1/11/24 - Chattanooga City Sports Authority Board meeting
The River Walk will be integrated with architectural elements, The Foundry building will offer public amenities, and a significant private sector investment is planned for the area, with the entire site now rezoned and future phases in development.
Past successful projects like the Sears building in Atlanta and an abandoned slaughterhouse in Nashville, with investments exceeding $400 million and $560 million respectively, serve as examples of the significant development expected in the Chattanooga project over time, encompassing a 120-acre site and a Tiff District of over 400 acres.
The $40 million additional financing for the stadium is backed by private entities, subordinate to the $80 million public TIF financing, and is expected to be covered by new construction investments within the TIF district, ensuring that the city and county won't bear the cost. [We believe this statement is HIGHLY misleading - as they absolutely will bear the cost that otherwise would go towards other projects]
14:28
The $80 million will be paid in full before the TIF dollars are used for the additional $40 million, and there are infrastructure costs of $10 million for transportation and utilities, with the private sector expected to finance any overruns and contingencies in place to cover unforeseen costs, while the $1.1 billion development projection is based on the current plans and investments in the TIF district.
19:35
The initial estimate of needing $350 million for bonds to cover the project has now increased to approximately $700 million due to the fully entitled and zoned site for the entire district, representing a billion dollars in construction, with ongoing developments in the TIF district contributing to revenue.
Multiple developments, including apartment complexes, townhomes, and a veterinary center, are already underway and set to contribute to tax revenue after 2021, positively impacting the project's financing.
The increased costs for the project are primarily due to inflation and not specific uncovered issues during the process, and it became evident in the last quarter of 2023 as the design process progressed.
The $120 million budget is solely allocated for construction with no upfront capital finance or debt service included, and the private sector is taking the additional risk for the cost beyond that budget.
The $40 million increase in cost is primarily due to the significant construction cost inflation currently experienced across the country, with typical inflation rates of 5 to 6%, which has led to a higher overall budget for the stadium project. [This is bullsh*t] - 5-7% inflation doesn't translate into going from $60-80 million estimate to $120 million]
Construction costs have significantly increased due to factors such as supply chain issues, high demand for contractors, and market forces, leading to a 30-40% rise in pricing on various city projects over the last several years. [ Again this is bullsh*t - we're talking about a bad estimate from one year ago, not from several years ago]
48:01
The proposed financing plan for the stadium involves issuing up to $80 million in bonds with certain restrictions, primarily relying on sales tax revenues, rent, and tax increment revenues from the South Broad District to repay the debt.
52:40
The proposed financing plan involves a $40 million loan to the Sports Authority, payable solely from incremental tax revenues from the South Broad District, making it a high-risk, taxable loan with variable interest rates, and requiring approval from the city and county legislative bodies.
56:56
The proposed financing plan involves two series of bonds, one taxable and one not, with the taxable bonds being payable from lease payments made by the team and carrying a higher estimated interest rate, while the non-taxable bonds are payable from other revenue sources.
1:01:13
The debt service for the proposed bonds, kicking in from 2026, shows a gradual increase with a peak at $4.44 million, factoring in tax-exempt bonds, while subtracting projected Tiff revenues that are based on various components including adjacent property developments.
1:05:07
The presentation discusses the financial feasibility of the proposed bonds, factoring in sales taxes, Tiff revenues, and development projections, showing that if the development estimates are correct, the city and county would need to fund about $180,000 in 2026, with the possibility of repayment in later years.
1:09:29
The financing structure in Knoxville for a similar stadium involved a state grant, a subordinate Tiff, and direct equity, with a focus on public infrastructure investment; however, there have been no discussions of additional credit support or funding alternatives beyond the proposed $80 million in Chattanooga.
The repayment period for the $40 million subordinate loan is limited to 30 years, aligned with the Tax Increment Financing (Tiff) allocation, and any remaining debt after 30 years would be considered a bad debt and written off by the developer.
The Tiff revenue estimates are considered moderately conservative and assume no additional construction beyond The Foundry site, making it highly unlikely that the developer would have to pay the additional $40 million, which is expected to be reimbursed from Tiff increment without a city and county backstop guarantee.
The city is expected to finance the entire $120 million based on conservative estimates of tax increment revenues, with no general taxpayer responsibility for the $40 million private loan, but rather the risk rests on the private sector.
The total amount for both bonds and loan debt servicing is approximately $180 million for the $80 million bonds and variable for the $40 million loan, with TIF dollars likely going towards paying off the loan once debt service is satisfied, and any surplus would still be tied to the project rather than returned to the city and county.
In the event of cost overruns in the construction of the stadium, the Sports Authority anticipates having a Guaranteed Maximum Price (GMP) before issuing debt, with certain elements like early site work and environmental factors being addressed in stages, ensuring that costs remain within the $120 million budget and reducing the need for a single, comprehensive GMP.
The guaranteed maximum price for the stadium project, which is currently budgeted at $120 million, will be provided in multiple pieces, ensuring it remains within the budget, and while there may be additional infrastructure costs in the next 10-20 years for site activation, the expectation is that these would be covered by the private sector rather than TIF revenues.
Parking revenues, estimated at $200,000 a year, will play a role in covering project costs, and negotiations are ongoing to ensure a stable parking arrangement with a commitment to maintaining adequate parking for the stadium throughout the project's term.
The $40 million additional investment through tax increment financing (TIF) is crucial for the project's feasibility, and the development's success will generate ongoing tax revenue for the city and county, making it a worthwhile endeavor.
