ITEM #11E - Fredericksburg, VA

ITEM #11E

MEMORANDUM TO: City Council FROM: Kathleen Dooley, City Attorney DATE: June 26, 2013 RE: Multi-purpose Minor League Baseball Stadium ISSUE: Shall City Council initiate a Comprehensive Plan and Capital Improvements Plan amendment process for the proposed construction of a $30M multi-purpose Minor League Baseball stadium in Celebrate Virginia South? RECOMMENDATION: This is a decision for the governing body, to be made after hearing public comment at the July 9 public hearing. The Comprehensive Plan and Capital Improvements Plan amendments would begin a process that could include land acquisition, public finance planning, and negotiating a stadium lease with the baseball team. At the conclusion of the preparatory work, Council would conduct another set of public hearings on the details of any final proposal. BACKGROUND: The Project: The Hagerstown Suns, the Class A Minor League Baseball affiliate of the Washington Nationals, proposes to relocate to Fredericksburg. Under the Team’s proposal, the City would acquire land in Celebrate Virginia South and construct a multi-purpose Minor League Baseball stadium. The estimated cost of the stadium is approximately $30 million, not including land acquisition costs. Land acquisition, stadium design and construction would be publicly financed, with a Team contribution of $3 million. The City would meet its debt obligations through the creation of a special service tax district to include property within Central Park and Celebrate Virginia South. In addition, the City is authorized by special legislation to apply a portion of the state sales tax revenues generated at the stadium to debt service.

ITEM #11E

The proposed 4,750 seat stadium would be the home of a Minor League Baseball team and potentially the site of 25 to 35 non-baseball events throughout the year. The stadium would be leased to the team for year-round operation. The Team’s proposal is contained in its May 13, 2013 Stadium Lease Proposal. Exhibit C of the Stadium Lease Proposal shows the general design concept for the stadium. The Comprehensive Plan: The Comprehensive Plan is the City’s strategic plan for future public and private development. It is made with the purpose of “guiding and accomplishing a coordinated, adjusted and harmonious development of the territory which will, in accordance with present and probable future needs and resources, best promote the health, safety, morals, order, convenience, prosperity and general welfare of the inhabitants” of the City.1 Compliance with the Comprehensive Plan is mandatory for new public facilities, including public stadiums.2 The proposal before Council is to initiate an amendment to Chapter 9, “Public Facilities,” and Chapter 18 “Action Plan,” to add a new Initiative:

Develop a multi-purpose minor league baseball stadium in Celebrate Virginia South.

All amendments to the Comprehensive Plan must be referred to the Planning Commission for public hearing and recommendation. The time frame for the Planning Commission’s work is 60 days unless a longer time is authorized by the governing body.3 The Capital Improvements Plan: The Capital Improvements Plan is the City’s cost and financing estimate for large-scale public facilities, equipment and infrastructure, such as streets, bridges, sidewalks, ambulance units and fire trucks, police cars, water and wastewater infrastructure, and parks. The CIP provides City residents with an overview of anticipated “big ticket” capital expenditures and assists the City in planning for those expenses. The CIP provides a financial plan for implementing the new public facilities envisioned in the Comprehensive Plan. The proposal before City Council would refer a Capital Improvements Plan amendment for a $30 million expenditure in FY 2014, in a new fund to be designated the “Multi-purpose Baseball Stadium Capital Fund,” to the Planning Commission for review and comment in conjunction with the Comprehensive Plan Amendment. Special Service District financing: The Team proposes that the Council establish a special service tax district to pay debt service on the project. The proposed special service district, encompassing much of Central Park and

1 Code of Virginia §15.2-2223. 2 Code of Virginia §15.2-2232. 3 Code of Virginia §15.2-2229.

ITEM #11E

Celebrate Virginia South, is shown on the map dated June 2013, attached. This map shows revisions from the May 28, 2013 Team proposal. A revised parcel listing is also attached. Council has engaged the services of bond counsel and its financial advisor to review the special service district proposal. Bond counsel submitted confidential legal advice to the City Council. The financial advisor’s written memorandum is attached for public review. The EDA’s Market Study and Financial Analysis: The Fredericksburg Economic Development Authority commissioned Brailsford & Dunlavey to perform a Multi-Use Stadium Market Analysis (available on the EDA’s websitehttp://www.fredericksburgva.com/uploadedFiles/Main_City_Content/Doing_Business/Files/Multi-Use Stadium Market Analysis Report - May 2013.pdf) which concluded that the Fredericksburg market “has an exceptionally strong demographic profile for minor league baseball given its ideal household wealth, spending, and size characteristics.” The Market Analysis projected stabilized attendance levels of 4,100 to 4,600 for minor league baseball games at the stadium, and between 25 and 35 non-game revenue-generating events per year. The EDA also commissioned B&D to conduct a confidential Financial Analysis of the May 13 Stadium Lease Proposal. The portion of this confidential Financial Analysis released for public review is attached. Financial Advisor’s memorandum: Mr. Kevin Rotty, Managing Director for the firm Public Financial Management, has advised the City on all of its recent public bond offerings. His written financial advice for Council regarding the proposed special tax district is attached. ATTACHMENTS: Resolution Initiating Comprehensive Plan and Capital Improvements Plan Amendments May 13, 2013 Stadium Lease Proposal June 20, 2013 Team’s Proposed Special Service District Map June 20, 2013 Special Service District Parcel Listing May 28, 2013 Brailsford & Dunlavey Financial Analysis (excerpt) June 27, 2013 Memo from financial advisor Kevin Rotty, Managing Director, Public Financial Management Inc.

http://www.fredericksburgva.com/uploadedFiles/Main_City_Content/Doing_Business/Files/Multi-Use%20Stadium%20Market%20Analysis%20Report%20-%20May%202013.pdf

http://www.fredericksburgva.com/uploadedFiles/Main_City_Content/Doing_Business/Files/Multi-Use%20Stadium%20Market%20Analysis%20Report%20-%20May%202013.pdf

MOTION: July 9, 2013 Regular Meeting SECOND: Resolution No. 13-__ RE: REFERRING AN AMENDMENT TO THE COMPREHENSIVE PLAN

(2007) AND THE CAPITAL IMPROVEMENTS PLAN FOR THE CONSTRUCTION OF A $30M MULTI-PURPOSE BASEBALL STADIUM, TO THE PLANNING COMMISSION FOR PUBLIC HEARING AND RECOMMENDATION

ACTION: APPROVED: Ayes:0; Nays: 0

WHEREAS, Fredericksburg City Council adopted the Fredericksburg Comprehensive Plan (2007) by adoption of Resolution 07-92 on September 25, 2007;

WHEREAS, Code of Virginia (1950) as amended, §15.2-2232 states that no public

building or public structure shall be constructed, established or authorized, unless the general location or approximate location, character and extent thereof is shown on the Comprehensive Plan.

WHEREAS, Code of Virginia (1950) as amended, §15.2-2239 provides that a local

planning commission may, and at the direction of the governing body shall, prepare and revise annually a capital improvements program based on the comprehensive plan, and shall consult with the chief administrative officer of the locality and interested citizens and organizations and hold such public hearings as it deems necessary.

WHEREAS, the City Council wishes to consider the development of a publicly-

owned multi-purpose baseball stadium in Celebrate Virginia South.

NOW THEREFORE, BE IT RESOLVED that the Fredericksburg City Council:

1. Refers to the Planning Commission an amendment to Comprehensive Plan (2007) which adds the following Initiative to Chapter 9, “Public Facilities” and Chapter 18, “Action Plan:”

Develop a multi-purpose minor league baseball stadium in Celebrate Virginia South.

2. Refers to the Planning Commission an amendment to the Capital Improvements Plan

which adds a $30 million expenditure in FY 2014 in a new fund to be designated the “Multi-purpose Baseball Stadium Capital Fund.”

July 9, 2013 Resolution 13-__

Page 2

3. Requests that the Planning Commission conduct a public hearing on these amendments in conformance with Code of Virginia §15.2-2229 and make its recommendation to City Council within 60 days.

Votes: Ayes: Nays: Absent from Vote: Absent from Meeting:

***************

Clerk’s Certificate I, the undersigned, certify that I am Clerk of Council of the City of Fredericksburg, Virginia, and

that the foregoing is a true copy of Resolution No. 13- duly adopted at a meeting of the City Council meeting held July 9, 2013 at which a quorum was present and voted.

____________________________________ Tonya B. Lacey, CMC

Clerk of Council

2013 05 13 Stadium Lease Agreement – Fredericksburg, VA – CONFIDENTIAL & PROPRIETARY

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STADIUM LEASE AGREEMENT

This Stadium Lease Agreement (hereinafter “Stadium Lease” or “Agreement”) is made and

entered into this _______day of _____________2013 by and between the CITY OF

FREDERICKSBURG, a Virginia municipal corporation (“Stadium Owner”) and

HAGERSTOWN BASEBALL, LLC, a Florida limited liability company or its

designee/nominee (“Lessee”) (each a “Party” and together the “Parties”).

WITNESSETH WHEREAS, Lessee is the owner of a Class A minor league professional baseball franchise (the

“Franchise”), a member of the League of Minor League baseball, as hereinafter defined, which is

presently affiliated with the Major League Baseball Franchise;

WHEREAS, the Stadium Owner and Lessee each desire that Lessee play its Home Games, as

hereinafter defined, in the City of Fredericksburg, VA (the “City”);

WHEREAS, the Stadium Owner has agreed to finance and construct a multi-purpose baseball

and entertainment stadium (“Stadium”) in the City on the location described in Schedule A

hereto, on property owned or to be acquired by or on behalf of the Stadium Owner (“Site”) for

management, operation and use by Lessee for the exhibition of minor league professional

baseball games and other events, including but not limited to those enumerated and defined as

“additional, more complete, or more timely government services” in Virginia Code §15.2-2403,

as amended (all referred to as the “Allowed Uses”);

WHEREAS, the Stadium Owner intends to finance, develop, construct and lease the Stadium to

Lessee under the terms and conditions set forth herein;

WHEREAS, Lessee desires to lease the Stadium from the Stadium Owner for the Allowed Uses,

and to exclusively manage, use and operate the Stadium for the Term (as hereinafter defined) as

outlined in this Agreement;

WHEREAS, the Stadium Owner and Lessee desire this Agreement to set forth their full and

complete understanding of the terms and conditions under which the Stadium Owner will

construct, and Lessee will occupy, operate, manage and use the Stadium, for the Allowed Uses,

which include the scheduling and playing of baseball games and the conduct of other events

therein as provided in this Agreement.

NOW WHEREFORE, for and in consideration of the premises, the mutual promises and

covenants contained herein, and other good and valuable consideration, the receipt sufficiency

and adequacy of which are expressly acknowledged, the Stadium Owner and Lessee, each

intending to be legally bound do hereby mutually agree as follows:

DEFINITIONS

For all purposes of this Agreement the following capitalized terms shall have the following

meanings:

“Agreement” shall have the meaning set forth in the introductory paragraph of this Agreement.

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“Allowed Uses” shall have the meaning set forth in this Stadium Lease and shall include those

enumerated now or in the future as “additional, more complete, or more timely government

services” in Virginia Code §15.2-2403, as amended.

“Available Parking Areas” shall have the meaning set forth in Section 6(c).

“Baseball Game” means any Game or any other baseball game or baseball exhibition game

played in the Stadium including games sanctioned by a professional league, and any college,

high school or other amateur baseball game.

“Beneficial Occupancy” shall occur when all final regulatory approvals (including federal, state,

county and city approvals, as applicable) have been obtained for the Stadium, the Site and

appurtenant improvements (including, without limitation, the seating areas, Concessions areas,

Concessions equipment, playing field, Suites, press boxes, parking areas, drainage facilities, and

other improvements agreed upon by the parties for proper operation and use of the Stadium), and

evidence of such approvals (including, without limitation, a certification of completion by the

Stadium architect) has been delivered to Lessee such that it is reasonably understood that the

Stadium can be used for its intended purposes.

“Capital Expenditures” shall have the meaning set forth in Section l0(i).

“Commencement Date” shall have the meaning set forth in Section 3(e).

“Concessions” means all food and beverages, including but not limited to beer, wine and wine

coolers, alcoholic and nonalcoholic beverages, confections, peanut, popcorn, ice cream, hot dogs,

hamburgers, and all other food and beverage items customarily sold at baseball games and other

events in stadiums of similar type as the Stadium. The term Concessions includes all food and

beverage catering services provided in Suites, gathering and picnic areas and all other group

catering services but shall not include Merchandise.

“Defaulting Party” shall have the meaning set forth in Section 15.

“Deficiency” shall have time meaning set forth in Section 3(g).

“Delayed Deficiency” shall have the meaning set forth in Section 3(g).

“Effective Date” shall have the meaning set forth in Section 2(a).

“Event” or “Events” means a Baseball Game or Other Event.

“First Renewal Term” shall have the meaning set forth in Section 2(b).

“Franchise Event” means a Franchise Baseball Game or Other Event.

“Force Majeure” means any cause or event not within the reasonable control of the Stadium

Owner or Lessee, excluding those due to the Stadium Owner’s or Lessee’s negligence, but

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including, without limitation, natural disasters; strikes, lockouts or other industrial disturbances;

acts of public enemies; acts of terrorism; validly issued orders of restraint of any kind of the

Government of the United States of America, the Commonwealth of Virginia, or City of

Fredericksburg, VA or any of their departments, agencies or officials, or any other governmental,

civil or military authority; insurrection; riots; landslides; earthquakes; fires; storms; droughts;

floods; explosions; breakage or accidents to machinery, transmission pipes or canals.

“Game” means any exhibition game, all-star game, regular season game, preseason game, or

postseason game (i.e., a game that occurs as a result of a team making the playoffs in its league)

between a professional or amateur sports team and any opposing team at the Stadium.

“Gross Expenses” means any and all expenses incurred or paid by Lessee arising from or derived

from the operation, use and maintenance of the Stadium and any Event at the Stadium, whether

paid or incurred by Lessee or by any entity wholly-owned by Lessee, including but not limited

to, costs of goods; payroll (excluding any amount paid to, or incurred for, the salary of any

owner of Lessee); taxes and fees; Lessee’s capital expenditures; service and gratuity charges;

appearance or other fees to performers or professionals in all Baseball Games and Events;

commissions to non-profit organizations or to third party vendors; fees to or for management

companies, Minor League Baseball, Major League Baseball, or MLBAM; charitable donations

and expenses contemplated by this Agreement.

“Gross Revenues” means all taxable revenue arising from or derived from the operation and use

of the Stadium and any Event at the Stadium, whether received by Lessee or by any entity

wholly-owned by Lessee, including but not limited to, Ticket Sales, all of the items mentioned in

Section 6(a) through (o), inclusive, income from third-party concession vendors and revenue

contemplated by this Agreement, but shall exclude any revenue amounts expected or received as,

or for, Stadium Naming Rights.

“Home Game” means any Minor League Baseball game or other game in which the Lessee

Franchise acts as the host team for its opponent (i.e., the Franchise takes the field in the first half

of each inning and bats in the last half of each inning of such baseball game).

“Initial Term” shall have the meaning set forth in Section 2(a).

“League” means the South Atlantic League or any successor thereof.

“Lease Payment” shall have the meaning set forth in Section 5.

“Lessee” means Hagerstown Baseball, LLC and its subsidiaries and controlled affiliates together

with its approved successors and assigns.

“Lessee Exclusive Areas” means the entire Stadium property and premises, including parking

areas.

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“Major Leagues” means Major League Baseball, which includes the National League of

Professional Baseball Clubs, the American League of Professional Baseball Clubs, and the teams

comprising the American and National League, or any of them.

“Merchandise” means all souvenirs; novelties; scorecards; programs, yearbooks and other

publications: promotional materials; hats, jerseys. t-shirts and other sports apparel and

merchandise, including but not limited to items bearing Lessee’s insignia or the insignia of teams

in Major League Baseball, the League or any other professional team or organization; and any

other similar or incidental items customarily sold at baseball games in stadiums of similar type as

the Stadium.

“Minimum Standards” shall have the meaning set forth in Section 3(b).

“Minor League Baseball” means the National Association of Professional Baseball Leagues, Inc.

“MLBAM” means Major League Baseball Advanced Media. L.P.

“Necessary Items” shall have the meaning set forth in Section 10(j).

“Non-Defaulting Party” shall have the meaning set forth in Section 15.

“Other Event” means an event at, or other usage of, the Stadium other than a team sport.

“Parking Spaces” shall have the meaning set forth in Section 6(c).

“Property Taxes” shall have the meaning set forth in Section 19.

“Profit” shall mean the Gross Revenues (as defined herein) minus Gross Expenses (as defined

herein) in or for any year, which Lessee shall determine and calculate annually.

“Profit Sharing to Stadium Owner” shall mean fifteen (15%) percent of only the amount by

which the Profit (as herein defined) for any year exceeds Seven Hundred Thousand ($700,000)

Dollars, which the Lessee shall determine and calculate annually.

“Second Renewal Term” shall have the meaning set forth in Section 2(b).

“Site” shall have the meaning set forth in the preamble of this Agreement.

“Stadium Naming Rights” shall have the meaning set forth in Section 6(h).

“Stadium” shall have the meaning set forth in the preamble of this Agreement.

“Stadium Capital Improvements Fund” means a trust fund established by the Stadium Owner for

use for Capital Expenditures and equipment change-out solely at or for the Stadium as described

in Section 10(l).

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“Stadium Maintenance Fund” shall mean a trust fund established by the Stadium Owner for use

for Maintenance and similar Stadium items at or for the Stadium as described in Section 10(m).

“Suites” means the private suites to be located in the Stadium which shall be enclosed and air

conditioned.

“Term” shall have the meaning set forth in Section 2(c) hereof.

“Ticket Sales” means the revenue received from all ticket sales for all Events at the Stadium less

all applicable taxes.

“Utilities” shall mean services including electric, gas, sewage, heating oil, sanitation and water

utilized at the Stadium and in the Stadium area.

“Video Displays” shall have the meaning set forth in Section 3(c).

SECTION 2 – LEASE TERM

(a) Initial Term. This Agreement shall be effective upon execution by the Stadium Owner and

the Lessee (“Effective Date”). The initial term of this Agreement shall commence on January 1,

2014 and shall continue for thirty (30) years until and through December 31, 2044 (the “Initial

Term”) and shall expire after the year 2044 unless extended pursuant to its terms.

(b) Renewal Terms. Provided the Lessee is not in default of any of Lessee’s material obligations

under this Agreement. Lessee shall have the right, upon written notice to the Stadium Owner at

least nine (9) months prior to the end of the Initial Term, to extend the Term of this Agreement

for an additional five (5) years following the Initial Term (the “First Renewal Term”). In the

event that Lessee exercises Lessee’s option to extend the Term of this Agreement into the First

Renewal Term, then, provided that Lessee is not in material default hereunder, Lessee shall have

one (1) additional option to extend the Term of this Agreement for an additional five (5) years

after the First Renewal Term (the “Second Renewal Term”), by notifying the Stadium Owner of

Lessee’s exercise of such option no later than nine (9) months prior to the expiration of the First

Renewal Term. There shall be no privilege to renew or extend the Term of this Agreement (or

any period of time beyond the expiration of the Second Renewal Period without a subsequent

mutually agreed upon amendment to this Agreement executed in compliance with this

Agreement. The Initial Term, together with any applicable renewal periods (the First Renewal

Term and the Second Renewal Term, as applicable) shall be known as, and considered to be part

of the “Term” for all intents and purposes hereunder.

SECTION 3 - STADIUM DEVELOPMENT & COMPLETION

(a) Site. The Stadium Owner represents and warrants that it has acquired or will acquire

possession of all ownership rights to the Site and any and all rights and licenses necessary to take

possession of and develop the Site, to build the Stadium on the Site, and to allow Lessee to

utilize the Stadium, and that Stadium Owner’s performance of this Agreement and each party’s

exercise of such party’s rights under this Agreement will not conflict with or result in a breach of

any binding agreement to which the Stadium Owner is a party.

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(b) Development of the Stadium. The Stadium Owner shall develop the Stadium on the Site

such that, upon completion, the Stadium will be of a quality that meets or exceeds that of the

newest minor league baseball stadiums in the region and that will meet or exceed the standards

and specifications established by the League and by Minor League Baseball for Class A

Stadiums (“Minimum Standards”). The Stadium shall be reasonably energy efficient, based upon

construction standards and practices at the time of its construction and the Stadium Owner will

consider “green” solutions when economically and commercially viable. In order to ensure that

the Stadium meets the foregoing requirements, the Stadium Owner agrees to consult on an

ongoing basis with Lessee on Site location and acquisition, design of the Stadium, the Project

Budget (as defined below) and during the construction. Lessee shall be invited to participate in

all meetings related to Site location, acquisition, design, planning and construction.

(i) The Stadium Owner shall finance, pay and contract for the development of the Stadium,

and be responsible for all work, construction and installation of all systems related to operation

of the Stadium, including the build-out of the Lessee Exclusive Areas, all in accordance with the

project budget attached hereto as Schedule B (the “Project Budget”) and incorporated herein by

this reference. Without limiting the foregoing, the Stadium will include those items set forth on

Schedule C (“Stadium Items”) attached hereto and incorporated herein by this reference. The

parties agree that the budget for the Stadium with parking shall be Twenty-Nine Million Five

Hundred Thousand ($29,500,000.00) Dollars excluding the cost of Site acquisition, and that the

Project Budget shall reference the amount Three Million ($3,000,000) Dollars which Lessee

shall contribute at the appropriate time to reimburse Stadium Owner for the acquisition of Site

(“Lessee’s Contribution”). The parties agree the Stadium Owner shall expend and apply the

Lessee’s Contribution in the following order of priority; first to reimburse Stadium Owner for the

acquisition of Site; second, if available, then to fully fund in advance all or part of the Stadium

Owner’s required contribution to the Stadium Capital Improvements Fund, as defined and

described below in Section 10.(l), for the Initial Term of this Agreement, in the amount of no

more than One Million Five Hundred ($1,500,000) Thousand; third, if available, then to fund in

advance all or part of the Stadium Owner’s required initial contribution to the Stadium

Maintenance Fund, as defined and described below in Section 10.(m), in the amount of no more

than Fifty Thousand ($50,000) Dollars; and fourth, if available, then to satisfy, reduce and/or

apply toward Lessee’s responsibility for cost overruns in excess of the Project Budget as

described in Section 3.b.(ii), below. The Stadium Owner shall use commercially reasonable

efforts to obtain and maintain (or work with the City and or the Virginia Department of

Transportation to obtain and maintain) directional signage to the Stadium on all nearby major

highways and thoroughfares directing patrons to the Site. The Stadium Owner will be

responsible for using best efforts toward obtaining permission and approvals to install eight (8)

video signs within City limits to generate interest in the development of the Stadium and major

events to be held at the Stadium. The Stadium Owner shall be solely and completely responsible

for providing proper ingress and egress to the Stadium.

(ii) The Lessee shall be solely and completely responsible for any and all cost overruns in

excess of the Project Budget referenced in Schedule B, but shall receive credit against such

responsibility in the amount of any funds remaining or available from the priority of applications

of the Lessee’s Contribution described above in Section 3.b.(i).

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(iii) If Lessee desires upgraded or additional features that are reasonably considered to be

beyond the scope of the Project Budget (including without limitation upgrades or additions to the

administrative offices beyond the base build-out contemplated in the Project Budget), then

Lessee may either (i) offer to directly pay, by using or applying any Site acquisition contribution

credit referenced in this Section against, the incremental cost of such upgraded or additional

features over and above the amount, if any, set forth in the Project Budget for such features, in

which case such upgraded or additional features shall be incorporated into the project and Lessee

shall pay such incremental amounts upon construction of such features; or (ii) request that the

Stadium Owner assume the initial expense of such upgraded or additional features in which case

the Stadium Owner will consider such request and may offer to approve such upgrades or

additions subject to mutual agreement regarding an appropriate adjustment to Stadium Rent.

(iv) The Stadium Owner represents warrants and covenants that the design, development and

construction of the Stadium shall comply with all applicable local, state and federal laws,

ordinances, codes and regulations, and the Stadium will be designed to comply with the

Americans With Disabilities Act of 1990, as amended, and all other applicable local, state and

federal laws, ordinances, codes and regulations.

(v) Notwithstanding anything to the contrary contained in this Agreement and

notwithstanding any review by Lessee of the design development and construction documents

relating to the Stadium, Stadium Owner shall be solely responsible for the design and

construction of the Stadium. Lessee shall have no responsibility or liability with regard to the

safety, sufficiency, adequacy or legality thereof and the Stadium Owner shall be solely

responsible for the compliance of all plans and specifications with all applicable laws and

regulations.

(vi) The Stadium Owner shall obtain and/or make all reasonable efforts to ensure as

appropriate and commercially reasonable, that all permits, approvals and clearances are promptly

obtained to assist in the timely completion of each phase of construction. The Stadium Owner, its

employees or agents will obtain such building permits, signage, noise and light ordinance

permits and/or clearances as necessary to alter street and traffic flow as per the Stadium plan and

such other permits and clearances as may be required in order to complete the Stadium as

contemplated hereunder.

(c) Stadium Signage. The Stadium Owner shall be responsible to ensure that the Project Budget

in Schedule B includes the purchase and installation of a quality double sided video board, two

(2) outfield wall Ribbon Boards for sponsorship sign displays. two (2) marquee video entrance

boards, eight (8) color remote controlled sign boards through key locations in City and in and at

the Stadium (the “Video Displays”), an amount necessary to provide Video Displays equal to or

greater than the quality of those currently in existence at other similar stadiums. The Video

Displays shall include software and hardware necessary for operation and three remote control

cameras to broadcast games on video boards and through cable TV. In the Project Budget,

Lessee shall include and locate at the Stadium a telecommunications, electrical and empty rough-

in structure for a future kiosk-type display to be used solely for marketing or advertising of

Stadium Owner’s activities involving the City of Fredericksburg, subject to Lessee’s approval of

content thereof.

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(d) Concessions. The Stadium Owner shall be responsible only up to the amount set forth in

Schedule B attached hereto (Project Budget), for the costs necessary to equip and install

Concessions equipment in commissary, kitchen, concourse and other fan areas of the Stadium. In

the event Lessee determines that additional Concessions equipment is needed over and above the

equipment purchased from the Concessions budget, Lessee may at its sole discretion, cost and

expense, purchase and install such additional Concessions equipment in the same manner (Site

acquisition contribution credit) as described above in Section 3.

(i) The Lessee shall be responsible for the maintenance and repair of all Concessions

equipment located in the Stadium and the Stadium Owner will consider purchasing extended

warranties from vendors as appropriate from the Stadium Maintenance Fund.

(ii) The Lessee shall use commercially reasonable efforts to cooperate with Stadium Owner’s

attempt(s) to secure all necessary licenses and permits to sell and serve beer, wine and liquor at

the Stadium on or before April 1, 2014.

(e) Commencement & Beneficial Occupancy. The Stadium Owner shall break ground and

commence construction of the Stadium not later than July 1, 2013 (“Commencement Date”).

(i) The Stadium Owner shall have the Stadium available for Beneficial Occupancy on or

before April 1, 2014. It is understood that if certain parts of the Stadium are ready for Beneficial

Occupancy prior to others, Lessee may take early occupancy of such areas if acceptable to the

Stadium Owner, and possession of such areas by Lessee shall constitute Beneficial Occupancy of

the Stadium. The parties acknowledge that in order for Lessee to effectuate a smooth transition

of Games to the Stadium, it is important for Lessee to have access to and use of the Stadium

team offices as early as possible in the 2014 calendar year. Accordingly, the Stadium Owner

shall make all commercially reasonable efforts to ready the Stadium team offices for occupancy

by Lessee on or before April 1, 2014.

(ii) Lessee shall make all commercially reasonable efforts to cooperate with Stadium Owner

to ensure that the Stadium is available for Beneficial Occupancy by April 1, 2014. Lessee shall

not take any action that would unduly delay the Stadium Owner’s ability to meet its obligations

under this Section 3. Absent a willful default by Stadium Owner of its obligations under this

Section 3, or as otherwise provided for in this Agreement, Lessee shall take Beneficial

Occupancy of the Stadium under the Terms of this Agreement on or before April 1, 2014.

(f) Moving Expenses. Lessee, at its sole cost and expense, shall be responsible for all costs and

expenses arising in conjunction with the relocation of Lessee’s equipment from its current

location to the Stadium and shall make every effort to complete such relocation promptly before

April 1, 2014.

(g) Deficiencies. The parties acknowledge and agree that additional improvements and

modifications to the Stadium may be necessary following the date of Beneficial Occupancy to

correct incomplete or inadequate work or other shortfalls in Stadium construction (each, a

“Deficiency”). Lessee and the Stadium Owner agree to work together to identify the Deficiencies

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and to correct the Deficiencies in a prompt and efficient manner provided such Deficiency is

related to the original Project Budget and design scope of the Stadium.

In this regard, upon notification by Lessee of a Deficiency, the Stadium Owner agrees to use

commercially reasonable efforts to correct such Deficiency within fifteen (15) days of such

notification. The Stadium Owner further agrees that work to correct such deficiencies shall not

materially interfere with the staging of Baseball Games or Other Events at the Stadium. If the

Stadium Owner does not correct a Deficiency within fifteen (15) days of such notification (a

“Delayed Deficiency”), or if Lessee determines in good faith that the Deficiency is of such an

urgent nature that it must be repaired in less than fifteen (15) days, then Lessee shall be entitled

to correct such Deficiency upon prior notice to the Stadium Owner, provided that in the case of a

Delayed Deficiency, the cost to correct such Delayed Deficiency is less than Fifty Thousand

($50,000) Dollars.

If necessary in order to preserve product or service warranties, Lessee shall use reasonable

efforts to engage contractors from a pre-approved list of contractors provided by the Stadium

Owner. Lessee shall invoice the Stadium Owner for the costs incurred in correcting such

Delayed Deficiency, and the Stadium Owner shall reimburse Lessee from the Stadium Capital

Improvement Fund for such costs within forty-five (45) days of receipt of such invoice, If the

Stadium Owner fails to reimburse Lessee within such forty-five (45) day period and the Stadium

Owner is not then contesting the invoice or the amount thereof, then Lessee shall be entitled to

offset such costs from subsequent Stadium Rent payments or other payments required under this

Agreement.

(h) Lessee Remedies. The Stadium Owner acknowledges that its covenant to have the Stadium

available for Beneficial Occupancy on or before April 1, 2014 is of great importance to Lessee

and that in the event the Stadium is not available for Beneficial Occupancy on or before April 1,

2014, Lessee will suffer damages. the actual amount of which would be impractical or extremely

difficult to determine, that the liquidated damages amount set forth below is a reasonable pre-

estimate of what Lessee’s monetary damages would be in the event the Stadium is not available

for Beneficial Occupancy on or before April 1, 2014 and it is the parties’ mutual intention that

the Lessee receive liquidated damages to compensate Lessee if the Stadium is not available for

Beneficial Occupancy on or before April 1, 2014, rather than penalties. Therefore, in the event

the Stadium is not available for Beneficial Occupancy on or before April 1, 2014 then Lessee

will have the following available remedies: The Stadium Owner shall ensure that any general

contractor of the Stadium contractually agrees to pay to Lessee liquidated damages for each day

after April 1, 2014 on which the Stadium is not available for Beneficial Occupancy the amount

of Two Thousand ($2,000) Dollars per calendar day or to provide, at other than Lessee’s

expense, an alternative and temporary location suitable to Lessee until Beneficial Occupancy is

obtained. The parties hereby acknowledge and agree that failure of either party to meet its

obligations under Section 3(e) of this Agreement would result in significant financial and other

harm to the Lessee and that such harm would be difficult to calculate with precision. The parties

thus acknowledge and agree that the amounts provided for in this Section 3(h) as remedies in the

case of a violation of Section 3(e) of this Agreement amount to liquidated damages, and not a

penalty, and such amounts are a reasonable estimate of damages that would occur in the event of

such breach.

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It is specifically understood by and between the parties that notwithstanding any liquidated

damages contained herein, if the Stadium is not available for Beneficial Occupancy on or before

April 1, 2014, Lessee shall have the right to schedule its activities or events at another stadium

and Lessee’s obligations pursuant to this Agreement shall be abated and suspended. Lessee shall

make commercially reasonable efforts to move into the Stadium as soon as possible following

the date on which the Stadium becomes available for Beneficial Occupancy, subject, however to

any commercially reasonable arrangements Lessee makes or has made to secure use of another

stadium during the period in which the Stadium is not available for Beneficial Occupancy,

including if the arrangement for use of such other stadium extends beyond the date on which the

Stadium becomes available for Beneficial Occupancy.

(i) Insurance During Construction. The Stadium Owner agrees it will, at all times prior to the

Commencement Date maintain or cause the general contractor for the construction of the

Stadium to maintain, in full force and effect, comprehensive builders risk, casualty, property, and

commercial general liability insurance covering all bodily injury, death and properly damage at

the Site. Such policy or policies of insurance shall name the Stadium Owner and Lessee as

additional insureds, as their respective interests may appear, and the Stadium Owner shall cause

the general contractor to maintain worker’s compensation insurance as required by law. Said

insurance policy or policies shall contain a provision that such insurance may not be canceled by

the issuer thereof without at least thirty (30) day’s advance written notice to the Stadium Owner

and Lessee. The Stadium Owner shall deliver copies of such policies of insurance to Lessee upon

Lessee’s request.

SECTION 4 – STADIUM USE

(a) Management of the Stadium. Lessee shall have the exclusive rights to manage, occupy, use

and operate the Stadium throughout the Term as set forth in this Agreement.

(b) Other Events. Lessee shall have the exclusive right to schedule and use the Stadium to play,

stage or hold, any Other Events, including all activities incidental to Other Events without prior

consent of Stadium Owner. Lessee agrees to host, manage all events requested by Stadium

Owner, including but not limited to Arts, Music, Automobile Shows & Antique Shows.

(c) Ticketing. Lessee shall be responsible for the printing, sale and collection of all tickets for

admission to all Events. Lessee shall have the exclusive right to set ticket prices for admission to

all Events. Tickets to Games shall be sold or distributed via an automated ticket system sufficient

to verify ticket sales.

(d) Lessee Exclusive Areas. Lessee shall have the exclusive right to occupy and use the Lessee

Exclusive Areas on a year-round basis as outlined in this Agreement.

SECTION 5 – LEASE PAYMENT

(a) Rent. In consideration of the use and occupancy of the Stadium by Lessee, and the costs

incurred by the Stadium Owner to construct the Stadium. Lessee shall pay to the Stadium Owner

on an annual basis One Hundred Five Thousand ($105,000.00) Dollars through the end of the

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Term; except the first year’s rent shall be prorated using the date on which the Lessee takes

Beneficial Occupancy of the Stadium.

(b) Payment of Rent. Payments required to be paid by Lessee under this Section 5 of this

Agreement shall be payable annually on January 1st of each year, except the first year to be

prorated as above, and billed by Stadium Owner before the first day of each year. Such required

payments shall commence in April 1, 2014 (prorated first year) and end at the end of the Term.

(c) Late Fee. If Lessee fails to make any Payment required under this Section 5 by the due date,

then after (10) days of the Stadium Owner's written notification to Lessee, the Stadium Owner

may charge Lessee a late fee of one percent (1%) of the overdue amount for each month or part

thereof that the same remains overdue. Any such “late fee” shall be deemed additional rent.

SECTION 6 – STADIUM REVENUES

(a) All Events. For any and all Events at Stadium, Lessee shall receive all Gross Revenues. For

all Events, Lessee shall upon Stadium Owner’s request, provide a single block of twenty (20)

best available (for that Event) seating tickets at no charge, except that Stadium Owner shall be

responsible for any Concessions, Merchandise, other items and any gratutuies.

(b) Suites and Stadium Club. The Stadium shall include the Suites and Stadium Club as

referenced in the Stadium Items - Schedule C. Lessee shall have the right to use, or to lease or

license to third parties the right to use, all Suites, subject to Section 6(a) above, and the Stadium

Club during all Events held in the Stadium. Lessee shall be entitled to receive and retain all

revenues (net of applicable taxes) from the lease or license of the Suites or Stadium Club during

all Events.

(c) Parking. The Stadium Owner shall supply free Parking Spaces as referenced in the Stadium

Items - Schedule C for use by the Lessee during the Term. The Stadium Owner will work with

Lessee to determine the exact locations of the Available Parking Areas. Lessee may, in its sole

discretion, charge parking fees for any Event.

(d) Concessions. Lessee or an affiliated, licensed entity shall have the exclusive right, during the

term, to operate and sell Concessions at all Events held at the Stadium. Such right shall include

the right to contract with a third-party to operate and sell Concessions at all Events held at the

Stadium during the Term. Lessee shall receive all Gross Revenues derived from Concessions

sales at all Events. Lessee is hereby granted Stadium Owner’s permission to post signs in

appropriate locations in the Stadium which shall state that patrons are prohibited from bringing

any food, beverages, beverage containers or alcoholic beverages into the Stadium.

(e) Alcohol. Consistent with state laws and the provisions of this Agreement, Lessee has rights to

sell alcoholic beverages after obtaining all appropriate licenses and permits or otherwise

arranging for the legal sale of alcohol at the Stadium for all Events. If Lessee chooses to use an

outside caterer for the sale of alcohol, only a caterer licensed by the appropriate authority will be

allowed to serve alcohol. Lessee and the Stadium Owner agree that the use of alcohol in the

Stadium shall be in accordance with all laws and applicable rules and regulations of Major

League Baseball, Minor League Baseball and any other applicable governing body.

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(f) Pricing. Lessee shall have the sole, exclusive and absolute authority to set the prices of all

Concession items to be sold by Lessee or its concessionaires. Lessee shall post in a conspicuous

place at each concession stand (permanent or temporary) a list of prices of all items or services

offered for sale.

(g) Quality. All concessionaires and concession services permitted under this Agreement shall

be of first quality and commensurate with industry standards prevailing in stadiums similar to the

Stadium. Lessee shall provide and require concessionaires and concession services to be in a

sufficient number, involving properly trained concession personnel. Lessee shall maintain

standards of cleanliness and all drinks, confections and other items sold or kept for sale will

conform in all respects to applicable health regulations and laws.

(h) Stadium Naming Rights. During the Term, and upon approval by the Stadium Owner,

Lessee shall have the exclusive rights to designate the official name of the Stadium and the Site,

to market and sell the naming rights to the Stadium and the Site (the “Stadium Naming Rights”)

and to receive all Gross Revenues derived therefrom. The Stadium Owner will cooperate with

Lessee in good faith as requested by Lessee in furtherance of Lessee’s effort to market and sell

the Stadium Naming Rights. Lessee and the Stadium Owner shall mutually agree upon and

designate placement of any and all fixed exterior naming signage facing outside the Stadium,

with such signage to be included in the Project Budget and paid for by the Stadium Owner. All

Stadium Naming Rights revenue received by Lessee during the Term shall be shared one-half

each between the Lessee (50%) and the Stadium Owner (50%), but only after the Lessee first

deducts the value of the amenities (such as parking, food, beverage, admission, naming signage

or similar costs, suite/seating, etc.) granted to the any Stadium Naming Rights sponsor(s).

(i) Advertising; Sponsorship. Lessee shall have exclusive rights to sell advertising and

sponsorships for all areas of the Stadium based on rules of Minor League Baseball/Major League

Baseball for sponsorships including, but not limited to, fixed and rotational scoreboard signage,

signage outside the Stadium, outfield wall signage, video scoreboard advertising, concourse

signage, signage or advertising in Suites and all pre-game, in-game, post-game and team

sponsorships, including game night promotions, interactive fan games and contests, and all

giveaway promotions. To the extent mutually agreed upon by the Stadium Owner and Lessee

and permitted by the City’s municipal code, the Stadium Owner will permit Lessee to install

advertising signs on the exterior or interior of the Stadium walls. Lessee shall be entitled to

receive all Gross Revenues derived from advertising and sponsorship sales for the Stadium and

for all Events.

(j) Merchandise. Lessee or its assignees shall have the exclusive rights to sell Merchandise and

and shall receive all Gross Revenues received from such sales of Merchandise.

(k) Media. Lessee shall retain the exclusive right to broadcast via television, radio, internet or

other medium, all Franchise Events, or to sell such rights, including, but not limited to, broadcast

rights, on-air advertising and sponsorships. Lessee shall receive all Gross Revenues derived from

the staging of Events.

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(l) Pouring and Branding Rights. Lessee shall retain all pouring and branding rights at the

Stadium and receive all Gross Revenues derived therefrom.

(m) Games and Contests. Lessee shall have the right to charge admission, participation and

related fees and charges in connection with the operation and staging of other activities at the

Stadium during all Events. Lessee shall receive all Gross Revenues derived from such other

activities at Lessee Events during the Term.

(n) Arcade Games. Lessee shall receive all Gross Revenues derived from Arcade Games in the

Stadium during the Term (“Arcade Revenues”). The Lessee will supply manpower and gifts for

ticket redemption at the Lessee’s cost related to said arcade games in the Stadium. In this regard,

the Lessee will supply said arcade games and change and ticket dispensers and shall be

responsible to provide maintenance thereof. Lessee will be responsible for the replenishment of

change or ticket machines

(o) All Other Revenues. Subject to Section 6(a) of this Agreement, Lessee shall receive all other

revenues derived from the use, operation or management of the Stadium including all baseball

and non-baseball Events.

(p) Profit Sharing to Stadium Owner. The Lessee shall annually pay to the Stadium Owner the

Profit Sharing to Stadium Owner as defined in this Agreement.

(q) Calculation. Lessee’s calculation of Gross Revenues shall be made monthly and may be

determined by Lessee’s proprietary stadium management computer software.

(r) Access. The Lessee agrees to provide Stadium Owner a limited license with login rights to

access Lessee’s proprietary stadium management software (live reporting of Gross Revenues and

Profit as defined in this Agreement) for the sole purpose of determining the applicable taxes to

which Stadium Owner may be entitled and also the Profit Sharing to Stadium Owner.

SECTION 7 – PUBLIC SAFETY

(a) Police, Fire, etc. Unless otherwise mutually agreed by the Lessee and Stadium Owner, , the

Stadium Owner agrees to provide to support all Events at the Stadium the physical presence of

the standard and customary two (2) police units, one (1) paramedic emergency medical services

(“EMS”) unit and fire equipment as necessary for fireworks presentations (“Public Safety”). The

Stadium Owner acknowledges the importance to Lessee of being able to exhibit fireworks at

Baseball Games at the Stadium. Lessee is responsible for obtaining all necessary permits and

licenses for the exhibition of fireworks displays at Baseball Games. During any Event at

Stadium, Lessee agrees to make available (1) its in-Stadium private radio system to these Public

Safety personnel; and (2) reasonable food and non-alcohol beverage from its Concessions at no

charge, to any Public Safety personnel, as defined, and other uniformed police mobile street units

on duty in the City of Fredericksburg.

SECTION 8 – EVENT EXPENSES

(a) Lessee Obligations. Lessee at its sole cost and expense shall be responsible for the following

costs and expenses incurred in connection or associated with all Events:

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(i) Staffing expenses for Lessee’s employees and contractors, provided that, unless otherwise

required herein, Lessee shall determine staffing levels in Lessee’s sole determination;

(ii) Ticket takers, parking attendants at the Stadium, players and staff, and ushers;

(iii) Housekeeping, sanitation and other pre-Event, in-Event and post-Event clean-up, such as

trash pickup, pressure washing and restroom cleaning; and;

(iv) All other reasonable and customary expenses associated with conducting or staging

Events, other than as described in Section 7 (Public Safety), above.

(b) Stadium Owner Obligations. The Stadium Owner, at its sole cost and expense, shall be

responsible for the following costs and expenses incurred in connection with or associated with

the Stadium and all Events:

(i) Public Safety in all areas in and around the Site and Stadium in accordance with Section 7,

above; and

(ii) Fire safety services required by the city during Events where fireworks will be exhibited

and fire department services as necessary at all Events.

SECTION 9 - UTILITIES

(a) Lessee. Lessee shall be responsible for the cost of utilities for the Stadium, including, without

limitation, electricity, heating oil, gas, sewage, water and sanitation. The Stadium Owner shall be

responsible for any other utilities and any storm water management related fees required by local

or state ordinances.

SECTION 10 – MAINTENANCE; CAPITAL EXPENDITURES; STADIUM FUNDS

(a) General Maintenance. The parties shall perform maintenance tasks and capital

improvements in accordance with this Section.

(b) Lessee’s Cleanliness Responsibilities. Lessee shall keep the non-structural portions of the

interior premises in clean condition.

(c) Lessee’s Other Responsibilities. The Lessee shall be responsible for the general, year round

routine maintenance of the Stadium, including but not limited to snow and ice removal outside

the Stadium, office lighting, concession lighting, tenting, cleaning and repair of roofs and

downspouts, and painting of walls and other exterior surfaces, plumbing, HVAC, electrical

systems, field lighting (including aiming and adjusting of field lights and bulb replacement, as

needed), wheel chair lift, concourse lighting, doors, walls, fencing, foundations, access roads,

and underground utilities, except as otherwise provided in this Agreement. The Stadium Owner

will, in consultation with Lessee, winterize the Stadium and prepare it for spring each year.

(d) Plan. Annually during the month of October, representatives from Lessee and the Stadium

Owner shall establish a mutually acceptable plan for the maintenance of the Stadium. The plan

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will include an inventory of items of equipment and other property owned by each party with an

anticipated replacement schedule for each such item. The Stadium Owner and Lessee shall

conduct joint inspections of such items at times mutually agreed upon. The parties shall

accomplish or pay for the items included in the plan by utilizing the Stadium Maintenance Fund,

any expenditure from which shall require Stadium Owner’s pre-approval, which shall not be

unreasonably withheld.

(e) Landscaping. Stadium Owner shall be responsible to install landscaping within and outside

the Stadium in accordance with the Project Budget. Lessee shall maintain in good condition all

landscaping and planting areas at the Stadium. Lessee’s maintenance responsibilities include, but

are not limited to, any pruning, weeding, and fertilization as necessary to ensure that the

plantings remain healthy and attractive in the sole discretion of the Lessee.

(f) Playing Field. Lessee shall be responsible for the maintenance and upkeep of the entire

baseball playing field, including any routine drainage maintenance. Lessee shall maintain the

baseball playing field so that it meets all League and Minor League Baseball requirements. In

addition to the foregoing, Lessee shall be responsible for the care and upkeep of any tarpaulins

for the playing field. In the event Lessee determines after reasonable consultation with the

Stadium Owner that the baseball playing field needs to be replaced, the Stadium Owner will be

responsible for making commercially reasonable efforts towards such replacement utilizing the

Stadium Capital Improvements Fund. Additionally, Stadium Owner will purchase, included in

the Project Budget, a hard cover to protect the infield portion of the playing field for non-

sporting or Other Events.

(g) Video Displays. Lessee shall be responsible to operate the Video Displays including any

software upgrades and future releases to support the same. Lessee shall purchase a contract for

hardware and software support and maintenance and shall be responsible for same.

(h) Improvements. Except as otherwise provided in this Agreement, the Stadium Owner is

responsible for all improvements and or modifications to the Stadium required in order to ensure

compliance with the City's fire prevention code or other applicable law.

(i) Capital Expenditures. The parties covenant that the Stadium shall remain at or above the

Minimum Standards and comparable to other Class A minor league facilities in the region during

the Term. Without limiting the generality of the foregoing, the Stadium Owner, at its sole cost

and expense utilizing the Stadium Capital Improvements Fund and/or the Stadium Maintenance

Fund, shall be responsible for paying for, or reimbursing Lessee for, previously approved

reasonable, documented costs of all “Capital Expenditures” for the Stadium, including the

following:

(i) Labor and materials required to repair, restore, and/or replace, when necessary, all

structural components or parts of the Stadium, including, but not limited to, all foundations,

footings, structural members, piers, columns, walls, roofs, ramps and steps;

(ii) The provision of all labor and materials required to repair, restore, and/or replace, when

necessary, all integral components or parts of the Stadium, including, but not limited to, parking

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lots and access road surface and curb repairs, parking lot and access road lighting installations

including towers, poles, wires and conduits and light towers;

(iii) Replacement or refurbishment and/or overhaul of the HVAC, plumbing, electrical, water,

sewerage, security (fire and theft) systems and all fixtures and equipment;

(iv) Repair and/or replacement of cracked and/or disintegrated concrete, broken pipes, floor

drains, traps and associated piping, leaking roofs and/or ceilings;

(v) Repair and/or replacement of seats and seat standards, cup holders and other integral

components of the seating areas of the Stadium;

(vi) Painting of all surfaces of the Stadium;

(vii) Replacement and/or repair of all walls and fencing, including the outfield walls, interior

walls, and other exterior and perimeter fencings;

(viii) Repair and/or replacement of the video displays, sound system and public address

system;

(ix) Replacement and/or repair of all electrical systems, including risers, panels, disconnects,

transformers, circuit boards, main switches and overload protection and control hardware;

(x) Replacement of the playing surface of the Stadium;

(xi) Repair of any asphalt, gravel, concrete and other automobile and footpath surfaces on the

Site; and

(xii) Any other item to which the parties mutually agree.

(j) Determination of Necessary Improvements. Lessee may from time to time in the exercise

of its sole and reasonable discretion provide the Stadium Owner with a written list, in Lessee’s

opinion, of necessary Capital Expenditures. Any such list shall include reasonable detail

regarding the proposed improvement and the costs associated therewith and shall be

accompanied by at least one bid from an unaffiliated third party for completion of such

improvement. The Stadium Owner shall provide comments on the list to Lessee within thirty

(30) days of its submittal to the Stadium Owner. If the Stadium Owner does not provide

comments within such thirty (30) day period, then Lessee’s list shall be deemed accepted and

such items shall be deemed “Necessary Items” which must be completed. If the Stadium Owner

provides comments within such thirty (30) day period, then the parties shall negotiate in good

faith to arrive at a mutually acceptable list of necessary Capital Expenditures. In the event Lessee

and the Stadium Owner cannot arrive at a mutually acceptable list of necessary Capital

Expenditures, the Stadium Owner and the Lessee shall submit the disagreement to arbitration by

a mutually agreed unaffiliated person skilled and experience in facility management (the

“Arbitrator”) for a resolution of the disagreement in accordance with the rules of the American

Arbitration Association. Such items on a mutually accepted list of Capital Expenditures or as

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deemed appropriate by the Arbitrator shall be known as “Necessary/Critical Items.” Lessee

agrees to pay additional costs associated to fix Necessary/Critical Items above and beyond what

is available in the Stadium Maintenance Fund and/or Stadium Capital Improvements Fund.

(k) Timing of Performance. The Lessee shall pursue and manage completion of any

Necessary/Critical Items upon determination thereof in accordance with the aforementioned

subsection, but in any event within thirty (30) days. Lessee shall invoice the Stadium Owner for

agreed upon costs incurred in completing such Necessary/Critical Items, and the Stadium Owner

shall reimburse Lessee from the Stadium Capital Improvements Fund and/or the Stadium

Maintenance Fund for such costs within thirty (30) days of receipt of such invoice.

(l) Stadium Capital Improvements Fund. The Stadium Owner shall establish and maintain the

Stadium Capital Improvements Fund (“SCIF”) for the long term capital needs of the Stadium.

The primary purpose of the SCIF shall be to ensure that the Stadium remains a first-class Class A

minor league facility and an asset to the Stadium Owner and the surrounding community for the

term of this Agreement. Capital Expenditures shall include equipment change-outs and shall be

funded by the Stadium Owner therefrom. Unless the SCIF is fully funded in accordance with

Section 3.b.(ii), above, then the Stadium Owner shall fund the SCIF prior to Beneficial

Occupancy with at least Fifty Thousand ($50,000) Dollars (required by MiLB) and shall add an

additional amount of $50,000 on each year anniversary during the Term. Notwithstanding the

foregoing, in the event mutually agreed upon Capital Expenditures exceed funds available in the

SCIF, the Lessee shall remain responsible for the full cost of all such mutually agreed upon

Capital Expenditures. Either initially or during the Term of this Agreement, the Stadium Owner

shall not be responsible to fund the SCIF for any amount which exceeds One Million Five

Hundred Thousand ($1,500,000) Dollars, unless otherwise mutually agreed by the parties.

(m) Stadium Maintenance Fund. The Stadium Owner shall also establish the Stadium

Maintenance Fund (“SMF”) for the maintenance needs of the Stadium. The primary purpose of

the SMF shall be to ensure that the Stadium remains a first-class Class A minor league facility

and an asset to the Stadium Owner and the surrounding community for the term of this

Agreement. Maintenance expenditures shall include all break-fix, replacement and routine

maintenance to the facility and equipment and shall be funded by the Stadium Owner therefrom.

The Stadium Owner shall fund the SMF prior to Beneficial Occupancy with at least Fifty

Thousand ($50,000) Dollars (required by MiLB) and shall maintain and/or replenish said fund to

this same level or amount of $50,000 on each year anniversary during the Term. Notwithstanding

the foregoing, in the event mutually agreed upon maintenance expenditures exceed funds

available in the SMF, the Lessee shall remain responsible for the full cost of all such mutually

agreed upon maintenance expenditures.

SECTION 11 - DESTRUCTION

(a) Destruction. If the Stadium or any part thereof is wholly or partially destroyed, the Stadium

Owner shall, at its expense, promptly commence and diligently complete the restoration of the

Stadium (or applicable portion thereof) to substantially the same condition as it was in

immediately prior to such destruction. The Stadium Owner shall use commercially reasonable

efforts to time and organize all repair activities in such a manner as to facilitate Lessee’s ability

to play scheduled Home Games at the Stadium and to conduct Other Events to the extent

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feasible, and the Stadium Owner agrees to consult with Lessee on all such Stadium Owner

decisions. Should the Stadium or any part thereof be made untenantable for Lessee as a result of

such destruction, then the Lease Payments, or a fair and just proportion thereof, according to the

nature and extent of the destruction sustained, shall be abated until the Stadium is restored as

detailed in this subsection.

(b) Temporary Facility. If the Stadium or a material portion thereof becomes unavailable on a

temporary basis by reason of either partial destruction or repair or restoration, or for any other

reason, the Stadium Owner shall utilize commercially reasonable efforts to assist Lessee in

locating a temporary facility in which Lessee may play Games, and Lessee may otherwise

conduct Other Events at other locations in Lessee’s discretion.

SECTION 12 - INSURANCE

(a) Lessee. Lessee at its sole cost and expense shall procure, maintain and keep in full force and

effect at all times during the Term the following insurances:

(i) Commercial general liability of not less than One Million ($l,000,000) Dollars per

occurrence and Two Million ($2,000,000) Dollars in the aggregate or the equivalent thereof in

connection with this Agreement and Lessee’s use of the Stadium, issued by a Best’s A-rated or

better company. Such insurance shall include contractual liability (specifically including but not

limited to, full performance of Lessee’s indemnity obligations to the Stadium Owner hereunder),

products liability if products are dispensed or vended by Lessee and liquor liability coverage in

an amount not less than One Million ($l,000,000) Dollars with the Stadium Owner named as an

additional insured. In the event Lessee uses contractors for operation of the Stadium or the sale

of Concessions or Merchandise, then Lessee shall require such contractors to provide insurance

at the same limits and terms as the foregoing including naming the Stadium Owner as an

additional insured.

(ii) Umbrella or excess covering claims in excess of and following the terms of the

commercial general liability policy above (including liquor liability) with a limit of liability not

less than Three Million ($3,000,000) Dollars;

(iii) Insurance covering all of Lessees furniture and fixtures, machinery, equipment,

inventory, stock, merchandise, concessions, and any other personal property owned and used in

Lessee’s business and found in, on or about the Site or the Stadium in an amount not less than

the full replacement cost thereof. Property forms shall provide coverage on a broad form basis

insuring against “all risks” of direct physical loss;

(iv) Worker’s compensation insuring against and satisfying Lessee’s obligations and

liabilities under the workers compensation laws of the Commonwealth of Virginia, including

employer’s liability insurance in the minimum limits required by the laws of the Commonwealth

of Virginia;

(v) If Lessee operates owned, hired, or non-owned vehicles in, on, or about the Site or the

Stadium, comprehensive automobile liability insurance at a limit of liability not less than One

Million ($1,000,000) Dollars combined bodily injury and property damage; and

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(vi) Necessary and appropriate insurance coverage as desired by Lessee with respect to

Lessee’s use and occupancy of Lessee’s administrative offices during the Term.

(b) Certificates. Certificates of Lessee’s insurance required hereunder, together with copies of

the endorsements, when applicable, shall be delivered to the Stadium Owner prior to Lessee’s

Beneficial Occupancy of the Site, the Stadium, or any portion thereof, and for renewal insurance

coverages from time to time throughout the Term no later than ten (10) days prior to coverage

termination. All commercial general liability or comparable policies maintained by Lessee shall

name the Stadium Owner as an additional insured.

(c) Stadium Owner. The Stadium Owner shall at its sole cost and expense procure maintain and

keep in full force and effect at all times during the Term the following insurances:

(i) Commercial general liability insurance of not less than One Million ($l,000,000) Dollars

per occurrence and in the aggregate or the equivalent thereof in connection with the Stadium

Owner’s use of the Stadium, with Lessee named as an additional insured.

(ii) Property insurance on the Stadium in the amount sufficient to be able to restore the

Stadium to substantially the same condition as of the Commencement Date with all subsequent

improvements, reasonable wear and tear excepted. Such properly insurance will insure against

loss or damage to the Stadium by fire and such other hazard and risks as are ordinarily insured

against in such amounts as are ordinarily insured against by insureds owning and operating

properties of a similar character and size, provided that if at any time the Stadium Owner is

unable to obtain such insurance, it will obtain insurance in such amounts and against risks as are

reasonably obtainable.

(iii) The Stadium Owner shall furnish Lessee with certificates of insurance evidencing

renewal coverage at least ten (10) days prior to expiration of any coverage. To the extent

permissible under applicable law, the Stadium Owner and Lessee each waive any and all rights

to recover against the other or against any other tenant or occupant of the Site, the Stadium, or

any portion thereof, or against the officers, directors, shareholders, partners, joint venturers,

employees, agents, customers, invitees, or business visitors of the other party hereto or of such

other tenant or occupant of the Site, the Stadium, or any portion thereof, for any loss or damage

to such waiving party arising from any cause covered by any property insurance required to be

carried by such party pursuant to this section or any other property insurance actually carried by

such party to the extent of the limits of such policy. To the extent permissible under applicable

law, the Stadium Owner and Lessee from time to time shall cause their respective insurers to

issue appropriate waiver of subrogation rights endorsements on all property insurance policies

carried in connection with the Site, the Stadium, or the contents of the Site or the Stadium.

SECTION 13 - SECURITY

(a) Security. Security for Events shall be provided in accordance with the Project Budget and

with this Agreement. The Stadium Owner shall equip the Stadium with, and at all times

maintain, an adequate alarm system and shall install and at all times maintain sufficient

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monitoring devices, including security cameras, at the Site and inside the Stadium including

parking areas.

SECTION 14 - MUTUAL INDEMNIFICATION

(a) Mutual Indemnification. Commencing on the Commencement Date, the Lessee and the

Stadium Owner mutually agree to hold the other harmless, indemnify and defend the other and

its partners, shareholders, directors, officers, employees, representatives, agents, invitees,

assignees, tenants, subtenants, affiliates, trustees, from and against any claim, action, loss,

damage, injury, liability, cost and expense, of whatsoever kind or nature, including, without

limitation, court costs and reasonable attorneys’ fees, caused by, resulting from or arising out of

bodily injury or death of persons or damage to or destruction of property, arising out of or

incidental to the negligent acts or omissions in the use, occupation of and access to the Site and

the Stadium.

SECTION 15 – EVENTS OF DEFAULT & REMEDIES

(a) General. Should either the Stadium Owner or Lessee fail to perform any obligations under

the terms of this Agreement (the “Defaulting Party”), and such failure to perform continues for a

period of forty-five (45) days after written notice of such failure to perform is delivered to the

Defaulting Party from the other party (the “Non-Defaulting Party”), then, unless Section 15(b) of

this Agreement applies, the Non-Defaulting Party shall be entitled to seek all remedies available

at law or in equity (including specific performance and injunctive relief) for breach of this

Agreement except as otherwise provided in this Agreement.

(b) Default Specific to Stadium Development and Completion and Lessee’s Taking of

Beneficial Ownership. The Stadium Owner and the Lessee agree, notwithstanding anything to

the contrary in this Agreement, should Stadium Owner default on its obligations under Section

3(e) of this Agreement, Lessee’s remedy for such default shall be the suspension of any and all

of the Lessee’s rent or other payment obligations under this Agreement for the time the Stadium

and related facilities are not complete.

SECTION 16 – NOTICES

(a) Notices. All notices or advices required or permitted to be given by or pursuant to this

Agreement shall be given in writing and (i) delivered by U.S. Registered or Certified Mail,

Return Receipt Requested mail or (ii) delivered for overnight delivery by a nationally recognized

overnight courier service. Such notices and advices shall be deemed to have been given on the

third business day following the date of mailing if delivered by U.S. Registered or Certified

Mail, Return Receipt Requested, or (iii) on the date of receipt if delivered for overnight delivery

by a nationally recognized overnight courier service. Unless otherwise notified in advance, all

such notices and advices and all other communications related to this Agreement shall be given

as follows or to such other address as the party may have furnished to the other party in

accordance herewith:

If to Lessee: Manager, Hagerstown Baseball, LLC, 13479 Polo Trace Drive, Delray Beach,

Florida 33446, with a copy to John J. Ferrante, 705 Planters Row, Wilmington, N.C. 28405.

If to the Stadium Owner:

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With a copy to:

SECTION 17 – ASSIGNMENT

(a) Assignment. Neither party may assign this Agreement without first obtaining the prior

written consent of the other party.

(b) Security. Lessee may not collaterally assign, transfer, mortgage, pledge, hypothecate or

encumber this Agreement or any interest herein as security for a loan or otherwise without the

prior written consent of the Stadium Owner, which shall not be unreasonably withheld or

delayed.

SECTION 18 - TAXES

(a) Taxes. The Stadium Owner is the owner of the Stadium and the Site and shall be solely

responsible for taxes, if any, such as Property Taxes, ad valorem taxes, or taxes which are

assessed or based on the value of the Site, the Stadium or its contents.

SECTION 19 - MISCELLANEOUS

(a) Successors/Assigns. This Agreement shall inure to the benefit of and remain fully binding

upon the parties hereto and their respective successors and permitted assigns.

(b) Quiet Enjoyment. Lessee upon fully complying with all applicable terms and provisions of

this Agreement shall peaceably and quietly enjoy the Stadium subject nevertheless, to the terms

of this Agreement.

(c) Force Majeure. Subject to Sections 10(c) and 11 above, if, because of the occurrence of an

event of Force Majeure, either the Stadium Owner or Lessee is unable to carry out its obligations

to the other party under this Agreement, except for the payment of money, and if such party

promptly gives to the other written notice of such Force Majeure within five (5) business days of

such event, then the obligations of both parties under this Agreement shall be excused to the

extent, but only to the extent, made necessary by such Force Majeure and only during its

continuance, provided that the effect of such Force Majeure is eliminated insofar as possible

with all reasonable dispatch. Neither party shall be separately liable to the other for any loss or

damage of whatsoever kind or whosesoever situated caused by such Force Majeure.

(d) Relationship of Parties. Nothing in this Agreement shall be construed to create a partnership

or joint venture, nor to authorize either party hereto to act as agent for or representative of the

other party hereto. Each party hereto shall be deemed independent and neither shall act as, or

hold itself out as acting as, agent for the other party hereto.

(e) No Waiver. No failure of either party to insist upon exact compliance with the terms and

provisions of this Agreement shall be deemed or construed as a waiver of any subsequent breach

of this Agreement.

(f) Severability. In the event any provision of this Agreement or the application of such

provision to any person or set of circumstances, shall be determined to be invalid, unlawful, or

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22

unenforceable to any extent for any reason, the remainder of this Agreement, and the application

of such provision to persons or circumstances other than those as to which it is determined to be

invalid, unlawful, or unenforceable, shall not be affected and shall continue to be enforceable to

the fullest extent permitted by law.

(g) Governing Law; Jurisdiction Venue; Waiver of Jury Trial. This Agreement shall be

subject to and interpreted by and in accordance with, the laws (excluding conflict of law

provisions) of the Commonwealth of Virginia. The parties hereby submit to the jurisdiction of

the Virginia or federal courts for the purposes of all legal proceedings arising out of or relating to

this Agreement, and the parties irrevocably waive, to the fullest extent permitted by law any

objection which they may now or hereafter have to the venue of any such proceeding which is

brought in either such court. No party waives its rights to trial by jury in either such court.

(h) Enforcement. This Agreement shall constitute the entire agreement between the parties

hereto with respect to the subject matter herein contained. There are no agreements or

understandings between the parties hereto, whether oral or written, regarding the subject matter

hereof, which have not been embodied herein or incorporated herein by reference.

(i) League Approval. This Agreement shall be subject to the prior and ongoing approval of the

League and Minor League Baseball and in all respects shall be subject to the then current rules

and regulations of Major League Baseball. Lessee shall be responsible for using best efforts to

obtain all necessary approvals. The parties hereby acknowledge and agree that all rights granted

under this Agreement are expressly subject to, and must conform with, all baseball rules and

regulations, including, without limitation: (1) all rules, regulations, constitutions and bylaws of

the League of which the Lessee is a member; (2) all rules and regulations of The National

Association of Professional Baseball Leagues, Inc. d/b/a Minor League Baseball, including the

National Association Agreement; (3) the Professional Baseball Agreement; (4) the Major

League Rules; and (5) any rule, regulation, restriction, guideline, resolution or other requirement

issued from time to time by any baseball authority (e.g., the League President, the NAPBL

President, the NAPBL Board of Trustees or the Commissioner of Baseball) including the

NAPBL Gambling Guidelines.

(j) Counterparts. This Agreement may be signed in multiple counterparts, each of which shall

be deemed an original and all of which together shall constitute one and the same instrument.

(k) Headings. The headings in this Agreement are for convenience only and shall not be deemed

to establish any obligation among the parties hereto.

(l) Amendment. This Agreement may be amended or modified only in a writing which has been

signed by both of the parties hereto and which specifically references this Agreement.

(m) Disputes. The parties shall attempt in good faith to resolve any dispute, controversy or claim

arising out of this Agreement between them by negotiations between their designated senior

executives who have authority to act and who will promptly meet for negotiations to attempt to

settle the dispute. This Agreement and all terms and conditions shall be freely assumable and

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23

transferable to a new Buyer of the Lessee or in the event Lessee sells the Franchise or the

baseball team. Said sale shall not require the consent of Stadium Owner.

IN WITNESS WHEREOF, this Agreement has been executed by duly authorized officers of

Lessee and duly authorized officials of the Stadium Owner, each of whom hereby represents and

warrants that he or she has the full power and authority to execute this Agreement in such

capacity, all as of the day and year first above written.

CITY OF FREDERICKSBURG HAGERSTOWN BASEBALL, LLC

[STADIUM OWNER] [LESSEE]

By:________________________ By:_______________________

Name:______________________ Name:_____________________

Title:_______________________ Title:______________________

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24

SCHEDULE A

(Legal Description of Land)

Stadium Owner shall utilize prompt, reasonable and best efforts to locate and acquire an

appropriate Site, including the municipal powers available and granted by the laws of the

Commonwealth of Virginia, including § 15.2-2403.3, § 15.2-1800 and § 15.2-1901 et. seq.

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SCHEDULE B

Section 3(b)(i) – Project Budget

$29,500,000 as described in this Agreement and also the Preliminary Facilities

Program dated February 26, 2013 by HKS, Inc., which is attached hereto and

hereby incorporated by this reference.

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26

SCHEDULE C Section 3(b)(i) – Stadium Items

Items as described in this Agreement and also described in the Ballpark

Layout (with PHOTO SKETCH) dated February 25, 2013 by HKS, Inc., which

is attached hereto and hereby incorporated by this reference.

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Fredericksburg Ballpark Fredericksburg, Virginia

PRELIMINARY FACILITIES PROGRAM HKS Project 15293.000

February 26, 2013

HKS Inc. Sports and Entertainment Group

THIS PAGE INTENTIONALLY LEFT BLANK

Fredericksburg Ballpark HKS Inc. Facilities Program Page 1 February, 2013 ©2013 HKS Inc.

Table of Contents

Stadium Facility

1. Venue Seating Bowl

Fixed Bowl Seating Berm Seating Picnic Area(s)/Decks Private Suites Premier Indoor Club Seating Club Lounge Party Decks Arcade Playing Field

2. Team and Multipurpose Facilities

Home Clubhouse Vestibule Home Team Player’s Lounge Home Team Locker Rooms Home Team Shower/Toilets Home Team Training/Hydrotherapy Room Home Manager/Coaches Locker Room/Meeting Space Home Manager/Coaches Shower/Toilets Home Equipment Room Home Laundry Room Visiting Team Locker Rooms Visiting Team Shower/Toilets Visiting Team Training/Hydrotherapy Room Visiting Manager/Coaches Locker Room Visiting Manager/Coaches Shower/Toilets Umpires' Locker Room Umpires' Shower/Toilet Hitting/Pitching Cages Dugouts Dugout Toilets Bullpens

3. Patron Amenities and Support

Concession Stands Suite Level Concession/Kitchen-Pantry Public Toilets Family Toilets Suite/Party Deck Toilets Club Toilets Team Store Ticket Windows Ticket Sales Management Offices Guest Services First Aid Naming Rights Sponsor’s Space Hall of Fame/Border Olympics


4. Stadium Administration

Reception Conference Room Executive Offices Open Office Space Mail/Copy/Work Room Staff Break Room IT Server Storage

5. Media/ Electronic Systems

Writing Press Media Workroom TV Broadcasting Booth Radio Broadcasting Booths Media AV Room Media Storage Camera Platform(s) Scoreboard Operator/Video/PA Booth

6. Circulation

Main Concourse Suite Level Corridor Entry Plaza VIP Main Concourse Entry Lobby Passenger Elevators Service Elevator Elevator Machine Rooms Stairs Ramp

7. Food Service

Commissary Kitchen Commissary Storage Vendor Depot/Commissary

8. Venue Operations

Field Equipment Storage/Stadium Maintenance Stadium Storage Receiving Dock and Service Entrance Grounds Keeper Office Grounds Crew Locker Room/Break room Maintenance Yard/Equipment Wash-Off Area Trash Area Custodial Closets

9. Mechanical and Electrical

Main Electrical Room Electrical Distribution Rooms Telecommunication Rooms Fire Sprinkler Service Room Generator/Transformer Yard Mechanical Rooms


10. Miscellaneous

Consolidated Parking Kids Zone Graphics and Advertising Signage Marquee Sign

Compilation 1. Venue Seating Bowl 195,865 SF 2. Team and Multipurpose Facilities 18,490 SF 3. Patron Amenities and Support 11,870 SF 4. Stadium Administration 3,190 SF 5. Media/Electronic Systems 1,110 SF 6. Circulation 42,600 SF 7. Food Service 2,860 SF 8. Venue Operations 10,050 SF 9. Mechanical and Electrical 2,860 SF 10. Miscellaneous NA TOTAL 292,805 SF


THIS PAGE INTENTIONALLY LEFT BLANK


VENUE SEATING BOWL FIXED BOWL SEATING (4,750 SEATS, INCL. 20” SEATS) 16,250 SF DUGOUT SEATING – EXTENDED FROM TEAM DUGOUTS EA SIDE BERM SEATING (1,000 PATRONS) 10,000 SF PICNIC AREA(S)/DECKS (2 @ 200 PATRONS) 4,500 SF PRIVATE SUITES (10 @ 12 PATRONS EA, 22” SEATS) 2,640 SF CLUB LOUNGE (150 PATRONS, 21” SEATS) 1,375 SF W/ EXTERIOR SEATING / TABLE AREAS PARTY DECK (125 PATRONS) 2,100 SF ARCADE – COVERED AREA / BAND STAGE 12,000 SF PLAYING FIELD 147,000 SF 195,865 SF OVERALL VENUE CAPACITY – 5,001 SEATS


TEAM AND MULTIPURPOSE FACILITIES HOME CLUB VESTIBULE 90 SF HOME TEAM PLAYER’S LOUNGE 260 SF HOME TEAM LOCKER ROOMS 940 SF HOME TEAM SHOWER/TOILETS 630 SF HOME TEAM TRAINING/HYDOTHERAPY ROOM 600 SF HOME MANAGER/COACHES OFFICE/LOCKER ROOM/MEETING SPACE 450 SF HOME MANAGER/COACHES SHOWER/TOILETS 250 SF HOME EQUIPMENT ROOM 280 SF HOME LAUNDRY ROOM 360 SF VISITING TEAM LOCKER ROOM 800 SF VISITING TEAM SHOWER/TOILETS 560 SF VISITING TEAM TRAINING/HYDROTHERAPY ROOM 360 SF VISITING MANAGER/COACHES OFFICE/LOCKER ROOM 360 SF VISITING MANAGER/COACHES SHOWER/TOILETS 225 SF UMPIRES’ LOCKER ROOM 150 SF UMPIRES’ SHOWER/TOILET 200 SF HITTING/PITCHING CAGES 3,800 SF DUGOUTS 3,180 SF DUGOUT TOILETS – ACCESSIBLE TO TEAM AND DUGOUT SEATING 195 SF BULLPENS – VISIBLE TO FANS 4,800 SF 18,490 SF


PATRON AMENITIES AND SUPPORT CONCESSION STANDS 3,480 SF SUITE LEVEL CONCESSION/KITCHEN-PANTRY 500 SF PUBLIC TOILETS 3,915 SF FAMILY TOILETS 240 SF SUITE/PARTY DECK TOILETS 550 SF CLUB TOILETS 575 SF TEAM STORE 1,350 SF TICKET WINDOWS 620 SF TICKET SALES MANAGEMENT OFFICE 130 SF GUEST SERVICES 150 SF FIRST AID 220 SF NAMING RIGHTS SPONSOR’S SPACE 140 SF HALL OF FAME – WALL BY BATTING N/A 11,870 SF


STADIUM ADMINISTRATION RECEPTION 270 SF CONFERENCE ROOM (20 PEOPLE) & PRESS ROOM 290 SF EXECUTIVE OFFICES (5) 470 SF OPEN OFFICE SPACE (15) 1,450 SF MAIL/COPY/WORK ROOM 160 SF STAFF BREAK ROOM 180 SF IT SERVER 250 SF STORAGE 100 SF 3,190 SF


MEDIA/ELECTRONIC SYSTEMS WRITING PRESS 160 SF MEDIA WORKROOM 180 SF TV BROADCASTING BOOTH 90 SF RADIO BROADCASTING BOOTHS 270 SF MEDIA AV ROOM 160 SF MEDIA STORAGE 110 SF CAMERA PLATFORMS TBD SCOREBOARD OPERATOR/VIDEO/PA BOOTH 140 SF 1,110 SF


CIRCULATION MAIN CONCOURSE 35,000 SF SUITE LEVEL CORRIDOR 1,500 SF SUITE LEVEL VIP LOBBY 880 SF MAIN ENTRY PLAZA 3,400 SF VIP MAIN CONCOURSE ENTRY LOBBY 320 SF PASSENGER/SERVICE ELEVATOR 160 SF ELEVATOR MACHINE ROOM 80 SF STAIRS 1,260 SF RAMPS TBD 42,600 SF


FOOD SERVICE COMMISSARY KITCHEN 1,300 SF COMMISSARY STORAGE 1,360 SF VENDOR DEPOT (2 POS) 200 SF 2,860 SF


VENUE OPERATIONS FIELD EQUIPMENT STORAGE/MAINTENANCE SHOP 1,700 SF STADIUM STORAGE 770 SF RECEIVING DOCK AND SERVICE ENTRANCE 1,800 SF GROUNDS KEEPER OFFICE 120 SF GROUNDS CREW CHECKIN 140 SF MAINTENANCE YARD/EQUIPMENT WASH-OFF AREA 4,500 SF TRASH AREA 530 SF CUSTODIAL CLOSETS 490 SF 10,050 SF


MECHANICAL AND ELECTRICAL MAIN ELECTRICAL ROOM 250 SF ELECTRICAL DISTRIBUTION ROOMS 660 SF TELECOMMUNICATION ROOMS 290 SF FIRE SPRINKLER SERVICE ROOM 100 SF GENERATOR/TRANSFORMER YARD 460 SF MECHANICAL ROOMS 1,100 SF 2,860 SF


MISCELLANEOUS CONSOLIDATED PARKING TBD KIDS ZONE TBD GRAPHICS AND WAYFINDING TBD MARQUEE SIGN TBD POOL TBD

6

FREDERICKSBURG BALLPARK

1

4

2

2

2

2

5

5

3

3

7

713

19

25

10

16

16

22

2

2

8

8

14

20

26 11

17

23

9

15

15

15

15

21

27

28

29

31

30

1218

1832

34

33

33

24

CONCOURSE LEVEL / SITE PLAN01

02

03

SUITE/CLUB LEVEL

PRESSLEVEL

2/25/2013

press box

vertical circulation

suites - (10) 12 patrons

club - 150 seats

party deck - (2) 200 patrons

seating bowl - 4,500 seats

dugout

bullpen

double sided video board

batter’s eye

berm seating

pitching / hitting tunnels

team opps building

autograph alley

concessions

toilets

stage

arcade

ticketing

team store

entry plaza

vip entrance

commissary

kitchen

loading docks

kid’s zone

pool

maintenance

field maint. access

vip parking

general parking

player parking

site access

dog park

video wall boards

double sided video marquee

stadium signage

1

7

13

4

10

16

2

8

14

5

11

17

18

35

36

36

37

37

35

35

3

9

15

6

12

19

25

22

20

26

23

21

27

28

29

30

31

32

33

34

24

GPIN TOTAL VALUE OWNER STATUS

7769‐42‐9699 $7,167,900 RE‐FRED LLC INSIDE

7769‐48‐9861 $35,985,100 MID‐AMERICA APARTMENTS LP INSIDE

7769‐49‐8694 $35,654,100 HAVEN AT CELEBRATE VIRGINIA II LLC INSIDE

7769‐52‐1392 $1,891,700 CENTRAL PARK 1225 LLC INSIDE

7769‐52‐2897 $1,695,600 FREDERICKSBURG 35 LLC INSIDE

7769‐52‐5535 $4,480,400 GIRAFFE PROPERTIES LLC INSIDE

7769‐52‐6385 $510,000 SPOTSYLVANIA COUNTY OF INSIDE


7769‐52‐8705 $2,304,600 BUILDINGKENTHREE LLC INSIDE




7769‐53‐2655 $0 CENTRAL PARK PROPERTY OWNERS INSIDE

7769‐53‐4080 $1,038,100 RE‐FRED LLC INSIDE

7769‐53‐5435 $2,026,500 CARL D SILVER HOLDING COMPANY LLC INSIDE





7769‐53‐7362 $2,580,000 1201 CENTRAL PARK BOULEVARD LLC INSIDE

7769‐53‐9111 $359,800 TITAN INVESTMENTS LLC INSIDE


7769‐54‐8273 $2,811,000 OK WILSON LLC INSIDE



7769‐58‐6534 $187,200 CELEBRATE VIRGINIA SOUTH LLC INSIDE

7769‐58‐6847 $1,782,300 VIRGINIA CREDIT UNION INC INSIDE


7769‐58‐9529 $2,388,900 FREDERICKSBURG AREA ASSOCIATION OF INSIDE

7769‐59‐5101 $280,700 CVAS BOULEVARD LLC INSIDE






7769‐62‐4926 $281,400 CENTRAL PARK PROPERTY OWNERS INSIDE




7769‐62‐9857 $303,200 SILVER CARL D ESTATE INSIDE


7769‐63‐2700 $14,081,200 TARGET CORPORATION INSIDE

7769‐63‐4948 $3,536,300 FOUNDATION COMMERCIAL LLC INSIDE


7769‐63‐6359 $985,600 NORSWORTHY FRANCIS P JR INSIDE


7769‐63‐8312 $2,745,900 YANG CENTRAL PARK LLC INSIDE

7769‐63‐9099 $12,711,300 VIRGINIA LANDMARK HOTELS LLC INSIDE


7769‐64‐0677 $1,527,400 PALANI PROPERTIES VCB LLC INSIDE



7769‐64‐5717 $9,355,200 ENTERTAINMENT BASED REAL ESTATE OF INSIDE


7769‐64‐9206 $10,836,100 BRR UNSOLD SHARES LP ET AL INSIDE


7769‐65‐7236 $3,063,800 CENTRAL PARK MARKETPLACE HOLDINGS INSIDE

7769‐65‐7619 $2,513,600 CHOE SONG SIK & EUN SOOK INSIDE

7769‐65‐8848 $2,556,000 KPI INVESTMENTS LLC INSIDE




7769‐66‐0236 $25,256,100 WAL‐MART REAL ESTATE BUSINESS INSIDE



7769‐66‐7012 $3,813,700 SKCRYANS LLC INSIDE


7769‐66‐7902 $2,026,500 EMERALD GROUP LLC INSIDE


7769‐67‐0589 $2,885,900 BURDETTE WILLIAM E JR INSIDE


7769‐67‐1824 $784,100 BURDETTE WILLIAM E JR INSIDE



7769‐67‐6823 $1,669,300 NAVY FEDERAL CREDIT UNION INSIDE



7769‐68‐1072 $784,100 KIM HO JIN & CLAUDETTE INSIDE

7769‐68‐3152 $980,100 KIM SUK K TR & KIM HYUN K TR INSIDE




7769‐68‐9012 $1,973,700 SOUTHWEST PNC LLC INSIDE






7769‐73‐7735 $17,469,400 LOWE'S HOME CENTER INC INSIDE







7769‐74‐5871 $3,069,900 ETHAN ALLEN INC INSIDE



7769‐75‐2309 $2,144,800 TRANQUILITY LAND PROPERTIES LLC INSIDE



7769‐75‐4038 $1,334,400 LEE TAE KYOO & IN SOOK INSIDE


7769‐75‐5749 $881,100 CENTRAL PARK MARKETPLACE HOLDINGS INSIDE

7769‐75‐6532 $4,999,900 H‐Z OCEAN CITY LC INSIDE

7769‐75‐6739 $369,700 PINNACLE TOWERS LLC INSIDE







7769‐76‐4042 $215,300 CARL D SILVER HOLDING COMPANY LLC INSIDE

7769‐76‐4688 $536,300 CARL D SILVER HOLDING COMPANY LLC INSIDE


7769‐76‐7126 $1,234,600 PREIHS PROPERTIES CENTRAL PARK LLC INSIDE



7769‐78‐7674 $2,237,000 CELEBRATE VIRGINIA SOUTH LLC INSIDE

7769‐79‐3089 $995,000 SIGNATURE INVESTMENTS LLC INSIDE

7769‐79‐7036 $11,737,000 CELEBRATE 1040 LLC INSIDE


7769‐84‐0141 $4,455,800 COLE PM FREDERICKSBURG VA LLC INSIDE

7769‐84‐1298 $6,015,700 REALTY INCOME CORPORATION INSIDE

7769‐84‐3490 $1,914,900 FREDERICKSBURG CP LLC INSIDE


7769‐84‐4861 $6,548,900 SCP REALTY FUND‐I F'BURG LLC INSIDE

7769‐84‐5147 $919,400 CENTRAL PARK 1220 LLC INSIDE



7769‐85‐1026 $8,727,500 KOHL'S DEPARTMENT STORES INC INSIDE


7769‐88‐0831 $1,395,700 CELEBRATE VIRGINIA SOUTH LLC INSIDE

7769‐88‐3772 $8,220,500 CELEBRATE 1080 LLC INSIDE

7769‐89‐4007 $10,374,100 BRE SELECT HOTELS PROPERTIES LLC INSIDE

7860‐71‐9630 $7,633,000 NATIONAL SLAVERY MUSEUM THE INSIDE

7769‐49‐5130 $2,597,100 CELEBRATE VIRGINIA SOUTH LLC INSIDE ‐ PENDING CONSTRUCTION OF BUILDING(S)

7769‐59‐4420 $337,500 CVAS BOULEVARD LLC INSIDE ‐ PENDING CONSTRUCTION OF BUILDING(S)

7769‐59‐8455 $1,704,900 CITY OF FREDERICKSBURG INSIDE ‐ PENDING CONSTRUCTION OF BUILDING(S)

7769‐68‐4772 $672,900 CVAS PARKWAY LLC INSIDE ‐ PENDING CONSTRUCTION OF BUILDING(S)

7769‐69‐0025 $2,209,700 CVAS PARKWAY LLC INSIDE ‐ PENDING CONSTRUCTION OF BUILDING(S)

7769‐69‐0891 $755,400 CELEBRATE VIRGINIA SOUTH LLC INSIDE ‐ PENDING CONSTRUCTION OF BUILDING(S)


7860‐40‐5307 $8,314,200 CVAS 2 LLC INSIDE ‐ PENDING CONSTRUCTION OF BUILDING(S)

7860‐50‐3126 $1,749,200 CVAS BOULEVARD LLC INSIDE ‐ PENDING CONSTRUCTION OF BUILDING(S)



7860‐62‐2096 $7,174,700 CELEBRATE VIRGINIA SOUTH LLC INSIDE ‐ PENDING CONSTRUCTION OF BUILDING(S)

7769‐54‐6729 $976,500 FREDERICKSBURG 102 LLC OUTSIDE SERVICE DISTRICT

7769‐54‐9833 $1,568,000 FREDERICKSBURG 35 LLC OUTSIDE SERVICE DISTRICT

7769‐55‐5873 $570,000 CENTRAL PARK STARMAKER LLC OUTSIDE SERVICE DISTRICT

7769‐55‐7007 $5,150,400 LIFEPOINT CHURCH OUTSIDE SERVICE DISTRICT







7769‐67‐3767 $1,882,000 BUTTRAM WILLIS JR OUTSIDE SERVICE DISTRICT

7769‐79‐5783 $12,443,500 CVA EXPO CENTER LLC OUTSIDE SERVICE DISTRICT

7769‐85‐2914 $2,089,700 CONTRARY CREEK CO COWAN LLC THE OUTSIDE SERVICE DISTRICT

7769‐85‐5954 $684,000 CONTRARY CREEK CO COWAN LLC THE OUTSIDE SERVICE DISTRICT

7769‐89‐0275 $1,788,500 CELEBRATE VIRGINIA SOUTH LLC OUTSIDE SERVICE DISTRICT

7860‐20‐2990 $150,000 CITY OF FREDERICKSBURG OUTSIDE SERVICE DISTRICT

7860‐20‐7474 $63,700 CELEBRATE VIRGINIA SOUTH LLC OUTSIDE SERVICE DISTRICT








7860‐82‐5806 $146,700 RAPPAHANNOCK QUARRY WEST LLC OUTSIDE SERVICE DISTRICT

1 . 4 B R A I L S F O R D & D U N L A V E Y I N S P I R E . E M P O W E R . A D V A N C E .

City Revenues and Expense Summary

Based on the draft lease agreement dated May 13, 2013 and B&D’s analysis, the City is projected to realize a surplus on stadium operations of approximately $274,000 in 2019. The chart below summarizes the City’s projected surplus revenues.

E X H I B I T 6 : C I T Y R E V E N U E A N D E X P E N S E S U M M A R Y

Projected City Revenues and Expense Summary

Naming Rights $100,000Tenant Rent Payment $105,000Profit Sharing $35,000Direct Tax Receipts (Less Sales Tax Clawback) $432,000Total City Revenues $672,000

Police & EMS $265,000Stadium Maintenance Fund $50,000Insurance $33,000Stadium Capital Improvement Fund $50,000Total City Expenses $398,000

Surplus Revenues $274,000

MULTI-USE STADIUM FINANCIAL ANALYSIS

CONFIDENTIAL

Funding

It is understood that the total debt service on the $30 million stadium will be funded by state returned sales tax (claw back) income and the Special Service Tax District revenue. Debt assumptions include a 30-year term and 4.5% interest rate for a $30 million bond, creating debt service of approximately $1.8 million annually. With an assessed value of approximately $528,317,500, the Initial Special Service Tax District’s expected tax rate is $0.32 per $100 of assessed value. As additional development takes place in the Special Service Tax District, the tax rate could be decreased. A map of the Special Service Tax District boundaries is attached to this document as Exhibit B.

E X H I B I T 7 : S T A D I U M F U N D I N G

Assumption

Bond Amount EDA $30,000,000Term (Years) EDA 30Rate EDA 4.50%Annual Debt Service Requirement $1,841,746

Less State Returned Sales Tax (Clawback) [1] $129,000Annual Debt Service Requirement for Special Service District $1,712,746

Initial Service District Assessed Value EDA $528,317,500Projected Build-out Assessed Value EDA $607,565,125

Initial Service District Tax Rate (per $100) [2] EDA $0.32Projected Service District Tax Rate (per $100) [2] $0.28

[1] State returned sales tax (clawback) is dedicated to debt service reduction

[2] Initial and Projected Service District Tax Rate provided by Fairbanks & Franklin

Riverfront Plaza West Tower 901 East Byrd Street Suite 1110 Richmond, VA 23219

(804)780-2850 (804)780-2851 fax www.pfm.com

Public Financial Management, Inc. PFM Asset Management LLC PFM Advisors

Memorandum

To: Beverly R. Cameron, Fredericksburg City Manager From: Kevin Rotty, Managing Director Date: June 27, 2013 Re: Responses to City’s Questions for the Financial Advisor

In the role of the City’s Financial Advisor, PFM was asked to address several questions regarding the potential financing options relating to a new baseball stadium. Below are the questions and our responses: Question 2 – Questions for Financial Advisor

1. The stadium bond has been referred to as a “revenue bond.” Is the proposed bond in fact a revenue bond, and if so, is it marketable as such, or will market feasibility require a general obligation bond? In either case, what will be the rating agencies perspective on the issuance of the bonds for the stadium?

Introduction In order to structure a preliminary financing plan for a new baseball stadium, there are three key decisions that need to be addressed. These decisions are: the security pledge to the purchaser of the bonds; the revenue source used to pay for the bonds; and the federal income tax status of the bonds. The City has two basic options to choose from for a security pledge to potential bondholders: the full faith and credit of the City (a “General Obligation” or “GO” Bond) or a bond secured by a specifically defined stream of revenues (a “Revenue” Bond). For Revenue Bonds, the repayment sources would be clearly outlined, such as specifically identified local taxes, lease payments, revenue sharing under an agreement, a Special Tax District levy, etc.). For GO Bonds, the City pledges its full faith and taxing power on all of its revenue sources to secure the bonds in the event of default. The following table outlines the advantages and disadvantages of GO Bonds vs. Revenue Bonds:

GO Bonds Revenue Bonds

Advantages: Advantages: - Higher Credit Rating = Lower

Borrowing Costs - Smaller Borrowing Size

- City not Directly Obligated for debt

Mr. Beverly Cameron Questions for the Financial Advisor Page 2

Disadvantages: Disadvantages:

- Utilizes City’s future debt capacity - Increases City’s debt ratios which

could put stress on GO rating

- Higher borrowing cost - Greater issuance size because of

required reserves - Debt Service Coverage factor would be

required which increases annual debt service

- Increased pressure on District members to absorb higher borrowing cost

The City has identified several sources of revenue in the proposed deal for the baseball stadium that will be used to pay for the debt service on the bonds. It is important to understand that the use of the General Obligation security pledge does not preclude the City from using an earmarked stream of revenue for the payment of debt service. The difference between the two types of bonds is the security for bondholders in case the earmarked revenue stream is not sufficient to meet debt service payments. Under a GO pledge, the City would be obligated to make up the difference. Under a Revenue Bond pledge, the City may choose to but would not be obligated to make good on the debt service payments. The tax status for the bonds is a critical question, and is currently under review by the City’s Bond Counsel. Interest paid on most municipal bonds is not subject to federal income tax, which allows the City to issue the bonds with a lower interest rate than a similar private financing would need to pay. If these bonds are determined to be ineligible for tax-exempt status, then the interest rates paid by the City for debt service would be higher. In our response to the following question, we have quantified the borrowing cost of both tax-exempt and taxable borrowings in today’s market. Revenue Bonds – Further Discussion The financing plan in the Team’s proposal suggests a “Revenue Bond” approach for the City. However, there are certain assumptions in the proposal that we would highlight and call the City’s attention to as the deal is evaluated. First of all, the projections provide an interest rate assumption of 4.5%, which would seem to be an extremely optimistic assumption for a 30-year Revenue Bond structure (see our response to question 2 for indicative interest rates in the current market). Second, the City should be aware that under a Revenue Bond approach, bondholders will require a Revenue Covenant whereby the City would be required to set tax rates in the Special Tax District at a higher rate than the break-even rate to provide additional assurance that the revenue generated to pay the debt service will be sufficient. This Revenue Covenant cushion is often referred to as “Debt Service Coverage.” The reason that “Debt Service Coverage” is required under a Revenue Bond approach is that the security pledge is limited to the revenue stream. This limitation means bondholders will want a cushion for potential disruptions (i.e. delinquencies and / or defaults). A preliminary estimate of the required Revenue Covenant for this type of


transaction would be 150% or said another way, the tax rate would need to cover 1.5X annual debt service. It is important to note that the extra coverage (i.e., the amount above the debt service payment) could be utilized in several different methods but the preferred way from the perspective of potential investors is to accumulate the funds and use those funds to redeem the bonds early in advance of their stated maturity date. In addition to “Debt Service Coverage,” under a Revenue Bond certain reserves will be required which will increase both the size of the borrowing and the cost of the transaction. One major required reserve is a Debt Service Reserve Fund, equal to the maximum annual required debt service payments. A second major item that may increase the proposed size of the borrowing under either approach is the funding of “Capitalized Interest” during the construction of the stadium. Although Bond Counsel is in the process of further exploring this, it is practical to assume that the City would not impose a tax on the Special Tax District until the stadium is complete. If so, the City would be required to borrow additional funds and use them to pay interest on the bonds while the stadium is under construction. In terms of market access, the City would certainly be able to secure funds through a GO issuance. Under a Revenue Bond approach, financings of this nature (Special Tax District) are far less common, especially in the Commonwealth, and the success of such a structure in the marketplace is much more difficult to guarantee. A Revenue Bond structure will involve much greater evaluation and documentation than a GO sale. It would be our expectation that in order to publicly market the bonds, the underwriting team would need a variety of supporting studies and reports including an analysis on the businesses in the District (nature of business, vacancy rates, status of tax payments, etc.). The City should also realize that, any current tax delinquencies would be a complicating factor and could lead to an increased rate covenant (i.e., greater than 1.5x annual debt service) and/or greater reserve fund requirements. Additionally, we think that an Economic Impact Study would be a valuable document regardless of whichever financing method is selected. Under a Revenue Bond approach, we think such a study will be a requirement of both the underwriter and ultimately the bondholders. Even for a General Obligation issuance, we believe the bond rating agencies will wish to evaluate an Economic Impact Study to support the “business case” for the project. Given the tight economic times that governments have experienced recently, the rating agencies will be taking a close look at what they would view to be a non-essential project.

2. The Brailsford & Dunlavey funding assumptions are contained on page 5, Exhibit 7, of the May 28 Confidential Financial Analysis. Are these assumptions reasonable?

The three assumptions that we can address on page 5 of the Brailsford & Dunlavey (“B&D”) report relate to the estimated interest rate, term of the borrowing and resulting annual debt service. As outlined in our response to part 1 of the question, the ultimate credit structure and tax-status will be key factors in determining the annual debt service on the bonds. The following table is an attempt to provide City Council with estimated annual debt service under current


market conditions. The B&D report assumed a 30 year term at a 4.5% interest rate producing annual debt service of $1,841,746. Please note that the bond markets have been extremely volatile lately and we have seen significant market movements (an increase of nearly 1% since the beginning of the year) so these estimates are subject to fluctuation until the time of issuance. For illustrative purposes we have shown both a 20 year and 30 year debt amortization producing level annual debt service. While certainly a shorter amortization period increases the burden on the special tax payers, it does also reduce the City’s exposure period. Another alternative that could reduce the City’s longer-term exposure could be to utilize a level principal structure to more front-load the debt. The following table assumes $30 million of project cost (i.e., stadium construction plus financing costs) under market conditions as of June 18, 2013.

Chart 1

GO Bond (Aa2/AA/AA+) Revenue Bond (“BBB range”)

Term

Est. Financing Cost

Annual Debt Service

Est. Financing Cost

Annual Debt Service

Tax-Exempt

20 years 4.00% $2,199,131 5.25% $2,522,920

30 Years 4.25% $1,784,664 5.75% $2,155,511

Taxable

20 years 5.00% $2,518,130 7.00% $2,896,724

30 Years 5.25% $2,046,842 7.50% $2,591,994

However, as we previously indicated, we believe that the City will likely need to capitalize interest during the construction period (this analysis assumes that period is 24 months which equates to an increased borrowing requirement of $2.5 - 4 million) and that under a Revenue Bond approach, at a minimum the City would need to fund a debt service reserve fund (equal to maximum annual debt service). As such, the actual amount of the bond issue would likely be in the $33-37 million range. As shown on the charts on the following page, we have incorporated those additional costs into our calculations.


Chart 2

GO Bond Revenue Bond

Term

Est. Financing Cost

Annual Debt Service

Est. Financing Cost

Annual Debt Service

Tax-Exempt

20 years 4.00% $2,416,128 5.25% $3,256,386

30 Years 4.25% $1,968,587 5.75% $2,735,878

Taxable

20 years 5.00% $3,328,456 7.00% $4,024,295

30 Years 5.25% $2,512,900 7.50% $3,468,581

In term of other assumptions outlined on page 7, depending upon the terms of the lease, if there is not a cap on the cost of the project; we would encourage the City to obtain independent cost estimation. Finally, with regard to the calculation of the Service District Tax Rate, although this will ultimately depend upon the actual boundaries of the properties included in the District, it is important to reiterate that under a Revenue Bond approach there will need to be a coverage factor which could increase the tax rate anywhere from 50% or higher depending upon what structure could ultimately be sold to potential buyers. According to the estimates provided in the B&D report, it appears that the preliminary size of the District is $528 million such that each penny of additional tax on the District parcel produces initially about $53,000. The report states that the amount of debt that the District needs to cover is approximately $1.7 million, again assuming no coverage. However, as shown in Chart 2, assuming a Revenue Bond structure is selected with the required reserves and capitalized interest, and that it is determined that the bonds have to be financed on a taxable basis, the actual annual debt service could be approximately double this amount ($3.4 million range) thus doubling the potential District tax rate. Again, this also ignores a coverage factor that will likely be required. Assuming a Revenue Covenant of 150% and a taxable 30 year Revenue Bond structure, the tax levy would be required to be set at an amount to cover approximately $5.1 million ($3.4 million times 1.5). General Obligation Bonds – Further Thoughts Our analysis shows that a Revenue Bond approach is significantly more expensive than a GO Bond approach. If the City were to issue General Obligation debt for the construction of the stadium, several questions should be considered. First, does the City currently have the legal debt capacity to issue the additional debt under its current debt guidelines (General Fund supported debt will not exceed 4.8% of the assessed valuation of real property in the City)? Furthermore, can the City issue this debt without impact to its GO bond ratings? The answer to


whether the City has the capacity to issue the debt under its current guidelines is clearly “yes” in that the new issuance would only increase the City’s current ratio of 2.2% by approximately 0.6%-0.8%. This is even true if you factor in the City’s proposed general government projects in CIP over the next several years of approximately $27 million. As to whether such an issuance would impact the City’s current ratings, the City’s strong GO bond ratings of Aa2/AA/AA+ by Moody’s, Standard & Poor’s and Fitch are not predicated upon approaching the 4.8% policy ceiling but rather the City will be able to keep its current modest debt load well under 3% of total assessed value. PFM is currently working with City staff to evaluate the more realistic limits of this ratio. Additionally, there are numerous other variables and ratios (such as annual debt service as a percent of the City’s operating budget) that will also be critical elements of the overall discussion. While the rating agencies are unlikely to provide the City will a definitive statement as to “how much debt is too much”, to the extent that this project utilizes a significant portion of the City’s future debt capacity the economic spin-off of the project will be important to the rating agencies view of the City’s credit. The proposed Economic Impact Study will be critical to the bond marketplace in evaluating the deal. Ultimately, if the project is successful and expands the City’s economic base, it will be viewed favorably by the rating agencies. However, if the increased tax levy has a substantial negative impact on the businesses in the Special Tax District, it very well could put pressure on both the City’s credit ratings and the City’s overall financial position.

3. From the rating agencies’ standpoint, what record or evidence should the City develop to substantiate that the stadium deal is a good business proposition? What would you advise that the City do to develop this record or evidence?

As stated previously, we believe that the City needs to request an independent Economic Impact Study to determine the direct and indirect benefits of the new stadium. This Study will be a key document in explaining the project to the rating agencies. As part of the rating process, the agencies will inquire whether businesses in District support the project and the additional tax. They will inquire whether the City was able to quantify the potential impact of the additional tax on the businesses. Again, the key to getting the rating agencies comfortable with the project is making a compelling business case for the deal.

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