San Diego to sue SeaWorld for $10M in back rent that went unpaid during pandemic
“SeaWorld’s greed and arrogance are offensive, and the city will hold it accountable,” City Attorney Mara Elliott said of the planned litigation.
The San Diego City Council decided Monday to take SeaWorld to court in hopes of recouping nearly $10 million in back rent that the city says the marine park failed to pay during the height of the pandemic.
A lawsuit has yet to be filed, and it’s unclear how long it will be before the city initiates litigation, but City Attorney Mara W. Elliott’s office announced late Monday that the council in closed session had given it authorization to pursue litigation against the theme park. The vote was 8-0, with Councilmember Vivian Moreno absent.
Because the suit has not yet been formally filed, it’s unknown the precise sum of money the city will be seeking from SeaWorld. However, in a statement issued by Council President Sean Elo-Rivera, he noted that $12 million is owed, including penalties and interest.
The legal move comes two years after city officials first warned SeaWorld that it was in default on lease payments it owed for most of 2020 and a portion of 2021. It remains the only lessee among the city’s hundreds of tenants that is in default on its rent.
“Although SeaWorld’s public disclosures show it to be in good financial shape despite the pandemic, it refuses to pay back rent on its Mission Bay leasehold,” Elliott said in a statement following the vote. “It is the only City lessee to use state-mandated closures during COVID as a pretext to withhold rent. SeaWorld seems to believe that San Diego taxpayers should absorb its debts and liabilities, even though it has banked enormous profits for decades from its operations on prime City-owned real estate.
“SeaWorld’s greed and arrogance are offensive, and the City will hold it accountable.”
SeaWorld officials issued a statement Tuesday afternoon noting that while it’s the company’s policy to not comment on litigation, it remains hopeful that the issue can be resolved.
“We have partnered with the City for nearly 60 years — conducting thousands of animal rescues, numerous recycling drives and many other events,” the statement said. “We also have paid more than $146 million in lease payments to the City of San Diego since 2010. We appreciate all the City has done and we look forward to addressing this situation.”
City officials advised SeaWorld late last year of the money it owed following a formal audit the city treasurer conducted confirming that more than $9.7 million in back rent is owed, plus nearly $12,000 to cover the cost of the audit.
Multiple demands over the last two years have failed to persuade SeaWorld to pay up.
When the Union-Tribune requested a comment from the theme park last year about its decision to not pay the rent that the city said is due, it issued a written statement saying, “Our position remains unchanged, the City of San Diego has been a great partner of ours over the years and we continue to work with them in an attempt to resolve this issue.”
Just a little over a week ago, Elo-Rivera asked city officials during a budget hearing if SeaWorld had yet paid the back rent. When advised that no payment had been made, he grew angry, stating that the park’s position was unacceptable. SeaWorld, he said, should feel “ashamed” for not writing a check to the city.
“It’s been bothering me for a long time, and now we’re two years into this,” he said. “I want that money now, I want it yesterday, I want it with interest. I’m getting more and more mad as I think about it because of all the things that it could be used for instead of stacking (it) on top of the other stacks of cash SeaWorld has.”
He added late Monday that he was “glad the city has drawn a line in the sand and is demanding SeaWorld pay us what they owe us.”
SeaWorld had previously rebuffed repeated offers of a rent deferral plan that had been made available to all city tenants. The park had argued that early on in the pandemic when theme parks had to shut down completely that it was not required to make its minimum rent payments while there were mandated closures. City officials, however, disagreed, explaining that there was nothing in the lease, the law or state and city emergency orders to justify that conclusion. Rents could be deferred, but not waived, the city said.
Many city leases, like SeaWorld’s, are structured so that San Diego shares in the revenue its tenants collect. SeaWorld’s rent for its 190-acre site is calculated on the basis of a specified percentage of the park’s gross income from admissions and in-park spending or, alternatively, a minimum yearly rent, whichever is larger. Given that the park was closed for many months, there was no revenue coming in, and even later when it did reopen, it took a while for attendance and spending to come back.
As a result, minimum rent was due, the city informed SeaWorld. As of last year, SeaWorld’s minimum rent was $10.4 million for a full year, plus a 3 percent surcharge.
SeaWorld company officials have said little publicly about their resistance to paying the back rent, but early on they told the city that while the San Diego theme park was shuttered for months and collecting no revenue, they still had a large collection of animals to care for, animal rescues to perform and rides it had to operate periodically to ensure they were in working order, San Diego’s then Chief Operating Officer Jay Goldstone said last year. The city, however, concluded that SeaWorld was no more financially burdened by the pandemic than most of its other lessees and continued to demand that the park pay up.
In parent company SeaWorld Entertainment’s 2022 annual report in which CEO Marc Swanson noted that he was pleased to report “another record year in 2022,” the company referenced its deferred rent payment to the city of San Diego and the financial challenges it faced when COVID forced its California park to shut down.
Gross income from SeaWorld San Diego was “significantly impacted” during 2020 due to “the temporary park closures, limited reopenings, modified operations and capacity restrictions resulting from the impact of the COVID-19 pandemic and related government restrictions in San Diego,” the company stated in the report, which was filed with the Securities and Exchange Commission. As a result, it says it continues to defer $8.3 million in minimum rent for the year 2020.
In an interview early last year, Goldstone made it clear that the city was going to hold SeaWorld accountable, but it has taken some time for the city to reach the point of suing the park.
SeaWorld Entertainment last week released its earnings for the first quarter of 2023 and, as it has for the last several quarters, reported record revenue, rebounding strongly from the pandemic. Revenue, it said, was a record $293.3 million, up 8.4 percent compared with the first quarter of 2022, and 33 percent higher than the same quarter in 2019, before the pandemic.
5:38 p.m. May 16, 2023: This story was updated to include a statement from SeaWorld.