REPORT TO THE SUCCESSOR AGENCY OF THE
REDEVELOPMENT AGENCY OF THE CITY OF LAKE ELSINORE
To:Honorable Agency Chair and Members of the Successor Agency From:Jason Simpson, Executive Director
Prepared by:Barbara Leibold, Agency Attorney
Date:January 14, 2025
Subject:Third Amendment to Concession License Agreement and an Eleventh Amendment to Stadium Interim Management Agreement
Recommendation
1. Find that the Third Amendment to the Concession License Agreement and the Eleventh Amendment to the Stadium Interim Management Agreement are exempt from the California Environmental Quality Act (CEQA) pursuant to Section 15301 of the State CEQA Guidelines; and
2. Adopt A RESOLUTION OF THE SUCCESSOR AGENCY OF THE REDEVELOPMENT
AGENCY OF THE CITY OF LAKE ELSINORE APPROVING THIRD AMENDMENT TO
CONCESSION LICENSE AGREEMENT AND THE ELEVENTH AMENDMENT TO THE
STADIUM INTERIM MANAGEMENT AGREEMENT
Background
In 1994, the former Redevelopment Agency of the City of Lake Elsinore (the “RDA”), completed the Lake Elsinore Diamond Stadium (“Diamond Stadium”) on property donated for purposes of developing a minor league professional baseball stadium. The Diamond Stadium was intended to stimulate economic development and redevelopment within the Rancho Laguna Redevelopment Project Area 3 consistent with and in furtherance of the Redevelopment Plan. As required by that certain First Amendment to Amended and Restated Option Agreement Under Threat of Condemnation and Irrevocable Offer To Donate Stadium Site and Stadium Access Parcel and Unconditional Acceptance Subject To Covenants, Conditions, Restrictions and Reservations dated August 5, 1993, the RDA operated, managed and maintained the Diamond Stadium pursuant to various agreements.
Third Amendment to Concession License Agreement and
Eleventh Amendment to Interim Stadium Management Agreement
In 2001 and 2002, the RDA entered into certain agreements involving the operation and maintenance of the Diamond Stadium, including a License Agreement, a Stadium Field and Maintenance Agreement, and a Concession License Agreement (collectively, the “Stadium Operations Contracts”). Pursuant to the Stadium Operations Contracts, the Storm licensed and maintained the Stadium for baseball games and other Storm events. An affiliate of the Storm, Golden State Concessions and Catering, Inc. (“Golden State”), operated the concessions at the Stadium. Under the Stadium Operations Contracts, the RDA’s management, operation and maintenance costs were significant and the Stadium operated at a loss.
In 2005, the RDA commenced negotiations with Diamond Stadium Group (DSG) to undertake all of the Stadium operations, maintenance and management responsibilities. Storm LP, Golden State and DSG share common controlling ownership. Negotiations between the RDA and DSG resulted in June 2007 amendments to the Stadium Operations Contracts and a new Stadium License, Lease and Management Agreement (the “2007 Management Agreement”).
DSG fulfilled all aspects of the 2007 Management Agreement which reduced the RDA’s Stadium- related costs. However, in June 2011 DSG elected to exercise its right to terminate the 2007 Management Agreement effective December 31, 2012 citing annual losses under the 2007 Management Agreement. Upon termination of the 2007 Management Agreement, the rights and responsibilities for Stadium management, operations, and maintenance were again divided in accordance with the Stadium Operations Contracts; however, at that time, the RDA had been dissolved and the Successor Agency did not have the resources to satisfactorily perform its obligations.
On December 11, 2012, the Successor Agency approved the Stadium Interim Management Agreement (“Interim Agreement”) to provide for the efficient and cost-effective management, maintenance and operation of the Stadium by the Storm through 2013. A First Amendment to the Interim Agreement was approved in September 2013. A Second Amendment to the Interim Agreement was approved in September 2014, a Third Amendment was approved in September 2015, a Fourth Amendment was approved in September 2016, a Restated Fifth Amendment and Extension (collectively, “Fifth Amendment”) was approved in May and June 2018, a Sixth Amendment was approved January 8, 2019, a Seventh Amendment and an Amended and Restated Seventh Amendment (collectively “Seventh Amendment”) was approved January 14, 2020 and January 12, 2021, respectively, an Eighth Amendment and an Amendment No 1 to Eighth Amendment (collectively “Eighth Amendment”) was approved January 14, 2022 and September 13, 2022, respectively, Ninth Amendment was approved January 10, 2023, and a Tenth Amendment was approved January 18, 2024.
Since the dissolution of the RDA, the State Department of Finance has approved the allocation of Real Property Tax Trust Funds for Stadium obligations in accordance with the Successor Agency Recognized Obligations Payment Schedules (ROPS). The Interim Agreement and the First through Tenth Amendments have been successfully implemented to provide for efficient and cost-effective management, maintenance, and operation of the Diamond Stadium.
Discussion
Third Amendment to Concession License Agreement and
Eleventh Amendment to Interim Stadium Management Agreement
Third Amendment To Concession License Agreement.
A Third Amendment to the Concession License Agreement is necessary to conform to California Department of Alcoholic Beverage Control (“ABC”) regulations by implementing a flat Concession Fee to replace the percentage Concession Fee and to align the concession license granted to the concessionaire with the boundaries of the ABC licenses held by Golden State. No other changes to the existing Concession Agreement are proposed. Under the terms of the Interim Agreement, the Concession Fee covered by ROPS 25-26 is credited and assigned to the Storm as part of the compensation to the Storm for its performance of the operation, maintenance and management of the Diamond Stadium.
Eleventh Amendment to Stadium Interim Management Agreement.
Major League Baseball (MLB) engaged in a sweeping overhaul of the player development structure during the 2020 off-season, eliminating the National Association of Professional Baseball Leagues (NAPBL) as the governing structure and cutting approximately twenty-five percent (25%) of minor league affiliates. Remaining affiliates now contract directly with MLB under a new Player Development License agreement finalized in 2021 and aimed at modernizing facilities and improving player training and logistics. In this restructure the Storm has been designated as a “Class A” team.
The impacts of Major League Baseball restructuring in 2020 increases in minimum wage and current inflationary pressures continue to affect Stadium operations and the parties’ budget assumptions and projections, including operational and capital requirements and facilities standards established by MLB in the Player Development License. In order to address these impacts and provide certainty to the Successor Agency and the Storm for the continued efficient and cost-effective management, maintenance and operation of the Diamond Stadium through the 2026 baseball season, the Successor Agency proposes to enter into an Eleventh Amendment (“Eleventh Amendment”) extending the term one year to September 30, 2026. The proposed Eleventh Amendment also updates the Capital Repair schedule as set forth in Exhibit “C.” Absent the Eleventh Amendment, the existing Stadium Interim Management Agreement will expire on September 30, 2025 at which time the burden of maintaining, managing and operating Diamond Stadium under the Stadium Operations Contracts will fall onto the Successor Agency.
The Successor Agency lacks the personnel and the expertise to fulfil these contractual obligations.
During the 2025-2026 term of the Eleventh Amendment commencing October 1, 2025 through September 30, 2026, compensation to the Storm for the performance of the maintenance, management and operations services under the Stadium Interim Management Agreement shall be $1,219,515 for payable in equal monthly installments of $101,626.25.
As required by the Stadium Operations Contracts, the Successor Agency continues to be responsible for all Capital Repairs and alterations. Projected Capital Repair expenditures under the proposed Eleventh Amendment includes an additional $2,910,150 for the 2025-2026 term of the Eleventh Amendment.
Third Amendment to Concession License Agreement and
Eleventh Amendment to Interim Stadium Management Agreement
The proposed Eleventh Amendment is reasonable and necessary to satisfy the Successor Agency’s contractual obligations under the Stadium Operations Contracts and to protect and maintain the assets of the RDA. The Storm possesses the experience, capabilities and qualifications to best carry out these obligations. The proposed Eleventh Amendment is in the best interests of the taxing entities because the Storm’s skills, knowledge and resources will provide continued, efficient and cost-effective management, maintenance and operation of the Diamond Stadium which will protect the public’s investment in the Stadium, minimize costs and mitigate against potential breach of contract and related damages.
The Third Amendment to the Concession License Agreement and the Eleventh Amendment to the Stadium Interim Management Agreement is subject to the approval of the Riverside Countywide Oversight Board and the Department of Finance (DOF).
CEQA Exemption
Pursuant to the California Environmental Quality Act (CEQA), based upon a review of the evidence and information presented, approval of the Third Amendment to Concession License Agreement and the Eleventh Amendment to the Interim Agreement are categorically exempt from CEQA pursuant to Section 15301 of the State CEQA Guidelines because they consist of the operation, repair, and maintenance of existing facilities and will not lead to any direct or reasonably foreseeable indirect environmental impacts.
Fiscal Impact
The proposed Third Amendment to Concession License Agreement and Eleventh Amendment to the Interim Agreement provide a high level of certainty relating to the costs of Stadium operations and maintenance under the Stadium Operations Contracts. The Successor Agency ROPS 25-26 includes Real Property Tax Trust Funds to cover the Successor Agency obligations for the period of July 1, 2025 through June 30, 2026.
Attachments
Attachment 1 – Resolution Approving Amendments
Attachment 2 – Third Amendment to Concession License Agreement Attachment 3 – Eleventh Amendment to Stadium Interim Management Agreement Attachment 4 – Stadium Interim Management Agreement
City Attorney