City lets O's delay rent they owe on 33rd Street

May 01, 1992|By Mark Hyman | Mark Hyman,Staff Writer

At a time when the city is facing a severe fiscal crisis, Mayor Kurt L. Schmoke made a concession to the Orioles on their rent payment that he acknowledges amounted to an interest-free loan.

The concession could be worth more than $50,000 -- not a large amount considering the millions the city has been struggling to save in budget cuts. But it was extended to one of the city's richest tenants with relatively few questions asked.

The Orioles asked Baltimore to wait several months longer than usual for the rent payment due on their final year at Memorial Stadium, saying they've been distracted by their move to Oriole Park at Camden Yards. The lease for Memorial Stadium, which the city owns, requires the team to calculate its rent -- and pay the city -- by March 31.

Under the revised plan, the city doesn't expect to see the estimated multimillion-dollar payment until June.

Mr. Schmoke said he personally approved the rent extension -- forwhich the team will pay neither interest nor a penalty -- after the request was relayed to him by city Finance Director William R. Brown.

"They intended to have the money to us by the end of the fiscal year," Mr. Schmoke said. "I just asked Bill whether he thought that was a reasonable request and he said it seemed reasonable to him."

Not all city officials saw it that way. City Council President Mary Pat Clarke said the Orioles "definitely should pay us interest" on the rent they owe, and suggested the money be used to pay city police who arepatrolling at the new stadium.

City Comptroller Jackie McLean called the interest-free extension "absurd."

"This is ridiculous. I don't know of anyone who can get away without paying their bills and without a penalty being attached," she said.

Ms. McLean said she intended to "speak with the mayor" about the agreement and see if it could be changed because "this sets a precedent, and I don't like setting precedents where money is involved."

The Orioles' 1991 rent, though not yet determined, should be among the highest the city ever has collected from the team. The payment isabout half the team's annual profits, which were boosted last year, in part, by a franchise-record attendance of 2.55 million.

Since the profit-sharing lease went into effect in 1982, the Orioles have paid rent of up to $5.2 million, in 1989. Twice -- in 1982 and 1987 -- they paid nothing, although the city did receive millions in taxes it collects on the sale of tickets.

Before last season, the Orioles asked the city to drop the profit-sharing formula for their final season at Memorial Stadium and accept a lump-sum payment of about $3 million -- a proposal rejected by the city. If the Orioles end up paying that much, the city would, in effect, be floating an interest-free loan worth tens of thousands of dollars.

A conservative estimate would put the 1991 rent at $3 million. A $3 million loan extended at the prime rate of 6.5 percent -- the rate banks are charging their best customers -- normally would accrue interest charges in 60 days of $32,500, and in 90 days, of $48,750.

Mr. Schmoke said that when the Orioles' request was presented, "I don't recall thinking that it was that unusual or that I should call the Orioles to get more details. I really didn't think it was significant enough given the facts presented to me to look behind them." But the mayor said he might have been more cautious if he'd thought about the extension as an interest-free loan. "I probably would have sat down, called the Orioles and said, 'Why do you need a float?' "

"I know our citizens are very concerned about financial arrangements with the Orioles, and scrutinize them," the mayor said. "It's just that under the circumstances, it seemed like a reasonable request."

Orioles president Larry Lucchino declined to comment on the lease talks themselves, but said the team needed the extension to compensate for the "disruption and demands" of moving to the new ballpark.

Under the lease, the Orioles have 90 days from the end of their fiscal year (Dec. 31) to complete internal accounting and to pay the city for the use of Memorial Stadium in the previous year. City auditors then have a month to review the Orioles books and to decide whether they accept the team's accounting.

Before the current negotiation, the Orioles had failed to pay the city on time only once -- last year, when city team officials became involved in a proposed two-year rent payment that would have settled the team's rent through the end of the lease.

For 1989, when the team was sold at midseason to Eli S. Jacobs by the family of the late Edward Bennett Williams, the new owners paid the city $500,000 within the March 31 deadline. After city officials reviewed the accounting, the Orioles later paid an added $2 million.

Mr. Lucchino insisted that the Orioles hadn't asked the city to agree to something new this time. "I will say simply the schedule is a result of us basically confirming the practice of the last few years in terms of timing," he said.

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