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MAYORS PITCH ARENA FUNDING

MAYORS PITCH ARENA FUNDING

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The NBA Vancouver Grizzlies and its owner, Michael Heisley, were successfully courted by the J.R. “Pitt” Hyde led pursuit team. Monday the pursuit team turned its full attention to the two legislative bodies in Shelby County. The NBA has yet to approve the relocation. NBA commissioner David Stern said that the league is waiting for final or near final confirmation in the form of a commitment to build a new arena. While the county commission was holding its normal meeting, the city council held a special meeting. The city council will vote on its share of the NBA financing plan as submitted by Mayors Herenton and Rout as well as the Memphis pursuit team Tuesday, at 3:20 p.m. In both cases, the mayors used their time to highlight the new Memorandum of Agreement (MoA) that each signed last Friday evening. The MoA is the first step framework in signing a lease agreement. Central to that MoA was the beginning of a strongly pro-Memphis lease for the new arena. After the arena is built and the Grizzlies move in, they will begin a 25 year lease with the city and county of Memphis. For the first 10 of those years, no movement by the team is possible. After the tenth year, a number of stipulations must be met before the franchise could move. First, attendance must drop below 14,900 per game. If attendance does drop below that level, Memphis will have another season in which to regain that level. For example, if the team draws a disastrous 2,000 people per game in any season after the tenth and then draws an average of 14,901 the next year, then the team must stay. If those conditions are met, the corporate support to the Grizzlies must fail to provide its promised 5,000 tickets. Dean Jernigan, head of the Memphis Redbirds, is leading a corporate drive to secure those tickets. Regardless of the average attendance of the Grizzlies, if the corporate sector comes up with its 5,000, then the team must stay in Memphis. In other words, if the team draws 5,001 per game but 5,000 of those tickets are from the corporate sector, then the team must stay. If those conditions are met as well, then Michael Heisley must sale the team in order for it to move rather than keep it and move somewhere else. If he does decide to sale it, then he must give the Memphis minority ownership group right of first refusal. If the Memphis group is unable or unwilling to come up with the money to buy the team outright, then the Memphis city and county governments have the right of first refusal to either find a willing owner or to make the team a city and county asset. If neither party can or will buy the team, then the Grizzlies meet stiff moving penalties. For example, if all conditions are met simultaneously and the team decides to move after year 10, it will owe the city and county governments $98 million for bonds against the arena and $11 million dollars from the naming rights package with FedEx. Though that number decreases every year after the 10th in response to how much money is left to pay on the arena, the team would still owe the city and county governments all naming rights revenues through the 25th year. According to members of Herenton’s and the pursuit team’s staffs, the average buyout in relocation teams across the four major league sports is $85 million. In Memphis it will be $105 million. The arena will be owned by the city and county. However, the Grizzlies will operate the facility for no fee. While the Grizzlies receive all revenues from the facility, the team will pay the city and county 1.3 million a year, and will be responsible for all maintenance and upkeep of the facility. According to the pursuit team, this is rare in professional sports and was a major “win” for the Memphis negotiators. The Memphis city and county governments will be responsible for any “capital” repairs and will hold $10 million of the $250 million in reserve for those repairs. If the Grizzlies wish to change the building of the arena in any way that will make it cost more than $250 million, then the team will take on that cost. Controversial to the lease is the non-compete clauses that affect the Pyramid and the Coliseum. Herenton’s staff and the pursuit team qualified four types of events that might occur in the three facilities: Grizzlies events, National events, local events, and excluded events. All Grizzlies events (i.e. games, basketball camps, etc.) must be played at the new arena. If the Grizzlies wish to use the Pyramid, the team must make plans with the Pyramid leasing staff. A National event is any event televised to two or more TV markets. That includes such events as nationally televised NCAA tourney games. All University of Memphis games are in the Excluded category described below. All National Events must happen in the new arena. Those events may only occur at the Pyramid with the direct consent from the new arena’s staff. Local events (i.e. any non-U of M or Grizzlies basketball event, and not televised to more than two TV markets) may happen in any of the three facilities. However, the new arena’s staff has five days to match any offer that is available to the Pyramid or the Coliseum. Excluded events include all University of Memphis events (basketball, etc.), the Wonders Series currently held at the Cook Convention Center and The Pyramid, and certain concert series. In those cases, the sponsor of the event may pick the venue among the three. Citizenry both for and against the new arena were present at both meetings. In the city council meeting, those against were in the majority. In the county meeting, those for the arena proposal were more heavily present.

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