Minor league, major troubles

The Baltimore Sun

Two hours before game time, fans were already streaming into Ripken Stadium for another season of baseball in Aberdeen. Friends and neighbors exchanged pleasantries as the smell of funnel cakes and the sound of John Mellencamp's "Small Town" wafted through the stands. The crowd gasped as fireworks boomed overhead, then cheered as hometown hero Cal Ripken, smiling broadly, tossed the first pitch.

For Ripken, the Hall of Fame-bound owner of the minor-league IronBirds, the Aberdeen project appears to be a resounding success. Every game has been a sellout since the 6,000-seat stadium opened in 2002. Companies such as Bank of America have paid to be sponsors. And at an adjacent baseball academy, youngsters learn the "Ripken Way" on ball fields that include one modeled after Oriole Park at Camden Yards.

But even on days like this, when the city-owned stadium is packed, Aberdeen loses money.

The Harford County community owes $6.7 million in stadium-related debt, and millions in interest, on a payment schedule stretching to 2022. The city's stadium fund has posted operating losses that total more than $1 million since 2001, forcing Aberdeen to dip into its treasury.

"People who come to the games don't realize what we're dealing with," said Betsy Campion, head of the city's stadium management board, from her seat behind home plate during the June 19 home opener. "They see the stadium full, they buy food at prices in line with big league ballparks, and they think the city is a part of that."

The reason the city isn't sharing more richly in the proceeds is rooted in critical decisions made over the past seven years. Represented by part-time politicians and advised by well-meaning businessmen, Aberdeen took on a project as risky as it was ambitious for a city of just 14,000.

In closed-door negotiations, Aberdeen signed over to the Ripken businesses most of the money to be made from the baseball games. City officials had intended to cover the bills in other ways, including fees, taxes and a deal with Nottingham Properties to develop adjacent land. But the city's contract with Nottingham contained no penalty for delay. The land remains mostly acres of dirt.

Aberdeen officials, who were already struggling to balance the town's books and who raised taxes and other fees last year, have in recent weeks tried to get various Ripken enterprises to pay more toward the costs of the complex. The city's mayor has also considered hiring a financial adviser. Earlier this year, he floated the idea of selling the stadium but found that was not feasible.

Disenchantment

Over the years, city leaders never fully made public the extent of Aberdeen's financial strains. However, interviews and a review of thousands of pages of records reveal that their disenchantment was growing behind the scenes. S. Fred Simmons, Aberdeen's mayor, expressed concerns while he was a member of the board that oversees the stadium.

"What I am about to say may sting a little bit," Simmons said in a 2005 e-mail to some of his fellow board members. "But I think it needs to be said.

"We were not present when the original deal, full of winks and nods, was formulated. ... We do not control either the income or the direction of marketing at the stadium. ... We have [a] dysfunctional relationship with our 'partners' at the stadium."

Simmons concluded, "Municipalities, especially this one, shouldn't be in this type of business."

Former Mayor Douglas S. Wilson, who was defeated by Simmons later in 2005, defends the way the city handled the stadium complex during his tenure. "I still think we did the right thing. Hindsight is 20-20. The reason the city is so far behind is [certain elements] just didn't get built on time."

Memos and e-mails obtained by The Sun show the city has for years sought more money from Ripken entities whose payments have fallen short of the city's expectations. The two sides have talked periodically but have failed to resolve differences.

Ripken's business representatives maintain that the city hasn't formally complained and say that its financial difficulties stem from the stalled adjacent development. Chris Flannery, chief operating officer of Ripken Baseball, said its various enterprises have met their obligations.

"We've done all the things that we said we would do. ... To bring this into Harford County was a coup."

Neither Flannery nor the attorney for Ripken who helped broker the deals would discuss the negotiation process or the contracts' provisions. They also declined to discuss the organization's profits from the Aberdeen ventures.

Ripken, who will be inducted into the Hall of Fame in Cooperstown, N.Y., on July 29, has said little publicly about the project's troubles. While in Bel Air for a parade thrown in his honor, on the same day the IronBirds season opened, he raised the possibility of making some adjustments.

"I know there's some issues that have been going on for a while," Ripken said in response to a question at a news conference. "My general feeling is to try to help in any ways we can, and we're exploring those things."

The negotiating table

Under great pressure, the partnership between the city and the Ripken organization was finalized over slices of pizza in a community college conference room in late 2000.

Before that, the city had been working with Peter Kirk, a minor-league baseball mogul responsible for new ballparks in Frederick, Bowie and Salisbury. Aberdeen had already lined up public funding and broken ground on an $18 million stadium.

But Kirk abruptly dropped out, citing disagreements over strategy with one of his partners: Cal Ripken.

City officials didn't publicly acknowledge the crisis. Instead they turned to Ripken, who agreed to take over Kirk's leadership role and purchase a team - assuming that a deal could be struck with the city.

There was a lot at stake for Wilson, who had been elected mayor in 1998 by just one vote. An accountant based in Aberdeen, he turned to a pair of associates to negotiate the terms: Peter A. Dacey, the city manager, and Donald E. Brand, a local attorney with a background in construction and family law, but not sports business or entertainment.

Across the negotiating table, by contrast, was someone rich in experience in both specialties. Lonnie Ritzer had helped broker the sale of the Orioles to Washington attorney Edward Bennett Williams years before and was a tax lawyer at the Baltimore firm of Ron Shapiro, Ripken's agent in negotiating his player contracts.

Participating by cell phone was Ira Rainess, who had negotiated lucrative endorsements and other arrangements for Ripken. He would later establish a business doing the same for sports figures including Ravens linebacker Ray Lewis.

Wilson and Dacey said they were confident that the city's team could handle its end of negotiations with no additional expertise.

Others weren't so sure.

"It was suggested that we hire a 'gorilla'" to represent Aberdeen, recalled former City Councilman Jerry K. Hansen. "We never did that."

During the negotiations, city officials said they were regularly reminded that Ripken's stature and the draw of the baseball team and youth academy would make the project a "Cooperstown and Disney rolled into one."

The complex, built a few miles from the house in which Ripken grew up and where his mother, Vi, still lives, would serve as a tribute to the late patriarch, Cal Ripken Sr., with three of his children all playing a role. Cal is president and CEO of Ripken Baseball Inc., with Bill, a former Oriole infielder, and Elly holding key positions.

"This was not just a business venture by any means for the Ripken family," said John Maroon, a spokesman for Ripken. "This was a project of passion, and a project of caring."

As stadium agreements between local governments and minor league baseball franchises go, Aberdeen's deal with Ripken is middle of the pack.

"This is, other than a couple of these oddball things, a pretty standard deal and a pretty good deal for Ripken," said Martin J. Greenberg, a Milwaukee-based attorney and nationally recognized sports facility expert.

Spending millions

Ripken's participation helped persuade state leaders to authorize $6 million toward construction of the $18 million stadium. Harford County officials, who were skeptical about the project's viability, contributed $2 million. Ripken spent $6 million and also paid $3 million more to bring in a team.

The city, with a general fund budget at the time of just $7.6 million, pledged $4 million.

Most minor-league stadiums are owned by larger jurisdictions that can spread the costs over bigger budgets - the situation in Prince George's County, where the minor-league stadium is overseen by a multi-jurisdictional authority. Charles County appears to have safeguards built into its deal for a 4,500-seat stadium set to open next year in Waldorf. The team owner, Kirk, is working with former Oriole Brooks Robinson. A copy of the agreement shows the owner has pledged to make minimum payments of $250,000 and cover major infrastructure improvements for the next 15 years.

'Quantum leap'

Aberdeen's deal lacked such safeguards, and the city shouldered an additional burden by agreeing to provide land for the academy and an entertainment center.

"This is a quantum leap by a community" of that size, Greenberg said.

The plan, conceived by local businessman John S. Karas, called for the city to buy and annex 110 acres of farmland. The stadium and Ripken's youth academy - collectively, a $31 million undertaking - would each occupy about 30 acres.

The remaining 50 acres would be sold to a developer for a planned movie theater and shops. The idea was for the city to use the proceeds to pay off some of its debt and then reap $800,000 a year in tax revenue.

At a Nov. 13, 2000, council meeting, Dacey, the city manager, outlined the project in a slide presentation that, unlike the deal, was quick and simple. Members were assured that they wouldn't have to dip into the general fund. They weren't provided the contract documents, which would be finalized and signed three weeks later. According to minutes, there was little discussion.

One resident asked Bill Ripken, vice president of Ripken Baseball, whether the plans had the approval of his mother.

"Mr. Ripken stated yes," the minutes show.

The council - Hansen, Myra Fender, Franklin "Mac" Bradley and Macon Tucker - asked no questions, according to minutes. They approved the project unanimously. Two months later the council authorized millions in two state bond issues, backed by the full faith and credit of Aberdeen. The documents specify that the city will raise taxes, if necessary, to make its payments.

Oversight board

A stadium management board was set up to oversee operations. The city appointed four members and Harford County one.

Tufton Professional Baseball LLC, the Ripken entity leasing the stadium for baseball games, selected two: Bill Ripken and Ritzer. The board's first chairman - a city appointee - was Karas, who had helped gain political and financial backing for the stadium and had been actively involved with the city's Ripken Museum.

Aberdeen's share of the project eventually grew to $11 million, including the extension of sewer and other services. Even though the sale of adjacent land brought in $4.2 million, it became apparent that revenues would not cover the mounting debt.

The city was counting on a ticket tax and the potential for parking fees, advertising on a billboard and non-baseball events. The tax raised about $140,000 the first season, but the city had little success attracting concerts, banquets or similar functions. In 2002, those events brought in only $2,000.

"We were too disjointed to make it work right," said Karas, referring to the board members' responsibility for events. That's why they decided to hire an outside firm and chose Ripken's group, Tufton, to book and stage events. The board agreed to split the revenue in an agreement that would be reworked twice in later years.

Parking fees could have raised money for the city, which has an "exclusive right" to charge up to $2 per car at baseball events. But the contract requires getting permission from Tufton, which has been opposed.

Even the billboard idea had to be scrapped when the placement was found to violate federal guidelines for ads alongside interstate highways.

A crucial vote

In the summer of 2003, the city prepared to close on a deal it had counted on to provide a steady source of additional revenue - the proposal by Nottingham Properties Inc. for a retail and entertainment center bordering the stadium. When City Council member Hansen questioned whether the deal had a penalty provision if the developer failed to deliver, Brand, the city's special projects lawyer, said none was needed.

"Mr. Brand advised the council to sign the contract stating that this was Nottingham's last offer," according to minutes of the council's July 14 meeting. The deal was approved 4-1, with Hansen voting against it.

A lawsuit from a rival developer delayed the sale for two years, and the property remains largely dormant. J. Joseph Credit, the former Nottingham chief executive officer, said this week that construction of the retail development is not likely to begin until next spring.

"We still have a long way to go. That doesn't mean we're not committed to moving hard," said Credit, who continues to manage properties acquired by Nottingham before a recent series of transactions that split up much of its holdings among several firms.

He noted that a residential component near the stadium is under way. But the rest might not be completed until 2009 at the earliest. City officials' cash flow concerns, meanwhile, are "their business," he said.

Aberdeen's foray into the role of developer was also mixed in regard to land for the academy. For one thing, the city's agreements postponed lease payments until operations began in 2003, so scant revenue flowed from the various Ripken entities to pay down debt that had been incurred. In addition, infrastructure cost twice what had been projected to improve the academy's land. From the outset, records show, lease payments have fallen short of what was needed to cover the city's costs.

Dacey said in a January 2004 memo that he was shifting money from different funds so the city would not default on its bonds. The next month, the city's finance department estimated that the stadium fund would run deficits every year until 2022.

Later that year, the stadium board sought help. It hired Massachusetts-based consultant Beacon Sports Capital Partners over the objections of board member Bill Ripken, who said the unique arrangements would be difficult for an outsider to assess.

In a 2005 report, Beacon wrote that Tufton refused to provide certain financial information that the board needed to fulfill its "fiduciary responsibility" to citizens. From the limited information provided, Beacon determined that Tufton's revenue from booking non-baseball events was likely "one of the highest in the minor league baseball industry."

The consultant, among other things, advised renegotiating the agreement with Tufton to get more money out of events at the stadium. But Beacon's advice went mostly unheeded.

Latest amenities

While the city struggled, the Ripken group has continued to make the most of profit-making opportunities granted by the city. It used its right to sell advertising inside and outside of the stadium. One large ad for financial services company MBNA is displayed on the back of the scoreboard overlooking Interstate 95 - near where the city envisioned a billboard.

(Among the team's sponsors is the Baltimore Sun Co., which also has other business arrangements with Ripken and his companies. Ripken writes a weekly column for the newspaper on youth sports.)

This season, Tufton added a party deck in right field and a video scoreboard in left-center field. A local BMW dealership also signed a multiyear sponsorship deal for naming rights in the swanky tier now known as the "BMW of Bel Air Club Level."

"I guess we're getting a little more sophisticated in our sixth year," Cal Ripken said of the upgrades.

A $22 million hotel opened in April on land leased from the city. The original plan submitted by a Ripken entity called for an office building resembling the B&O; Warehouse. Later, the plan changed, and Ripken struck a deal with Baltimore-based H&S; Properties to erect a Marriott as the warehouse replica.

"You start with one thing, and it changes to another," said former Mayor Wilson, referring to the fluidity of the process.

He and the other officials most directly involved in negotiating the stadium project agreements have all moved on. Simmons defeated Wilson in the 2005 election, and Dacey resigned for reasons unrelated to the stadium.

Brand, the attorney who oversaw the city's contracts at $150 an hour, according to invoices, is now a building engineer for Baltimore County. Citing attorney-client privilege, he would not comment for this article.

Wilson and Dacey say they negotiated the best deal they could, working from a template left over from the Kirk agreement. The former city manager said this week, "There was nothing in writing that would protect us from annual losses, but there was nothing that protected Ripken from annual losses either."

In an earlier interview, Dacey expressed optimism that the city "can weather these tough times. We've got a substantial operation up there that is just going to get better and better." Asked whether the Ripken entities should pay more, he said, "Probably, but a deal's a deal."

After taking office, Simmons hired accountant Stephen M. Wright to review the city's finances - particularly the shortfalls arising from the Ripken Stadium contracts. Wright says he tried unsuccessfully to persuade Ripken's representatives to relax their strict reading of the terms.

"There were discussions that the 'spirit' of the agreement with the Ripken entities was that the City of Aberdeen would not have to cover any excess losses, but, these provisions were not made a part of the written contracts executed by the previous Mayor Doug Wilson," Wright told The Sun in a statement.

Aberdeen remains at odds with Ripken entities on two key fronts related to contract language: its share of revenues from non-baseball events and its recovery of the expense of buying and improving academy land. The city notified Ripken Baseball Inc. last month that the payment for 2006 non-baseball events was about half the $92,000 expected. And it has complained for years that lease payments are insufficient, falling short by about $90,000 in the fiscal year ended June 30.

A spokesman for Ripken's companies says they have paid more than the contract required for non-baseball events and the exact amount required by the leases.

Cash-poor Aberdeen has been unable to set aside the $50,000 a year that is needed for the capital maintenance the city is obligated to pay for. One consultant's report estimates that the city will have to cover $2 million in projects in the next five to 10 years.

Those problems aside, Aberdeen does have something to show for its money: a baseball complex that is a source of civic pride and has become an international draw. The Babe Ruth League 12-and-under championship is played at the academy's Cal Senior's Yard each year.

Among those cheering on the IronBirds during their 12-1 opening night victory was Wilson, wearing an IronBirds cap and seated in his front-row seats on the first base side. Ritzer briefly visited his spot behind home plate before settling in on the club level.

"The Ripken family has put Aberdeen on the map," said Wilson, after rattling off the names of major leaguers such as Orioles right fielder Nick Markakis who have passed through Aberdeen. "To create that in a small government, to be able to have a minor-league baseball team, I mean, it's pretty phenomenal."

Simmons, who attended the next night, remains critical of the stadium deal, though he said he was impressed with what he saw on his trip to watch the IronBirds play. He said in a recent e-mail that he would like to renegotiate the city's deals but might have to settle for a longer look at other ways to make money:

"I tried to put all that shook-up Coke back into the bottle but was unable."

justin.fenton@baltsun.com

greg.garland@baltsun.com

Aberdeen's baseball complex

THE DEAL

Aberdeen took on millions in debt to help finance Ripken Stadium and provide land for other facilities. The state, Harford County and Ripken businesses contributed.

THE ISSUE

City revenues from the deal have fallen short of its share of costs, generating annual losses. The city's ability to collect more income is limited by the contracts it signed with Ripken businesses and delays in development of adjoining land. City officials have tried to obtain more funds from Ripken businesses, which say they're already living up to their contracts.

WHAT'S NEXT

Officials consider hiring a financial adviser and look for other ways to make money. The developer of adjacent land says the commercial project there won't begin until next spring at the earliest.

Project overview

Costs: (in millions)

Land, infrastructure: $9.29*

Construction: $1.7

Total: $10.99

Funding:

Bank loan: $2.2

Bonds $7.87

Cash: $1.0

Total : $11.060

Debt (as of 6/07): $6.742** Annual expenses

Debt service: $702,000

Insurance: $50,000

Sinking fund for future repairs: 0

Total: $752,000 Annual revenues:

A&A; tax (Ironbirds): $140,000

Stadium non-baseball: $45,000

Lease payments: $239,382

Parking & signage - 0

Total: $424,000 Annual shortfall: $328,000

Other tax revenues*** Academy: $28,100

Developer: $26,555

Real estate: $11,168

Hotel (as of 7--01/07): $110,781 Total: $176,604

*$4.2 million received after city sold part of the improved land **not including interest

*** estimated

Source: City documents, Sun interviews

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