The Memphis Grizzlies have reached an agreement with the city and county that will keep the team in Memphis at least through 2029 but will require annual payments to the Grizzlies for the duration of the lease.

The Shelby County Commission Monday approved, unanimously and without discussion, the county’s $18.5 million total share. The county payment for fiscal 2023, which starts this coming July 1, is about $1.98 million. 

The agreement replaces any obligation the city and county would have had to buy tens of millions of dollars of tickets or suites under a troublesome provision of the existing lease. 

Calkins: Grizzlies aren’t leaving Memphis — now or in 2029

The Grizzlies and the city and county have been negotiating a solution to this provision for more than a year. The current agreement is being presented as an acceptable resolution for both sides.

“We have been working proactively and amicably with the City and County for an extended period of time to resolve this complex provision from the original FedExForum lease, and would like to thank all of the participating government officials and civic leaders for their partnership in reaching this mutually beneficial outcome, including Mayor Strickland, Mayor Harris and the members of the City Council and County Commission,” Memphis Grizzlies President Jason Wexler said in a statement. 

Under the agreement, the city and county will pay the Grizzlies $4.95 million a year for four seasons, starting with 2021-2022. The city and county will pay the Grizzlies $6.3 million for the four seasons after that, ending in 2028-2029.

The City Council does not have to vote on the agreement. The agreement will still have to be approved by the NBA.

The compromise stems from the “Early Termination” clause in the current lease, which 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.”

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That provision kicked in after the 2019-20 season, when the attendance thresholds were not met.

The Grizzlies do not release figures of average paid attendance, suite sales or club ticket sales. But average paid attendance for the portion of the 2019-20 season that was played at FedExForum before the season was suspended because of COVID-19 was well under 14,900 per game. Attendance then cratered after the pandemic began. 

Under the terms of the lease, the Grizzlies would have been free to relocate unless the city and county chose to “purchase or cause to be purchased” enough tickets to make up for the shortfall.

‘Early termination’ clause in Grizzlies lease may require city and county to kick in millions to keep team

Neither the Grizzlies nor the two local governments were happy with the provision. The city and county didn’t want to be in the business of buying and distributing thousands of tickets every season. The Grizzlies preferred to have a set payment every year.

So the Grizzlies and public officials started negotiations to figure out some way around that provision. Nobody wanted the franchise to move.

“We are certainly aware of that component of the contract and we’ve been working proactively with our partners at the county and the Grizzlies to address it,” said Kyle Veazey, the city’s former deputy chief operating officer, when The Daily Memphian broke the story.

Negotiations have been ongoing since.

The Grizzlies offered to take no payments for 2020-2021, when attendance was limited by COVID restrictions — although they would have been entitled to payments under the terms of the lease. Instead, the payments will begin with the current season. The first payment is to be made this July.

The agreement does not address the future of the Grizzlies after the current lease expires in 2029. Robert Pera, the owner of the Grizzlies, has never given any indication that he wishes to relocate the franchise. But a new lease — which will likely involve substantially more investment from the city and county — will have to be negotiated before the current lease expires.