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Since the original term sheet was released about 10 days ago, there has been much discussion over certain line-items in the proposal. Some of those concerns (including the failure of PSV to offer an academy program to girls) were raised in the City Council work session on Tuesday, and in an Editorial following that meeting. At that meeting, the Austin City Council also considered alternate proposals for development at McKalla Place. As that hearing went on, my feeling was that PSV/MLS had lost some ground, due to the aforementioned concerns, as well as some of the proposals offering things that PSV wasn’t.
Well, PSV may have had the same feeling as I did, because late Wednesday night, a revised Term Sheet leaked. This revision was based on negotiations between PSV and City of Austin staff, and represents an attempt to clean up some of the concerns that were raised by Austin Council members. Let’s take a look at the highlights.
But just as an initial matter: This is NOT the final agreement. The parties must execute a lease and stadium operating agreement. This Term Sheet was never intended to be the final document. As I said before, those documents can be over 100 pages (can could extend to several hundred). So this basically gives us an outline of what the final agreement will look like. But it is binding, subject to a couple of escape clauses.
Also: Many of the changes are relatively cosmetic changes in language. Changing out “reasonable” and “good faith” and “feasible” don’t mean a whole lot to me in the context of this document. Especially because it will be superseded by Lease/Development agreement.
PSV is still required to provide proof of ability to secure financing to the City, and the City can terminate the agreement if they don’t. However, no specific deadline is outlined here. Which means it will likely be incorporated into the Lease agreement. This is also an example of mere cosmetic changes to the agreement.
Changes to basic Lease Terms:
The lease is still for a 20 year term, but now PSV can exercise at its own discretion extensions of the lease in 10 year terms. That is a concession by the City to PSV. Also, the City has agreed to allow PSV to play a limited number of any type of home games at other local venues. This is typically if the game is going to wildly exceed the attendance capacity of the home stadium (think San Jose moving one of their games versus the Galaxy to Stanford). We’ll get to the relocation clause in a bit.
The rent to be paid to the City remains the same. This was a big source of contention for critics of the plan, given that a portion of the rent was required to be put into a Capital Fund for repairs to the stadium. That requirement hasn’t changed.
Metro Rail Station:
PSV is still not agreeing to construct a metro rail station to assist with increased traffic for stadium dates. This is going to be a huge point of contention at the meeting on Thursday, because other proposals for the site are offering to build a station there.
This is probably a deal-breaker for some of the council members, but whether it is for any that were willing to vote yes is another story.
“Good Faith” vs. “Best Efforts”:
There is a legal difference between these terms, as “Best Efforts” is a higher standard, but in these contexts, unless PSV is negligent or malevolent, it is unlikely to be a source of concern.
And you’ll note there is an escape clause in any case (“subject to competitive pricing and other financial considerations…”).
So this is interesting. PSV can add a surcharge to the ticket price for use in covering certain expenses, but look at the language:
“May be used?” Any attorney will tell you that “may” is not a mandatory term in a legal sense, like “shall.” And we know PSV knows the difference, because they use the word “shall” in that very sentence. Based on that, PSV could impose the surcharge and pocket the money.
The benefits appear to have changed slightly, in that they apply over term of the initial lease, but benefits during any lease extensions have to be negotiated.
Hmm…let’s come back to this.
Termination of the Term Sheet:
There are certain conditions which would trigger the termination of this agreement. Setting aside any material breaches by either side, the main things to look out for are if 1) A lease agreement is not secured by October, and 2) MLS fails to approve the relocation.
Interestingly, the deadline for MLS to approve the relocation must be included in the Lease agreement.
A full section on a non-relocation clause is included in the term sheet, including penalties for leaving early and breaking the lease.
Now, you may wonder why Austin doesn’t include a iron-clad “no relocate” clause, like the Village of Bridgeview has over (the heads of) the Chicago Fire. There is one simple reason really: PSV are building the stadium on their own dime. If they want to build a $200 million stadium and then leave after 20 years, well, that’s really their business. Austin does include provisions to penalize PSV if they break the lease, as well as require them to demolish it if the city desires. But otherwise, PSV is taking the risk, and if it doesn’t work out and he decides to leave, he’ll be the one out all that money.
Community Benefits Revisited:
Since the lease period has been adjusted down by five years, the total value of the community benefits has been changed to reflect that alteration. Big issue: There is still no commitment as it relates to an academy for girls, or a commensurate contribution.
Again, this is going to be a big problem. PSV is likely to get raked over the coals tomorrow by a number of the council members over the lack of money for girls programs. I’m not sure what they’re going to do. This is partially their fault by including the cost of a PSV Austin academy to increase the amount they could say was for community benefits. I’m not sure what they’re going to do. I don’t see how they make an equitable contribution, and it’s unlikely they start PSV affiliated girls academy. Like I said: Big problem.
So there are the main points of the revised term sheet. We’ll see how this plays tomorrow but I don’t see how this changes the minds of any Austin Council members who were leaning no, or were undecided. But we’ll know soon.