Memphis and Grizzlies are discussing their lease

Officials for the Memphis Grizzlies and the city are working to close out a deal to prevent the franchise from seriously exploring terminating its lease at the FedExFourm before its expiration in 2028.

The discussions between the city and the team started prior to the COVID19 shutdowns, and they’ve been tabled since then. So far the talks have been amicable, but it seems clear that there is going to need to be a serious financial commitment from the municipality if the team is going to not terminate it’s lease under current ownership. And that’s going to be a very hard pill for any politician and public to swallow with the slumping economy and slowing tax revenue that is going to continue throughout this pandemic.

In order to terminate the lease, certain attendance marks have to be hit from the 16th season onward.

“The “early termination” section provides that the Grizzlies “shall have the right, but not the obligation, to exercise The Early Termination Right” if in any season after the team’s 15th season in FedExForum 1) average paid attendance is “less than 14,900,” or 2)  “the 64 largest suites are not sold in full,” or 3) “the number of Club Season tickets is less than 2,500.”

Geoff Calkins, Daily Memphian

This is the club’s 16th season in the Forum.

Attendance has been inconsistent for the franchise because management has struggled to put together a team that can consistently reach the playoffs; or even considered to be a realistic threat to win the NBA championship. This makes it seem likely that the franchise will have all of the ammunition it needs to threaten the city with an early termination of its lease, especially with a former NBA city getting a shiny new arena in time for the 2021-2022 season.

As the pandemic has slowed spending and tax revenue in Memphis, and across the country, the city is looking for help from the federal government to fill in the revenue gaps in its 2021 fiscal budget. It would seemingly be difficult to potentially forgo millions in tax revenue at the arena or to give the team millions of dollars with the city facing a nearly $81 million budget deficit next year.

Despite the budget issues, this seems like the perfect situation for a billionaire owner to extort the taxpayers into either supporting tax relief or subsidies. But there is good news for Memphis, when current owner Robert Pera bought the team he agreed to a clause that binds the franchise to the city called a “call right”. What this means is that if Pera files for relocation prior to 2027, local ownership has the right to by the team from him at a price that is “equal to his invested capital”; basically, it’s not going to be very easy for him to move the team out of town and that should limit some of his leverage.

To be fair to Pera and his ownership group, they have not publicly or privately threatened relocation to sell the team. In fact, it seems that they’ve been dedicated to increasing the organizations connection to the fan base and cultivating a loyal group of fans; and they’ve gone as far to privately express frustration at the constant rumors of relocation because they feel it’s limiting the success of their outreach programs.

Pera’s commitment to grow and build a connection with the Grizzlies’ fan base in Memphis, along with his current report with city officials, make it seem unlikely that the franchise is in danger of using Seattle as leverage anytime soon; let alone moving up here.

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