Saturday, November 4, 2017

Soccer stadium deal tweaked, still has problems

Image result for Nashville MLS Soccer Stadium ConceptYesterday, Mayor Barry made some last minute tweaks to the $275 million soccer stadium project but they still do not satisfy two major concerns. One remaining concern with the project is that the guarantee that the owners of the soccer team would be responsible for the lease payments which in turn pay the bonds which finance the stadium.  Ultimately revenue bonds are a responsibility of the government and if revenue is insufficient to pay the bonds then the local government must make up the difference. As if often the case in deals like this however, the team owners are on the hook to guarantee the payments will be made to the city even if the revenue is low and the team loses money or, in the worst case, the owners lose their franchise. The bonds are for 30 years and the team agrees to sign a 30 year lease. The resolution says the team owners would guarantee the lease payments.  That is a problem. No individual team owners are named. "Team owners" is most likely a legal entity that could bankrupt if they lost their franchise.  If individuals team owners are not on the hook for the commitment to the city, then the commitment is not worth much.

Another problem with the deal is that it gives 10 acres of fairground property to the team owners for private development. This is in addition to the eight acres for the stadium. The owners say they must have this to financially make the deal work. I was initially concerned about the lost of property that shrinks the fairgrounds.  However, I have given more thought to that and am less concerned.  The State Fair will probably never be in a class with other state fairs.  Now, the State Fair is less prestigious and less well attended than many county fairs. While the loss of parking is a concern, the site is sufficient to maintain current uses at the fairgrounds.  Unless we are going to embark on a plan to expand the fairgrounds to have a truly impressive state fair, then there is not much lost by shrinking the fairground site. I still have a concern about just giving away ten valuable acres, but that is a different concern than shrinking the fairground footprint.

Other tweaks to the deal did address some concerns. One issue that may have been resolved in the revision is a change that says before any bond debt is actually issued for the project the council would have to approve by resolution the demolition of certain buildings at the fairgrounds. Bonds are authorized by resolution but then a separate resolution is required to actually issues the debt. The soccer deal includes demolishing and replacing several of the old buildings at the fairgrounds. Prior to these changes, the bond deal would be finalized and then at a later time the mayor would submit a demolition plan.  A Charter provision requires that no building on the fairground property may be demolished without a two-thirds approval vote of the Council.  What could have happened under that scenario is that the Council could have approved the bond sale and then if they could not get the 27 votes to demolish certain buildings at the fairgrounds then the stadium would have been build but the fairground improvements would not have happened.   Under this new version, the council can approve the $275 million resolution, then approve the demolition and reconstruction plan before actually issuing the debt. This is an improvement.

The deal is also strengthened by new guaranty language that says the team owners would be responsible for the pledged lease payments, team capital contributions and cost overruns.  If the team ownership changes, the new owners inherit these commitments.

Taking a lead in opposing the deal is Councilman-at-large Bob Mendez and Councilman Jeremy Elrod who are still not satisfied.  Councilman John Cooper has been a critic but his primary concern was about the possibility the stadium could be build but then the fairground building demolition may never occur.  That concern seems to be alleviated by the change mentioned above.

The soccer stadium deal appears in some regards to be a better deal than some other similar type deals in which the city has engaged.  I am especially pleased to see the team responsible for cost overruns, not the city. I also however, share the concerns about giving away ten acres of the fairgrounds for private development and am especially concerned about the weakness of the owner guarantees. This resolution will be on the agenda Tuesday night.  If it does not pass, then Nashville will not be in the running for a team franchise.  As of now however, I continue to have reservations about this deal and do not think it should be approved. If the grantee could be strengthened then I most likely would be in support of this proposal.

For more on this issue, see the Tennessean story and the Bob Mendez blog at the highlighted links.

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