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‘Rent’ in the White Sox/ISFA Agreement

I’ve been thinking on it, so I want to address a few things about the White Sox and the rent they pay the ISFA for exclusive use of Chicago’s Taxpayer Ballpark (aka U.S. Cellular Field).

Confusion on this subject is understandable, as it is in all issues surrounding the White Sox and the Illinois Sports Facilities Authority.  That’s because the relationship of these two entities—one private, one public—is laid out in a four-hundred page contract, the terms of which are complex, confusing, and in constant flux.

One of the reasons that I love the Irmer v Reinsdorf Thompson et al lawsuit complaint is its prose; it proves that lawyers can be clear, plain, and to the point when they want to be.

Understanding the contract language of the White Sox/ISFA Management Agreement, on the other hand, requires a legal parlance decoder ring, the patience of a Franciscan monk, and many hours shipwrecked on an island with nothing else to do.

I’d say that it’s as if the authors of this public document—outlining a deal that greatly benefits a private corporation over taxpayers—intended to obfuscate in order to dissuade interest.  But hey now, that’d be pretty cynical.

. . .


The only place you’ll find the words “rent” or “rental” in the 2011 ISFA Annual Report (the most recent) is in reference to a conference center built by the state for the White Sox, for which the team pays $100,000 a year plus an incremental amount related to changes in the Consumer Price Index (didn’t I tell you this stuff was complicated?).

This fee is only part of what the White Sox pay to the ISFA annually.  As the 2011 AR explains:

The Management Agreement, as amended, currently provides three mechanisms by which the Chicago White Sox remit fees to the Authority. The first mechanism is through ticket revenues; the second is through a guaranteed fee; and the third is an escalating fee for the use of the Conference Center.

The White Sox pay the “guaranteed fee,” or “Base Fees” as they’re referred to in the Management Agreement, of $1.5 million annually.  Shia Kapos refers to this fee as “rent” in her 2011 article outlining some details of Reinsdorf’s agreement with the ISFA, although it’s never referred to as “rent” in the Management Agreement or annual reports.  Maybe that’s typical of legal contracts and other official documents.

Perri Irmer’s lawyers claim in the lawsuit that (check out the quote in Ben Joravsy’s story):

In 2008, with Perri Irmer’s strong support, ISFA persuaded the White Sox to agree for the first time to begin paying rent for the use of Cellular Field, in the token amount of $1.2 million per year.

The $1.2 million the lawyers call “rent” here is the same fee that Kapos called “rent” in 2011.  But in 2008, the White Sox Base Fees were $300K less by the terms of the Management Agreement.

The White Sox Base Fees are outlined in the 17th Amendment to the Management Agreement, which you can download from the ISFA Docs page:

a. The Team shall pay the following minimum fees (“Base Fees”) to the Authority:

(i)    $1,200,000 for the 2008 Season;

(ii)   $1,300,000 for the 2009 Season;

(iii)  $1,400,000 for the 2010 Season;

(iv)  $1,500,000 for the 2011 Season;

(v)   For each season after the 2011 Season, the Base Fees shall be equal to the sum of $1,500,000, increased by a percentage thereof equal to the percentage increases, if any, in the CPI… blah, blah, blah…

Basically, the White Sox Base Fee to the ISFA will be $1.5 million, increasing a small percentage annually from 2012 onward.

Have I lost you yet?  I hope not.  We haven’t even gotten to ticket fees!

The White Sox “Base Fees” to the ISFA cover paid attendance up to 1,925,000 annually.  If the White Sox sell any tickets beyond that, then they have to kick in more to the state.  How much depends on how many more tickets they sell.  The breakdown (again, according to the 17th Amendment) looks like this:

 

Paid Attendance Range in Season Fee Per Paid Attendance Ticket
0 – 1,925,000 $0
1,925,001 – 2,425,000 $3.00
2,425,001 – 2,625,000 $4.00
2,625,001 – 2,825,000 $5.00
2,825,001 and above $7.00

 

Here is an example of how White Sox fees to the ISFA are determined (from the 2011 Audit).  In 2011, the White Sox “Total Paid Attendance” was 2,001,262.  This seemingly would have put them in the $3 per ticket zone on 76,262 tickets except that the White Sox essentially gave away about 140,000 tickets in 2011—tickets that don’t count toward “paid attendance” according to the Management Agreement (the details of this are complicated and not very important).

So the White Sox “Paid Attendance per 17th Agreement” in 2011 was 1,863,507.  This attendance number was below the 1,925,000 threshold, so the White Sox owed the ISFA only the “Base Fees” of $1.5 million and no ticket fees.

Got it?  Good.

It wasn’t always this way.  Before 2008 (and the 17th Amendment to the Management Agreement), there were no “Base Fees,” only ticket fees.

The way things were structured before 2001, the White Sox paid ticket fees on paid attendance higher than 1.2 million.  From 2001 through 2007, the White Sox got a break—probably not coincidentally the same years the team paid back $1.24 mil annually to the ISFA for some renovations to the park initially paid for by the state (more stuff that is not immediately relevant).  During those years, the White Sox had to pay ticket fees only on paid attendance higher than 1.5 million.

From 2001 through 2007, the White Sox were required to pay $4 a ticket, for paid attendance from 1,500,001 to 2,000,000 (And more for attendance above 2 million.  The number involved a calculation based on a complex equation—again more details, not relevant).

We can pretty closely estimate what the White Sox would have paid in ticket fees to the ISFA in 2011 under the old terms of the Management Agreement.  We take the total paid attendance in 2011 (1,863,507) and subtract 1,500,000 (the 2007 ticket threshold) and multiply by $4.00.  The result: $1,454,028.

So…

What the White Sox paid the ISFA (excluding rent for the conference center) in 2011 under the terms of the current agreement (17th Amendment): $1,500,000.

What the White Sox would have paid the ISFA approximately (excluding rent for the conference center) in 2011 under the terms of the old agreement (11th Amendment): $1,454,028.

The figures are actually even closer than this because, under the old agreement, the White Sox would have paid a small amount for tickets they sold at a discount not accounted for in paid attendance in the current agreement (again: details; complicated; really not significant).

To those who have stuck with me this far, thank you.  And you must be exhausted, so here’s my main point: the White Sox are paying about the same amount of money to the state annually as the team was before the fees were restructured in 2008.  We used to call it “ticket fees,” apparently now we call it “rent.”

Through her lawyers, Perri Irmer claims to have persuaded the White Sox to agree to paying rent in 2008; what she fails to mention is that White Sox ticket fee obligations were drastically reduced at that time.

It’s a small point but an important one, because there has really been no change in the pittance the White Sox pay the state every year to play and televise 81 games in Taxpayer Ballpark (aka U.S. Cellular Field), but we no longer can say the team operates “rent free” I guess.

“Rent too low” is a little more subjective and doesn’t trigger the same ire I would think, so the White Sox actually look a little better in this deal from a public relations standpoint.  And the 17th Amendment in which the fees were restructured was the same one in which the nebulous “Supplemental Stadium Account” was established; the account created with taxpayer funds to pay for the infamous Bacardi at the Park restaurant.

This is why Reinsdorf is such a frustrating and contemptible character.  He’s smarter, more persuasive, and more influential than anyone the taxpayers have on their side.  He ends up winning even when he makes concessions.

Of course the bigger story is that, whatever you call what the White Sox pay the ISFA, it is insignificant compared to the investment the state and the city have made (and continually make annually) in the team on behalf of the public, for little or no return.

I’ve written about that before, and will continue to write about it in the weeks and months to come.  But I felt like making this smaller point about semantics today.  Of course, it took hours of research and 1400 words to do it because of the shifty, convoluted covenant that is the White Sox/ISFA Management Agreement.

And that’s likely just how Jerry Reinsdorf and the ISFA want it.

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