Authorize a non-binding term sheet with Rip City Management LLC and Trail Blazers, Inc. for Rose Quarter Operating and Lease Agreements
WHEREAS, the Rose Quarter is the premiere event complex in Oregon, encompassing the Moda Center and the Veterans Memorial Coliseum, hosting over 260 events and attracting more than 1.7 million people to Portland’s Central City each year; and
WHEREAS, the Portland Trail Blazers of the National Basketball Association (NBA) have been a City treasure since 1970, providing civic pride, identity, joy, and meaningful economic activity to the City of Portland, metropolitan region, and state of Oregon; and
WHEREAS, the City of Portland and Oregon Arena Corporation entered into multiple foundational agreements in the early 1990s leading to the development of the Rose Quarter as we now know it including privately-funded construction of the Rose Garden Arena (now Moda Center), an entertainment/office building and two parking structures, and publicly-funded development of two additional parking structures, a public plaza, several new streets and other necessary infrastructure; and
WHEREAS, Rip City Management LLC is the successor entity to Oregon Arena Corporation and operates both the Moda Center and the Veterans Memorial Coliseum today; and
WHEREAS, the Arena Ground Lease is one agreement that became effective when the new arena opened on October 12, 1995 for a term of 30 years and expires, unless extended, on October 11, 2025; and
WHEREAS, the combined economic impact of Rose Quarter events is over $600 million in annual economic output each year, supporting nearly 6,000 jobs; and
WHEREAS, it is critically important to Portland, the metropolitan region, and the state of Oregon that the successful operation of the arenas at the Rose Quarter continue and the Moda Center remains the home court for the Portland Trail Blazers; and
WHEREAS, the Moda Center is nearing thirty years old, is one of the older NBA arenas yet to undergo a comprehensive renovation, and will need significant reinvestment to remain competitive in the league; and
WHEREAS, the City and Rip City Management LLC have been working in good faith to develop the framework for a long-term agreement that would fund a major renovation of the Moda Center and keep the team in Portland for 20 or more years; and
WHEREAS, the Rip City Management LLC intends to seek public funding from sources in addition to the City to provide the public financial support necessary for a long-term agreement and major renovation; and
WHEREAS, it is in the best interest of the City and Rip City Management to enter into a five-year bridge agreement with a possible five-year extension that will transfer the Moda Center arena into public ownership, allow the City to reinvest certain revenues generated by Portland Trail Blazers home games into sustaining improvements to the arena, provide time for the parties to secure additional commitments necessary for a long-term agreement and major renovation, and ensure that Oregon’s favorite basketball team plays at Moda Center until at least 2030; and
WHEREAS, all City sustaining investments into Moda Center during the five-year term will be matched equally by Rip City Management LLC; and
WHEREAS, all resources necessary for the City to meet anticipated Moda Center capital funding obligations during the five-year term will come from revenue generated by Portland Trail Blazers home games; and
WHEREAS, Rip City Baby!!!
NOW, THEREFORE, BE IT RESOLVED that the Portland City Council affirms its support for the proposed five-year bridge agreement to keep the Portland Trail Blazers playing at the Moda Center until at least 2030; and
BE IT FURTHER RESOLVED that the Mayor is authorized to sign the Proposed Terms for Arena Bridge Agreement in a form substantially similar to that attached as Exhibit A; and
BE IT FURTHER RESOLVED that the Portland City Council directs the Office of Management and Finance to complete their due diligence and work with Rip City Management LLC to develop formal definitive documents and amendments to existing agreements as necessitated by the terms contained in Exhibit A and that adequately secure the obligations of Trail Blazers Inc. Including but not limited to playing home games at the Moda Center; and
BE IT FURTHER RESOLVED that the Portland City Council will consider formal definitive documents and amendments to existing agreements as necessitated by the terms contained in Exhibit A.
Official Record (Efiles)
Impact Statement
Purpose of Proposed Legislation and Background Information
This resolution approves the Proposed Terms for Arena Bridge Agreement attached at Exhibit A. The resolution is non-binding, but if approved, sets in motion a period of due diligence and preparation of legal documents with the intent to bring binding contractual documents back to City Council for approval by late summer, 2024.
Rip City Management is the sister company to the Portland Trail Blazers that operates the Moda Center and the Veterans Memorial Coliseum. Both Rip City Management and the Portland Trail Blazers are currently owned by the estate of Paul G. Allen. The City, Rip City Management, and the Portland Trail Blazers desire to enter into a longer-term agreement that would keep the team playing in a fully renovated Moda Center arena for 20 or more years. However, negotiating a long-term agreement will require coordination with additional parties and necessitate additional time. Because the current suite of agreements expires in October 2025, and there is a one-year advance notice requirement to execute an extension of the existing agreements, the City and Rip City Management desire to enter into a five-year bridge agreement that will keep the team playing at the Moda Center until at least 2030 and allow public and private sustaining investments into the facility.
The proposed Rose Quarter bridge agreement terms, if approved by City Council with the authorization of definitive documents in Summer 2024, will have several key implications:
- The Portland Trail Blazers will be contractually obligated to play home games in Moda Center through October 11, 2030 with an option to extend the agreements to October 11, 2035. The current agreements requiring the team to play at Moda Center are set to expire on October 11, 2025. This bridge agreement represents a minimum 5-year extension of that commitment.
- Ownership of the Moda Center will be transferred to the City of Portland for $1. This will allow public investment into the arena both during the bridge term and potentially under the terms of a subsequent longer-term agreement desired by the parties.
- The City will purchase a parcel of land under a portion of the Moda Center owed by Rip City Management for a fair market price. This purchase is necessary to allow City ownership of the arena. This ownership transfer was anticipated in the original 1995 Arena Ground Lease.
- During the term of the bridge agreement, the City will match investments into capital improvements at Moda Center made by Rip City Management, according to a yet to be developed improvement plan. The amount of the City’s annual investment into capital projects at the Moda Center is limited to the actual revenues received from Portland Trail Blazers games through ticket user fees and parking revenues during the prior fiscal year. No City revenues from other sources will be spent on Moda Center capital projects.
- Rip City Management will retain all operational rights and responsibilities regarding Moda Center that exist under the expiring agreements.
Financial and Budgetary Impacts
The economic activity to the region and state of the Rose Quarter event campus is estimated at over $600 million in annual economic impact including nearly 6,000 full and part time jobs, and total labor income of over $290 million. Roughly 75% of this economic activity is attributable to the Portland Trail Blazers and 25% to other activities at the Rose Quarter arenas. The greater economic impact of keeping the team at the Moda Center for the long term is important to the long-term economy of the City, region, and state.
The proposed bridge agreement terms commit the City to several expenditures between now and 2030:
- The City will purchase the parcel of land under a portion of the Moda Center at a fair market value to be determined by the parties prior to execution of the definitive documents. Early estimates of the parcel’s value range from $6 to $8 million. The agreed upon purchase price may be paid in up to five annual installments.
- The City will match annual capital investments into the building made by Rip City Management. The amount of the City’s annual investment into capital projects at the Moda Center is limited to the actual revenues received through ticket user fees and parking revenues from Portland Trail Blazers home games during the prior fiscal year. This amount will vary depending on team performance. For reference, in Fiscal Year 2022-23, the City collected approximately $4.6 million in user fees (sometimes referred to as ticket taxes) and parking fees from Portland Trail Blazer home games. During the bridge agreement term, Rip City Management must match the City’s contribution 1:1 to obtain the City’s funding. If Rip City Management maximizes this funding opportunity, it is safe to say that the parties will split annual investments into the publicly-owned Moda Center of $9+ million each year of the bridge agreement.
Funding for these commitments as well as for the cost of negotiating and preparing the necessary legal documents and performing the necessary due diligence prior to closing will come from the City’s Spectator Venues and Visitor Activities Fund. Current reserves and projected future resources of the Fund are sufficient to allow the property purchase and the annual contribution to capital projects at Moda Center while still meeting other financial obligations at the Rose Quarter and Providence Park Stadium and maintaining adequate reserve levels.
Community Impacts and Community Involvement
The Portland Trail Blazers and Moda Center are important community assets hosting hundreds of events every year with an attendance of approximately 1.7 million people. The Portland Trail Blazers are a source of civic pride and a unifying force for many Portlanders. The economic, social, and cultural benefit of the team continuing to play at the Moda Center is profound.
Portland Trail Blazers have a long history of giving back to Portland and Oregon. Since 2009, the Trail Blazers Foundation has donated more than $9 million to local communities. The Team is dedicated to philanthropic efforts with particular focus on racial equity, environmental and educational initiatives.
Agreement negotiations between the City and Rip City Management to date have been subject to a non-disclosure agreement and have not involved the public. While no specific community outreach is planned, members of the public may choose to submit testimony at the City Council hearing on the proposed terms, and again when City Council considers approval of the definitive agreement documents in Summer 2024.
There is no known opposition to the proposed bridge agreement terms at this time.
100% Renewable Goal
Rip City management has led the nation with efforts to improve the environmental performance of the Moda Center and Veterans Memorial Coliseum. The Moda Center was the first major arena in the country to achieve LEED (Leadership in Energy and Environmental Design) Platinum status, and recently the Veterans Memorial Coliseum was awarded LEED Gold status, no small feat for a 63-year-old building.
This action approves a non-binding term sheet outlining the proposed agreement terms for a five-year Rose Quarter operating agreement that would allow continued operation of the Rose Quarter arenas by current operator, Rip City Management as well as ensure that the Portland Trail Blazers continue to play their home games at the Moda Center through at least 2030. Energy use at the Rose Quarter is not anticipated to change as a result of this action.
Financial and Budget Analysis
Analysis provided by City Budget Office
The resolution is non-binding, but if approved, sets in motion a period of due diligence and preparation of legal documents with the intent to bring binding contractual documents back to City Council for approval by late summer, 2024.
The proposed Rose Quarter bridge agreement terms, if approved by City Council with the authorization of definitive documents in Summer 2024, will transfer ownership of the Moda Center to the City for $1. This will allow public investment into the arena both during the bridge term and potentially under the terms of a subsequent longer-term agreement desired by the parties.
The proposed bridge agreement terms commit the City to several expenditures between now and 2030:
The City will purchase the parcel of land under a portion of the Moda Center at a fair market value to be determined by the parties prior to execution of the definitive documents. Early estimates of the parcel’s value range from $6 to $8 million. The agreed upon purchase price may be paid in up to five annual installments.
The City will match annual capital investments into the building made by Rip City Management. The amount of the City’s annual investment into capital projects at the Moda Center is limited to the actual revenues received through ticket user fees and parking revenues from Portland Trail Blazers home games during the prior fiscal year. This amount will vary depending on team performance. For reference, in FY 2022-23, the City collected approximately $4.6 million in user fees (sometimes referred to as ticket taxes) and parking fees from Portland Trail Blazer home games. During the bridge agreement term, Rip City Management must match the City’s contribution 1:1 to obtain the City’s funding. If Rip City Management maximizes this funding opportunity, the Spectator Venues program believes that the parties will split annual investments into the publicly-owned Moda Center of at least $9 million each year of the bridge agreement.
Funding for these commitments as well as for the cost of negotiating and preparing the necessary legal documents and performing the necessary due diligence prior to closing will come from the City’s Spectator Venues and Visitor Activities Fund. The program states that current reserves and projected future resources of the Fund are sufficient to allow the property purchase and the annual contribution to capital projects at Moda Center while still meeting other financial obligations at the Rose Quarter and Providence Park Stadium and maintaining adequate reserve levels.