Ballpark Financing

Ballpark Financing

City Council and County Commission get a first look at possible funding sources for a minor-league baseball stadium.

by scott barker • February 5, 2021
Image
Image
Rendering of the minor-league baseball stadium proposed by the Tennessee Smokies.

City and county officials presented the broad outlines of a financing plan for a proposed publicly funded minor-league baseball stadium on Thursday, though the details remain out of focus.

Debt payments on bonds issued to pay for the stadium would come from a variety of revenue sources.

The 7,000-seat ballpark, which would be built east of the Old City in the eye of a proposed $142 million private development, would cost up to $65 million and be funded by several revenue streams — one of which relies on the state Legislature for approval.

Tennessee Smokies owner and University of Tennessee President Randy Boyd proposed the project for property he has assembled in recent years in the Magnolia Avenue Warehouse District between the Old City and East Knoxville.

County Finance Director Chris Caldwell, city Economic and Community Development Director Stephanie Welch and bond counsel Mark Mamantov briefed county commissioners and City Council members who met in a rare joint work session. Welch and Caldwell emphasized the holistic benefits of the stadium.

“This is a multi-sport, multi-use stadium,” Caldwell said, noting that it will be designed for baseball and other outdoor sports but also would host concerts, festivals, markets,community events, corporate events, weddings and more. Boyd said during the meeting that he expects to host 350 events annually at the stadium, including the team’s 70 home games.

Welch said the stadium would be open to the public during daylight hours when games aren’t being played. 

“The public amenity that is provided to the surrounding community would be huge, not only from the redevelopment of the property,” she said, “but also if we think about this multipurpose venue, they operate really as more of a park-type setting, and offer a variety of opportunities for recreation at all times.” 

They also laid out a plan that calls for the newly formed Sports Authority of the County of Knox and the City of Knoxville to issue revenue bonds to cover the cost of building the stadium that would be the new home of the Tennessee Smokies. 

Mamantov said sports stadiums, particularly minor-league ballparks, are now almost exclusively financed and owned by local governments, including every stadium built in Tennessee since 2000. He offered Parkview Field in Fort Wayne, Ind., as an example of a successful urban minor-league stadium.

A variety of revenue streams, mostly new dollars generated in and around the stadium, would go toward paying off the debt. Mamantov said a consulting firm with experience in stadium financing would be hired to provide an independent analysis of the plan.

The exact proportions would be determined during negotiations between Boyd Sports, the Sports Authority and the two local governments. The revenue sources, along with an estimated range for their portion of the debt service, are: 

  • New tax revenues generated by stadium operations (12-18 percent).
  • New tax revenues generated by development surrounding the stadium (19-30 percent).
  • Lease agreement with the team (22-30 percent).
  • Payment-in-lieu-of-taxes or tax increment financing payments from the adjoining private development (17-30 percent).
  • Other tax revenues, split 50/50 between the city and county (0-30 percent).

Only the last pot of funds contains revenues like sales and hotel/motel taxes that already exist (under state law, property tax revenues can’t be used to pay off a sports authority’s debts) and could be used to make up any shortfalls.

Two of the streams would require legislative action.

The state Legislature would have to create a special tax district for the Sports Authority to receive sales tax revenues from the area surrounding the stadium. Mamantov said members of the Knox County delegation would be filing legislation establishing the district this session, likely with support from Hamilton County legislators seeking the same revenue option for a new stadium in Chattanooga.

A payment-in-lieu-of-taxes or tax increment financing deal for the private development would have to receive approval from County Commission and City Council. Revenues from the PILOT or TIF would also go toward paying down the stadium debt

Boyd has formed GEM Development Group to spearhead the mixed-use development that would circle the stadium. Boyd said he hopes to build the private development concurrently with stadium construction. 

He also pledged to work with the community to ensure the benefits of the project would extend beyond its edges, including a commitment to fund youth baseball teams in East Knoxville. 

Knoxville Mayor Indya Kincannon and Knox County Mayor Glenn Jacobs support moving forward with the stadium. Both talked about the ballpark’s ability to spur job creation, revitalize a moribund area, and become a civic asset that will make the community more attractive for business and new residents.

“As much as I love sports and would love to see baseball back in Knoxville, I support this project because it is about more than just baseball,” Kincannon said. “This is an investment in our community. It's an opportunity to revitalize and bring new life to a blighted area that has sat vacant for 20 years.”

Jacobs, a self-described libertarian, said he was initially skeptical of government involvement in the stadium project.

“Framed a different way,” he said, “what we're talking about here is a multi-purpose facility with an anchor tenant, one that will include $140 million in private development, and a financing plan that will not incur any additional tax burdens on Knox County taxpayers.” 

The meeting was an informational briefing and did not have a public forum session, so members of the public opposing the stadium did not speak. Erik Wiatr, founder of Knoxville Against Taxpayer Stadiums (KNATS), said in an interview after the meeting that the public shouldn’t finance a project to benefit a private developer.

“It’s a home run for Randy Boyd,” he said. “The taxpayers take all the risk and liability, and Boyd takes the profit.” 

Wiatr also noted that Boyd said he would find a development project for his property if the stadium is not built, so the choice isn’t between the stadium and nothing.

“The Old City is going to develop with or without the stadium,” he said.

The approval process will take months. At this point, the Sports Authority exists only on paper. Council and County Commission will appoint its members in March. 

Officials will refine the cost estimates and hold a number of public meetings in March and April, with a goal of finalizing all the agreements this summer. Council and County Commission would then have to sign off on the deal. If the project is approved, construction could begin in the fall, with the goal of completion in time for Opening Day of the 2023 season.