Is yet another crony capitalist deal about to blow up in Mississippi? Our favorite reporter, Anita Lee of the Sun-Herald, reported that the city of Biloxi sued Biloxi Baseball and Overtime Sports over a deal that has apparently soured:
The honeymoon is over after two seasons of minor league baseball, with the city filing a lawsuit Monday in Chancery Court against Biloxi Baseball and Overtime Sports Management, owners of the Biloxi Shuckers.
The city says in the lawsuit that it has been unable to determine how much Biloxi Baseball owes the city for rent, advertising and ticket sales under a stadium lease because Biloxi Baseball and Overtime Sports has failed to account for its sales.
Biloxi Baseball has paid the city $146,450 in rent through Oct. 1, claiming it is due a discount of $153,550 under the terms of the lease. The city denies the discount, or “offset” is owed.
The city says Biloxi Baseball has failed, despite requests from the city, to account for ticket sales, video-board advertising and other advertising for which the city is supposed to receive compensation under the lease.... Rest of article.
The lawsuit is posted below. The lawsuit makes several allegations and demands:
17. Pursuant to the Video Board Agreement, Overtime guaranteed payment to the City of at least $50 ,000 in advertising revenues per year in exchange for which the City assigned its field naming rights under the Sublease to Overtime "as long as the compensation required hereunder is paid to the City." No compensation has thus far been paid to the City under the Video Board Agreement....
20. On June 5, 2015, the City and Biloxi Baseball made a joint application to the Mississippi Development Authority ("MDA") for the Mississippi Tourism Rebate Program to defray the costs of constructing the Stadium. In that application, Biloxi Baseball represented to MDA that its expenses in acquiring and relocating its Minor League Baseball team and in tenant improvements to the Stadium exceeded $20,000,000. To date, the City's consultant who was hired to manage the application has been able to confirm with Biloxi Baseball's auditor approximately $16 ,500 ,000 of investment eligible under the Program....
22. Biloxi Baseball has not certified and accounted for its ticket sales since the commencement of the Sublease, nor has it accounted for its efforts made to sell advertising on the video scoreboards, its advertising revenues or the making of required specified improvements, thereby preventing the City from determining amounts owed by Biloxi Baseball under the Amended Sublease . As a result of Biloxi Baseball's actions and/or inactions, the City has been unable to verify the amounts that it is owed and therefore seeks the equitable remedy of an accounting of ticket sales, Base Rent and Additional Rent due, improvements made pursuant to the First Amendment, efforts made to sell advertising, advertising revenues owed and any other amounts owed under the Amended Sublease.
23. Biloxi Baseball has not provided information sufficient to support $20,000,000 in eligible investment under the Mississippi Tourism Rebate Program. As a result of Biloxi Baseball's actions and/or inactions, the City has been unable to reap the full benefits of the Mississippi Tourism Rebate Program and therefore seeks the equitable remedy of an accounting of all costs incurred by Biloxi Baseball in acquiring and relocating its Minor Baseball team and in tenant improvements to the Stadium.
25 (Biloxi made the same allegations against Overtime) 25. Overtime has not certified and accounted for its ticket sales since the commencement of the Sublease, nor has it accounted for its revenue received to date pursuant to its sub-assignment of the field naming rights.....
28. This Court should issue its declaratory judgment that Defendant Biloxi Baseball is currently obligated to pay the shortfall in Base Rent owing under the Amended Sublease through October 1, 2016 in the amount of $153,550, net only of such liquidated damages as Biloxi Baseball may prove itself to be entitled at the trial of this cause, but in any event such set-off is not to exceed $100,000....
This is not the first time serious questions have been raised about the methods used to bring the Shuckers to Mississippi. Steve Wilson reported a year ago in Watchdog.org:
The city’s hopes that fans would line up — like at the end of the movie — for its taxpayer-funded minor league baseball stadium didn’t materialize. MGM Park averaged 3,459 fans in 46 home games, 541 fans per game short of the 4,000 average envisaged by a study commissioned by the city.
The team, under its original lease with the city, was to pay $150,000 each year in rent plus a $2 surcharge on every ticket sold up to 231,250. The city, in a deal reached with the team, gave up that surcharge for the first two years of the 20-year lease in exchange for not having to pay additional fines of $10,000 per missed game if the stadium wasn’t open by June 1....
In 2013, Mississippi Gov. Phil Bryant announced plans to award $15 million in oil spill funds to the stadium, projected to cost $36 million. Biloxi voted to borrow $21 million in bonds to pick up the rest of the tab for the park.... Article.
Stay tuned, folks. It looks like we are going to have a courthouse conflict.
Kingfish note: The city sold $21 million in bonds to build the stadium. The professional service fees for the bond transaction are:
$21,000: Mississippi Development Bank (Issuer)
$12,000: Balch & Bingham (Issuer's counsel)
$60,000: Government Consultants, Inc. (Financial advisor)
$4,000: Hancock Bank (Trustee)
$74,500: Page Mannino, Peresich, & McDermott (bond counsel)
$52,500: Butler Snow (Disclosure counsel)
$5,000: Michael Collins (City Counsel)
$16,000: S&P Rating Serrvice
$500: Spence Flatguard (State bond attorney)
Note: The lawsuit is only 9 pages. The other 80 pages are comprised of exhibits.