Sweetheart stadium lease costing Keizer millions in public funds
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Sweetheart stadium lease costing Keizer millions in public funds
Rent based on ticket sales leaves Volcanoes owners paying far below market value for decades
Back in 2018, the City of Keizer approved a $6 million movie theater complex located in Keizer Station and the project was greenlit - pending funding.
This is connected to Volcanoes Stadium, just be patient.
So, the funding never materialized and the movie theater never happened…and the plot of land still sits empty. But the deal struck between the movie theater owner and the City of Keizer was pretty simple - rent would start at $147,120 in 2018 and inch up by 2% annually.
If the theater was opened in 2018 as initially planned, Keizer would be collecting around $160k a year on that lease at this point.
The movie theater was to sit on 3.25 acres. If you are the mathy type, that would be around $50k per acre/per year the theater would pay Keizer.
Jerry and Lisa Walker, along with their son, Mickey, own and operate Volcanoes Stadium pursuant to a nearly 30 year-old lease agreement (modified slightly & renewed in 2015).
The lease agreement describes an arrangement where the Walkers make monthly rent payments to the City of Keizer based ticket sales receipts (5% to City) and parking fees (20% to City). You can see (and download) both the original 1997 lease, and the 2015 extension and modifications, below.
Based on publicly available revenue data obtained from Keizer officials, the Walkers have paid, on average over the past 10 years, around $45k per year in rent, pursuant to the terms of the lease.
The Volcanoes Stadium complex sits on 20 acres. Again, for math dorks, that’s around $2,250 per acre/per year the Walkers pay the City of Keizer.
Imagine if we compared the anticipated rent revenue for the proposed theater with the actual rent revenue from the baseball stadium and what that drastic difference in rates would look like over a decade. What’s that? We don’t have to imagine? We have a graph?
The proposed Keizer Station movie theater was expected to generate a million dollars more than Volcanoes Stadium over a 10 year period. In fact, the trend lines above diverge, with Volcanoes revenue payments sliding downward over the past decade as revenue from the movie theater tenant would have grown 2% per year.
If a small, 3.25 acre space in Keizer Station can produce $1.6 million in city revenue over a decade…imagine what 20 similarly profitable acres could net the City of Keizer.
We tried a couple ways to compare the 3.25 acre site of the proposed movie theater - at the corner where Lockhaven Drive NE meets Keizer Station Blvd. - with the Volcanoes Stadium 20 acre site - situated at the Northeast corner of Keizer Station.
First we thought we might just kinda eye it up:
And while that was fun to put together, there’s a lot of wasted space and weird fits to get those four movie theater-sized plots to fit into the Stadium acreage.
So, instead, we went with the boring option of just seeing how many times 3.25 fits into 20…just around 6 times (a little more, but call it 6).
That means if Keizer could lease out the 20 acres currently occupied by Volcanoes Stadium at the same rate agreed to with the movie theater, the city could collect…well, a shit-ton of revenue.
How much? Let’s imagine, back in 2018, in addition to building the movie theater, they crammed 6 movie theater-sized businesses into the Volcanoes Stadium space. Same rent. Same schedule of increase (+2% annually).
Since 2018, the Walker family has paid Keizer just over $200k to lease their 20 acres.
In the same time frame, that same 20 acres at movie theater rates would generate nearly $4.6 million.
In other words, the City of Keizer would have collected just about $4.4 million MORE since 2018 (the past 5 years) if they rented out the Volcanoes Stadium land to entities capable of paying something far closer to a market rate (or at least in the same ballpark HEYOOOOOOO. That pun was a home run. Ok, I’m done.).
In fact, using the rate and increase schedule for the proposed movie theater, it’s reasonable to say that Keizer residents are missing out on around $1 million in revenue per year by renting out 20 acres of prime commercial real estate to the Walker family and their trickle of revenue.
And at the risk of doing entirely too much math in one story, that $1 million per year could probably mean a library for Keizer. Maybe the last few rounds of police fee increases could have been avoided.
Regardless of what Keizer could do with an extra million dollars in revenue per year, it’s simply not good governing to let this publicly owned land be so inefficiently utilized - especially when budgets are tight (which is pretty much always).
The “sweetheart” nature of Keizer’s extremely friendly lease deal with the Walker family isn’t isolated to shockingly low rent, either.
Since the rent for Volcanoes stadium is based on ticket sales and parking fees, those numbers are self-reported. In other words, the Walkers tell Keizer each month how much they’re paying.
Now, like any good and thorough legal document, there’s a stipulation in the stadium lease that allows for Keizer to audit Volcanoes ticket sales receipt data. How many times do you think Keizer has audited ticket and parking receipts from the Walkers in the nearly 30 years since they first leased the land?
If you guessed zero, you win!
According to Keizer Finance Director Tim Wood, the city has never initiated an audit for this lease agreement. But, he said, there’s actually a good reason - the lease states that the Walkers would have to pay for the audit if the receipts were misstated by 3% or more. Otherwise, Keizer would foot the bill. And, Wood explained, considering the Walkers generate such a small stream of revenue from the leased land, the cost of the audit would likely exceed any amount of misstated revenue recouped by the city.
While Wood’s rationale makes sense, there’s actually more at stake should Keizer actually audit the Walker family’s reported ticket and parking receipts. Section 19.1(d) of the ground lease describes a default condition where the lessee (the Walkers): “knowingly understates the Gross Ticket Receipts and Gross Rental Receipts by five percent (5%) or more….”
How would we ever know if they’ve defaulted on that stipulation if Keizer never actually audits the reported receipts?
Keizer is losing nearly $1 million annually in public funding by subsidizing a relentlessly underperforming business with zero signal of revenue growth now or in the future.
Keizer is also 40 years old. Time to grow up and cut ties with this poor, imbalanced relationships from younger years.
At the very least, Keizer elected officials have a fiduciary duty to explore healthier use of 20 of the most prime commercial acres in Keizer.
Sweetheart stadium lease costing Keizer millions in public funds
Just for fine-tuning purposes, the area marked #1 on the stadium map is not buildable without a very costly retrofit. It's an above ground detention facility that was built to handle all the runoff from that parking lot. and potentially a portion of Keizer Station, but I'm not sure about that.