2 TwoTwo TypesTypes ofof BallparkBallpark ProposalsProposals AccordingAccording toto PatPat McCormackMcCormack TypeType II——WorkableWorkable –– LeadsLeads toto buildingbuilding aa ballpark.ballpark. TypeType IIII——ImpracticalImpractical –– PoliticallyPolitically "saleable""saleable" butbut wouldwould notnot buildbuild aa ballpark.ballpark. 3 "Top"Top TenTen List"List" PastPast ReasonsReasons NotNot toto BuildBuild aa BallparkBallpark 10.10. There'sThere's nothingnothing wrongwrong withwith thethe Dome.Dome. 9.9. SportsSports facilitiesfacilities don'tdon't havehave aa significantsignificant economiceconomic impact.impact. 8.8. PayPay forfor itit yourself.yourself. IfIf SanSan FranciscoFrancisco cancan dodo it,it, soso cancan thethe Twins.Twins. 7.7. ComeCome backback whenwhen thethe TwinsTwins areare moremore competitive.competitive. 6.6. ComeCome backback whenwhen youryour leaselease isis up.up. 4 "Top"Top TenTen List"List" PastPast ReasonsReasons NotNot toto BuildBuild aa BallparkBallpark (Cont'd.)(Cont'd.) 5. Come back when MLB has its financial house in order. 4. Come back after MLB's owners agree to more revenue sharing. 3. Come back after baseball solves its competitive balance issues. 2. Come back after you achieve peace with the players. 1. The timing isn't quite right. Come back next year. 5 WhyWhy NowNow isis thethe RightRight TimeTime forfor aa NewNew BallparkBallpark (Jerry(Jerry Bell)Bell) WhyWhy BuildBuild aa BallparkBallpark Now?Now? PriorPrior obstaclesobstacles havehave beenbeen eliminated.eliminated. TwinsTwins cannotcannot sustainsustain recentrecent successsuccess inin thethe Metrodome.Metrodome. UseUse agreementagreement hashas expired.expired. MSFCMSFC agreesagrees thatthat aa newnew facilityfacility isis needed.needed. TakeTake advantageadvantage ofof lowlow interestinterest rates.rates. AvoidAvoid futurefuture costcost ofof inflation.inflation. 7 AA NewNew BallparkBallpark forfor MinnesotaMinnesota AA newnew TwinsTwins ballparkballpark isis thethe onlyonly wayway forfor MinnesotansMinnesotans toto continuecontinue enjoyingenjoying thisthis competitivecompetitive andand affordableaffordable familyfamily entertainmententertainment forfor generationsgenerations toto come.come. 8 IndustryIndustry andand TeamTeam ImprovementsImprovements SinceSince 20022002 LegislationLegislation (Bob(Bob Starkey)Starkey) 20022002 CollectiveCollective BargainingBargaining AgreementAgreement TheThe objectivesobjectives ofof thethe CBACBA werewere to:to: –– EnhanceEnhance competitivecompetitive balance.balance. –– IncreaseIncrease thethe financialfinancial stabilitystability ofof thethe industry.industry. TheseThese objectivesobjectives werewere addressedaddressed withwith thethe followingfollowing economiceconomic mechanisms:mechanisms: –– RevenueRevenue Sharing.Sharing. –– CompetitiveCompetitive BalanceBalance Tax.Tax. –– DebtDebt ServiceService Rule.Rule. 10 EnhancedEnhanced RevenueRevenue SharingSharing Clubs now share 34% of all locally revenues. Lower revenue clubs now receive more national revenues. In 2003: – Highest revenue club will pay over $50 million. – Twins will receive over $17 million. – Lowest revenue club will receive over $29 million. – The industry will transfer over $220 million. 11 RevenueRevenue SharingSharing CreditsCredits TheThe leagueleague isis providingproviding revenuerevenue sharingsharing creditscredits forfor clubsclubs investinginvesting inin newnew facilitiesfacilities byby allowingallowing clubclub deductionsdeductions againstagainst sharedshared revenues:revenues: –– AcceleratedAccelerated depreciation.depreciation. –– RentRent payments.payments. –– StadiumStadium operatingoperating expenses.expenses. TheThe greatestgreatest creditscredits areare realizedrealized withwith aa rentrent paymentpayment structure.structure. 12 CompetitiveCompetitive BalanceBalance TaxTax Beginning in 2003, clubs whose payroll exceed the $117 million threshold will be assessed a Competitive Balance Tax at a rate of 17.5%. The tax rate can escalate to as high as 40% by 2005 and 2006. The threshold increases, on average, approximately 5% per year over the term of the CBA. Tax proceeds are used to fund pension costs and promote the game of baseball. 13 DebtDebt ServiceService Rule:Rule: AA FinancialFinancial StabilityStability TestTest TheThe CBACBA nownow mandatesmandates thatthat clubsclubs generategenerate enoughenough positivepositive cashcash flowflow toto serviceservice theirtheir debtdebt payments.payments. ThisThis covenantcovenant willwill reducereduce industryindustry losseslosses andand indebtedness.indebtedness. ThisThis rulerule mustmust bebe consideredconsidered whenwhen structuringstructuring newnew ballparkballpark investments.investments. –– OtherwiseOtherwise operatingoperating flexibilityflexibility andand competitivenesscompetitiveness couldcould bebe diminished.diminished. 14 1616 NewNew BallparksBallparks BuiltBuilt SinceSince 19901990 15 TwinsTwins BaseballBaseball AwardsAwards VotedVoted thethe "Best"Best BaseballBaseball Organization"Organization" byby bothboth BaseballBaseball AmericaAmerica andand USAUSA TodayToday.. RatedRated thethe fourthfourth bestbest baseballbaseball operationoperation inin 20032003 andand thethe bestbest inin thethe AmericanAmerican LeagueLeague byby BaseballBaseball AmericaAmerica.. TerryTerry RyanRyan hashas beenbeen namednamed bestbest generalgeneral managermanager inin MajorMajor LeagueLeague Baseball.Baseball. DaveDave St.St. PeterPeter hashas beenbeen citedcited asas oneone ofof thethe 4040 peoplepeople underunder ageage 4040 toto watchwatch inin allall ofof sportssports management.management. 16 StructuringStructuring aa ProposalProposal TheThe structurestructure mustmust MINIMIZEMINIMIZE thethe Twins’Twins’ revenuerevenue--sharingsharing burdenburden andand MAXIMIZEMAXIMIZE theirtheir operatingoperating flexibility.flexibility. 17 CharacteristicsCharacteristics ofof aa WorkableWorkable ProposalProposal (Ralph(Ralph Strangis)Strangis) TwoTwo TypesTypes ofof BallparkBallpark ProposalsProposals AccordingAccording toto PatPat McCormackMcCormack TypeType II——WorkableWorkable –– LeadsLeads toto buildingbuilding aa ballpark.ballpark. TypeType IIII——ImpracticalImpractical –– PoliticallyPolitically "saleable""saleable" butbut wouldwould notnot buildbuild aa ballpark…”evenballpark…”even ifif passed,passed, eveneven ifif signedsigned byby thethe Governor”Governor” 19 CharacteristicsCharacteristics ofof "Type"Type I"I" ProposalProposal 1.1. FinanciallyFinancially efficientefficient structure.structure. 2.2. PrivatePrivate sectorsector participationparticipation mustmust considerconsider severalseveral variables.variables. 3.3. DetailedDetailed negotiationsnegotiations shouldshould bebe leftleft toto thethe teamteam andand hosthost community.community. 4.4. ShouldShould allowallow forfor promptprompt construction.construction. 5.5. LegislationLegislation shouldshould notnot containcontain unachievableunachievable conditions.conditions. 20 Twins/MLBTwins/MLB ImportanceImportance toto MinnesotaMinnesota (Dave(Dave St.St. Peter)Peter) MinnesotaMinnesota andand TwinsTwins BaseballBaseball AffordableAffordable familyfamily entertainment.entertainment. Baseball/softballBaseball/softball toptop youthyouth sports.sports. TwinsTwins gamegame attendanceattendance threethree timestimes greatergreater thanthan allall otherother propro sports.sports. Statewide/regionalStatewide/regional appealappeal forfor allall ages.ages. 22 TheThe TwinsTwins AreAre thethe MostMost AffordableAffordable FamilyFamily EntertainmentEntertainment AmongAmong ProfessionalProfessional SportsSports Average Team Ticket Price TwinsTwins $ 14.4014.40 VikingsVikings 59.0059.00 TimberwolvesTimberwolves 37.0137.01 WildWild 49.7249.72 Source: Team Marketing Report 23 KidsKids andand BaseballBaseball 77 ofof 1010 KidsKids AgesAges 66--1717 areare MLBMLB fans.fans. 28.428.4 millionmillion kidskids playplay baseball/softballbaseball/softball –– 61%61% moremore thanthan soccer.soccer. –– FiveFive timestimes thanthan tackletackle football.football. Source: MLB / American Sports Data, Inc. 24 BaseballBaseball AttendanceAttendance VersusVersus OtherOther SportsSports 2.0 1.9 ) 1.5 illions n M I ( 1.0 e .8 nc .6 nda .5 e t t 0.5 A 0.0 2003 Twins 2003 Vikings 2002-2003 2002-2003 Wild Timberwolves 25 StatewideStatewide AppealAppeal ofof TwinsTwins BaseballBaseball 6161 MillionMillion totaltotal fanfan impressionsimpressions inin 20032003 –– TwinsTwins RadioRadio NetworkNetwork –– TwinsTwins TelevisionTelevision Source: Arbitron / Nielsen Media Research 26 TwinsTwins CharitableCharitable ActivitiesActivities PohladPohlad FamilyFamily FoundationFoundation TwinsTwins CommunityCommunity FundFund TicketsTickets forfor KidsKids PlayersPlayers GivingGiving BackBack 27 TwinsTwins CommunityCommunity FundFund ContributionsContributions $2.2$2.2 millionmillion inin 20032003 charitablecharitable
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