The Red Sox will pay the city of Boston $7.3 million under a new deal that allows the baseball club to close off part of Yawkey Way on game days for concessions and grants air rights over Lansdowne Street for as long as the team plays at Fenway Park.
The Sox first leased the public property in 2003 and have paid an average of $183,000 annually to a city agency, the Boston Redevelopment Authority, over 11 seasons, but that agreement expires this year.
The new deal is not a lease but rather a sale of the Lansdowne air rights and of a limited easement on Yawkey Way. Under the agreement, the team will make 10 annual payments of about $734,000 over the next decade. After that, it will no longer have to make payments to the BRA.
The Red Sox used the air space over Lansdowne to construct part of the popular Green Monster seating section atop the left field wall, and turned the strip of Yawkey Way that abuts the ballpark into a ticket gate and outdoor food court. Together, use of those streets generates about $4.5 million in annual revenue, which the Sox share with their food vendor, Aramark, and other teams under Major League Baseball's revenue sharing program.
"If you're looking for a short answer to 'What's in this for the city?,' one answer is the preservation of Fenway Park," said Red Sox president Larry Lucchino. Keeping Fenway open, he asserted, has saved taxpayers money on a new ballpark and aided the business climate around the park.
Going into the negotiations, the BRA's director, Peter Meade, had said the team would have to increase its payments to the city; the Red Sox, for their part, asked for permanent access to the streets. Both parties appeared to get something close to what each wanted.
The agreement is expected to receive final approval from the BRA's board Thursday. It does not give the city a percentage of the money the Red Sox make from Lansdowne Street and Yawkey Way. Meade had wanted a revenue sharing agreement but decided it was not beneficial to taxpayers.
"We felt that we benefited more from a predictable revenue stream," Meade said, noting that under revenue sharing, the city's share would go down if ticket and concession sales were to decline. The BRA based its price on average lease and development rates in the area.
Steven Bourassa, a real estate professor at the University of Louisville who has written widely on leasing of public land, said the pricing method appeared to be reasonable.
"On the whole," Bourassa said, "it seems like a reasonably good deal for the city from a financial point of view. I can imagine other cities, such as my own, more or less giving away such rights, while Boston is earning some income by leasing or selling the space at something that at least approximates market rates."
The city will earmark $1 million of the money it receives for beautification projects in the Fenway neighborhood.
The deal also includes the sale, by the Sox, of a parcel of land between Boylston and Van Ness streets to the BRA for $2.7 million. The land will be used to make a new public street the city has planned for the Fenway neighborhood.
Red Sox principal owner John W. Henry is currently in the process of purchasing The Boston Globe and its related properties from The New York Times Co. for $70 million.
Though Yawkey and Lansdowne are public streets, the BRA did not put the lease of those properties out to competitive bid, which would have given other businesses the opportunity to challenge the Red Sox for the rights. Indeed, earlier this year, a businessman from Everett told the BRA he was interested in securing Yawkey Way concession rights.
The BRA did not consider his offer, and officials said it would be difficult to put Yawkey and Lansdowne out for public bid because the Red Sox, as an abutting property owner, would effectively have the power to block a competitor from gaining those rights. Since the 2003 season, the Sox have had the exclusive right to sell concessions on that portion of Yawkey Way.
Dot Joyce, a spokeswoman for Boston Mayor Thomas M. Menino, said the Red Sox food court generates more money for the city than the nominal fees that were paid by independent vendors who were able to sell on that strip of Yawkey prior to the Red Sox agreement.
In June, the state's inspector general, Glenn Cunha, said the properties should be subjected to competitive bidding to ensure the best deal for taxpayers. Cunha declined to comment Friday on the new agreement.
Cunha's predecessor, Gregory Sullivan, in 2012 also criticized the original street deal on similar grounds following a report by the Globe and the Northeastern University Initiative for Investigative Reporting. Moreover, Sullivan questioned whether the BRA, which is technically an agency independent of city government, could legitimately claim authority over the streets.
The Red Sox entered negotiations with the BRA hoping to preserve the pricing structure of the original contract, according to correspondence between the club and the agency that the Globe obtained through a public records request. The team asserted that a fee for the public land was reasonable because it had paid $56.7 million in property, sales, and meals taxes over a decade. Moreover, the club said it has spent $285 million upgrading Fenway Park.
Lucchino said Friday that by restoring and upgrading Fenway Park, the organization has encouraged other businesses to invest in the neighborhood. By the BRA's measure, private, non-institutional investment there has added up to $2.2 billion.
He also said the Yawkey Way and Lansdowne Street deal is "fundamental" to the team's ability to stay at Fenway.
"It's unlikely that if we were not able to make the kind of improvements that these two projects represent that we would have found a viable way to stay there," Lucchino said.