Robert E. Rich Jr. and his partners would not be the only ones making an expensive investment for Buffalo to obtain a major league baseball franchise.
Taxpayers would have to match the private investors almost dollar for dollar in what would amount to one of the largest public-private business ventures in local history.
Major league baseball is shaping up as a $230 million proposition.
Rich and his partners would have to invest an estimated $134 million. The public would be putting up at least $96 million, including the $44 million already spent to build Pilot Field.
Public officials have developed a financing plan for their portion of the costs that wouldn't take away from money that goes to providing basic services.
Rich, in pursuit of the private financing, has devised a plan that relies primarily on the capital of others.
While the public financing proposal has been widely publicized, little has been disclosed of Rich's plans for private investment.
But The Buffalo News has obtained investment documents that contradict commonly held beliefs that the Rich family intends to bankroll much or most of the undertaking and that their partners are limited to those who have been publicly identified.
According to those documents and interviews with investors:
The Riches are committed to investing $10 million cash plus the three minor-league teams they now own, although Rich said it's possible the family will invest more. While they would be the team's single-largest investor, the Riches' investment, unless substantially increased, would represent a fraction of the capital needed to buy and operate the team.
The ownership group assembled by Rich is larger than the 15 investors he has publicly identified and is not yet finalized.
None of the partners has determined precisely how much he will invest, although no one other than the Riches is expected to put up $10 million or more.
The huge price tag of obtaining a franchise has prompted team and public officials to begin questioning whether the Buffalo area can sustain a major league team.
"We agree with the city that baseball would be very desireable, both emotionally and economically, for the community," said William Gisel Jr., the Bison's vice president and legal counsel. "But neither of us can view this project as a baseball-at-any-cost proposition."
Ellicott Council Member James Pitts, who heads a task force studying the proposed stadium expansion, said nearly everyone in the community would like to see Buffalo get a major league team. But the public investment required to obtain one must be weighed against other community needs, he said.
"I think we have to set priorities within the city that ensures the taxpayers are going to receive their services first and their entertainment second," Pitts said. "It's unreasonable to expect them to pay for what is, in effect, a private interest at a public expense."
The city and county, in lease negotiations with the Bisons on the use of Pilot Field if Buffalo acquires an expansion team, have expressed a willingness to expand the stadium and give the Bisons a favorable lease. Bisons officials have said that's not enough, however.
To be a viable enterprise, the team says it needs local government to guarantee parking revenue, offer rent rebates in the event revenues fall below projections and be open to other concessions if the team falls upon hard financial times.
City and county officials counter that they are financially strapped and can't afford the additional concessions without dipping into general tax revenues that pay for basic services such as police protection and snow removal.
"Using general tax revenues is a line we will not cross," said Charles Rosenow, president of several City Hall development companies and point man on the issue of major league baseball.
Public officials are willing to expand the stadium and turn it over to the Bisons because that can be done through the use of special-purpose tax money that isn't available to pay for general government services.
Expanding Pilot Field from 21,000 to 40,500 seats to accommodate a major league team would cost an estimated $44.5 million, all but $5.5 million of which would come from public sources.
Most of the public financing -- $26 million -- would come from bonds paid with proceeds from the county's tax on hotel rooms, which must be spent on tourism and public assembly facilities. The state would provide an additional $8 million and the city and its development agencies $4 million.
The total cost for expanding Pilot Field would be somewhat higher than the $39 million estimate because of interest payments on the loans. How much would not be known until the bonds are sold.
Government, for its investment, would reap an estimated windfall of $4.6 million a year in increased tax revenues. Three-quarters of the additional money would go to the state in the form of additional income, sales and hotel-room tax revenue. Most of the remaining $1.2 million would go to local governments and school boards.
In proposing a lease for an expanded Pilot Field, the team has offered to invest $5.5 million in the stadium, primarily for a scoreboard and concession equipment; assume responsibility from the city for maintaining the stadium, at an annual cost of at least $3.2 million, and pay an annual rent of $700,000, the amount needed to cover a $5.5 million bond that would have to be sold to pay for expansion work.
In return, the team wants the city to surrender its claim to a portion of concession, souvenir and advertising revenues.
While city and county officials have conceptually agreed to those terms, they are balking at additional Bisons proposals that would be paid for with public money.
The most expensive item involves a minimum investment of $650,000 a year for further capital improvements to the stadium, which over the course of the proposed 20-year lease would total $13 million.
The team also wants $1.5 million a year in parking revenue from both public and private parking facilities around the stadium, and 600 parking spaces on or adjacent to the stadium's grounds.
Team officials maintain that, because baseball games would generate parking revenue, the Bisons are entitled to a share of it. The city questions how it could assess private parking operators or replace funds lost from its facilities without dipping into general tax revenues.
City officials also estimated that a new parking facility, because of cramped quarters around the stadium, would have to be a ramp, which would cost about $4.8 million to build.
The team also is seeking financial relief in the event Pilot Field has to close for expansion work, attendance is significantly lower than anticipated, or the team's share of national television money is withheld by the league during the early years of operation.
All the variables make a cost estimate to the public difficult to determine, but a worst-case scenario could involve tens of millions of dollars over the course of the lease.
While Gisel negotiates a lease with the city, Bob Rich and his wife and Bisons vice president, Mindy Rich, are continuing to line up private investors to come up with the $95 million franchise fee and the estimated $30 million needed to cover initial operating expenses.
Final investment decisions aren't expected to be made until after the National League reduces the list of prospective expansion sites to a half-dozen cities later this month. Major League Baseball, which held its annual winter meetings last week in suburban Chicago, expects to select two cities for National League teams next fall to begin play in 1993.
Rich has been reluctant to talk about the details of his ownership group, other than to announce the names of selected investors. While the details are subject to change, investment documents and interviews with 14 of the 15 known investors indicate that the basic framework of the business is in place.
The proposed partnership agreement circulated to potential investors this summer calls for the business to be set up as a limited partnership. Such partnerships are common in business and seem to be an especially popular setup among the 18 prospective ownership groups from 10 cities seeking a team.
The Rich family would be the general, or controlling, partner, at an annual fee of $300,000. As such, the family's management team would be empowered to operate the team's routine business as it sees fit.
Approval of the team's board of directors -- made up of representatives of the other partners -- would be required only in decisions involving change in the general partnership, the location of the franchise or the partnership agreement.
Operating capital for the team would be raised by selling partnerships in $10 million units and by borrowing money. The major leagues require that teams raise at least 60 percent of the $95 million franchise fee in the form of investment, rather than borrowing.
According to the proposed partnership agreement, the Riches would commit to buying one unit in cash. They also would contribute minor league franchises in Buffalo, Wichita and Niagara Falls, in exchange for additional equity equal to the fair market value of the teams.
Those franchises are worth an estimated $12 million to $15 million, although the value of the Bisons Triple A franchise probably would drop substantially if it were relocated to another city.
Rich declined to say whether he was prepared to make any additional investment. He termed his $10 million commitment "probably more of a minimum."
Other investors have varying expectations of what the Riches eventually will commit, although there is a sense they eventually will invest more than what the partnership agreement presently calls for.
"Right now, Bob's keeping all the cards close to himself. But in time, it will be demonstrated he's got a commitment there," said Jeremy Jacobs, chairman of Delaware North Companies and a key member of the ownership group.
"I don't know how much it will be, but I think Bob is going to wind up leading both personally and financially," Jacobs said.
Several potential partners said Rich has not asked investors to specify how much they will spend.
"We haven't made a determination, and the Riches haven't pressed us yet," said Milton Kantor, head of a Cincinnati-area investment group that has committed to Rich. "I think the whole group is waiting to see whether we make the cut."
To date, investors have signed a statement expressing their interest in buying into the partnership and allowing Rich to use their names in his dealings with the National League expansion committee. But the statements do not legally obligate the signer to invest, which means some could back out at a later date.
None of the investors interviewed expressed any second thoughts about his own involvement, however, and all said their circle is larger than the 15 individuals and still growing. Rich declined to pinpoint the precise number of investors, other than to say it is "well less than 100. We're talking about a diverse ownership group, but not a broad ownership group," he said.
Several of the publicly known investors, including Buffalo attorney Robert Swados and radio broadcaster Larry King, said they expect to invest a relatively small amount of money. Only King would specify his expected investment, which he pegged at approximately $250,000.
While Rich expects to attract larger investors, he said his family is the only investor expected to put up $10 million or more. Others will share the cost of the $10 million partnership units with other investors.
Mrs. Rich said investors intend to make a profit at the baseball venture.
"We're not going to go into this as anything other than a business," she said.
Her husband agreed but acknowledged that a major league baseball team "is certainly not the most lucrative opportunity for short-term gain."
Indeed, while major league teams reportedly posted an average pre-tax profit of $8.3 million in 1989, one-third of them lost money this season -- mostly in small markets the size of Buffalo. If and when there is money to be made, the partnership agreement is structured so that the Riches would receive bonuses and a disproportionate share of the profits once their partners have recouped their initial investment.
At this point, however, neither Rich nor public officials are focusing on the potential long-term profits. Instead, they are dealing with the massive upfront costs involved in obtaining a team.
"The acquisition and retention of a major league baseball team is a high stakes game for the community," Rosenow said. "Both the costs and the benefits are of enormous magnitude."