City Council will consider two resolutions next Tuesday regarding state funding for the proposed minor-league baseball stadium on the outskirts of the Old City — one supporting the creation of a special sales-tax district surrounding the ballpark and one opposed to it.

A special sales-tax district could generate around $400,000 a year to help pay for the baseball stadium construction debt.

The companion bills pending in the state Legislature, sponsored by state Sen. Becky Duncan Massey and state Rep. Jason Zachary, would allow the state’s share of sales tax revenues generated in a quarter-mile radius around the stadium to be used to pay off part of the ballpark’s debt.

The mechanism is one of several pieces of the preliminary stadium financing proposal, but it’s key to making the project affordable for city and county governments.

Knox County Finance Director Chris Caldwell said establishing the sales-tax district, which could cover up to 30 percent of the annual cost of the stadium, is vital to the project. “It’s a big piece of our model,” he said. 

Stephanie Welch, the city’s chief economic and community development officer, agreed, saying that failure to secure passage of the legislation could kill the stadium and the associated private development. “It would put the project in serious jeopardy,” she said. 

Tuesday’s Council meeting will be the second test of officials’ support for the stadium, which has been proposed by Tennessee Smokies owner and University of Tennessee President Randy Boyd. Boyd wants to return the team to Knoxville after two decades in Sevier County. Knox County Commission unanimously voted to approve a resolution in support of the legislation last month.

As outlined in a presentation to elected officials at a workshop last month, preliminary estimates show the 7,000-seat stadium would cost up to $65 million and would be paid for by revenue bonds issued by the recently formed Sports Authority of Knox County and Knoxville. Boyd plans to build a $142 million privately financed mixed-use development surrounding the stadium.

Knoxville Mayor Indya Kincannon’s administration is sponsoring a resolution in support of the sales-tax district legislation on Council’s agenda for Tuesday. Welch said the bill is “critically important” for paying the debt service on the stadium.

But support isn’t unanimous. Councilwoman Amelia Parker is offering a competing resolution that would explicitly reject the legislative effort. 

According to the fiscal note attached to the state legislation, the city and county would realize an increase in sales tax revenues of at least $393,500 a year beginning in fiscal year 2023-2024. That’s nearly $400,000 that would otherwise go to the state government, assuming the project would move forward regardless of legislative action.

The calculations are based on a formula that assumes there are at least 10 businesses generating sales tax revenue within a quarter-mile radius of the stadium site and that at least five new businesses would come with the development inside the sales-tax district.

Massey said convincing other lawmakers that the loss of potential state revenue would be worthwhile would be the biggest obstacle to the bill’s passage. But she likened it to incentive packages that routinely get offered to companies. “To me,” she said, “it’s no different than when you’re recruiting a business.”

Massey said having broad support from city and county officials will help her close the deal with other lawmakers. She noted that County Commission leans more toward the conservative end of the political spectrum, while City Council tilts toward the left. “If you’ve got 95 percent of the elected representatives supporting it, that’s a pretty strong statement,” she said.

Sponsors in the state Senate are Massey and Richard Briggs, both Knoxville Republicans. Briggs chairs the State and Local Government Committee, where the Senate bill has landed.

In the House, Zachary has been joined by co-sponsors Rep. Sam McKenzie, a Knoxville Democrat, and local GOP Reps. Michele Carringer, Eddie Mannis and Dave Wright. Rep. Ryan Williams, R-Cookeville, is also a co-sponsor and serves as chair of the Finance, Ways and Means Appropriations Subcommittee. 

Some Council members are already on board with the Kincannon administration’s resolution supporting the sales-tax district.

“I fully intend to support it,” Councilwoman Lynne Fugate said. “There is no sales tax revenue generated on that property as it stands now. It helps the project work financially.”

Fugate said the $142 million in private development that Boyd plans to build demonstrates that the project is more than just the baseball stadium. “We don’t have to hope for the private development to come,” she said. “There’s a commitment.”

Councilwoman Lauren Rider, who represents much of North Knoxville and Fountain City, is also leaning toward voting in favor of the administration’s resolution.

“I think at this point, I’ll support it,” Rider said, though she added, “We have a lot of discussion to go to put the package together.”

But Parker said that while she hasn’t taken a position on the stadium overall, she objects to the notion that it must be publicly financed and owned.

“I have yet to hear a convincing argument for using taxpayer money to fund the construction and maintenance of a sports stadium,” she said. “In fact, we have yet to receive an impact study regarding the project and whether the city’s involvement in the project would represent a good use of our tax dollars.”

Parker said the project doesn’t pass her two-pronged test for public funding — that a project must benefit the surrounding community and city at large, and that it would not be feasible without taxpayer support.

According to the preliminary financial plan for the stadium, the new sales tax revenues generated in the zone created by the legislation would service 17 to 30 percent of the debt issued by the sports authority to pay for construction. 

The other projected revenue streams include the team’s lease of the property, sales tax revenues generated inside the stadium during games and other events, and payments in lieu of taxes or tax-increment financing payments from the new private development (which would need the approval of County Commission and City Council).

All those revenues would be new and generated by the stadium or the associated development. But if that’s not enough to cover the debt payments, the city and county would have to split the remainder from existing revenue streams. Officials have said a consulting firm with experience in stadium financing would be hired to provide an independent analysis of the plan.

Welch emphasized that a vote in favor of the sales-tax district is not necessarily a vote to move forward with the project. “This is about options,” she said, “not a commitment to build a stadium.”