Stadium Costs Come into Focus
The proposed publicly financed sports and entertainment venue would have a higher sticker price but cost less to finance than previously estimated.
Correction: This article has been updated with the accurate number of jobs projected to be created over 30 years as a result of the project.
The multi-use stadium proposed for a site at the edge of the Old City is estimated to cost $15.5 million more than initially anticipated, but the amount the city and county would have to pay from existing revenue streams each year is projected to drop by more than half.
A state grant and Smokies' owner Randy Boyd's financial commitment would place the amount of debt needed to build the $80.5 million stadium at $65.2 million.
The new cost estimate of $80.5 million and a more detailed payment plan were presented to members of the Knoxville City Council and Knox County Commission at a joint workshop on Thursday.
Tennessee Smokies owner Randy Boyd has proposed a publicly funded, multi-use stadium for his AA minor-league baseball team and other local uses, including a home field for Knoxville’s new soccer club, on land he’s assembled along Jackson Avenue east of Hall of Fame Drive.
Boyd plans to donate the land, appraised at $10 million, for the stadium’s footprint. He has formed GEM Community Development Group to build privately financed, mixed-use development on his land surrounding the stadium.
“We have so many things that tear us apart, we need things that bring us together, and baseball can do that,” he told the assembled elected officials. “This is a once-in-a-lifetime opportunity for a transformative project.”
The original estimate, derived during the conceptual design stage in 2019, was $65 million. COVID-19 pandemic-related inflation, a huge increase in the cost of steel and the addition of retail space to the stadium footprint account for the new, higher projections.
The cost of steel for the stadium has jumped by $4.5 million since 2019. Inflation during the pandemic for other materials and services increased the overall estimate by $10.7 million. It would cost about $2.4 million to add 22,000 square feet of retail space along the Jackson Avenue side of the stadium.
A $13 million grant from the State of Tennessee reduces the amount that would have to be raised through issuing revenue bonds to pay for construction, however. Boyd would kick in $6 million to pay for the additional 22,000 square feet of retail space, digital signage and other amenities.
The new projection is for the city-county Sports Authority to borrow $65.2 million to pay for the stadium construction, including $4.2 in capitalized interest and bond issuance costs.
Lower interest rates, higher sales tax estimates due in part to the added retail space, and revenues from an anticipated payment-in-lieu-of tax agreement should lower the annual amount the city and county would pay from existing revenue streams.
Other funding sources to cover the projected $3.2 million in annual debt payments are new sales tax revenues generated by the stadium and a $1 million lease the Smokies would pay to the city-county Sports Authority.
Lease arrangements for new AA baseball stadiums average about $297,000 a year, but Mark Mamantov, bond counsel for the Sports Authority, said they typically include revenue sharing agreements as well. The Sports Authority would prefer to have a higher fixed annual payment in case other revenues like stadium naming rights fall short of expectations.
The city and county would be responsible for making the rest of the debt service payments out of existing revenues, an annual amount that has dropped from an initial estimate $500,000 to $240,000 each. If sales tax growth projections hold up, the city and the county would pay zero after 10 years.
Mamantov said the city and county negotiators can’t take sole credit for the lower debt service payments.
“It’s not because we are magicians,” he said. “Because we got $13.5 million from the state, we don’t have to borrow $13.5 million. … The state has been a tremendous partner in this project.”
An economic impact assessment from Conventions, Sports & Leisure International (CSL) was distributed to commissioners and Council members minutes before the workshop began. CSL’s Brain Cohn, who joined the meeting via Zoom, said the project would generate $487.9 million in net new dollars for the city and county, and create 405 jobs in a variety of industries over 30 years.
Commissioners and Council members had numerous questions about the project.
Councilman Andrew Roberto asked about additional infrastructure improvements around the site. Stephanie Welch, the city’s chief economic and community development officer, said talks are just beginning with the Knoxville Utilities Board about the needs in the warehouse district where the stadium will be built.
“There’s not a lot of information to share at this point,” she said. “We know that when we are doing redevelopment projects in a brownfield in the urban core, there will be infrastructure costs.”
Responding to a question from Commissioner Dasha Lundy about a possible community benefits agreement that would contractually obligate the development to meet certain negotiated goals, Welch said Boyd’s team would be obligated on a variety of fronts.
One arrangement already in place is an agreement with the Knoxville Area Urban League to recruit minority- and women-owned businesses to act as subcontractors on both the stadium project and the private development. The goal is to have disadvantaged business enterprises, or DBEs, make up at least 15 percent of the subcontractors.
“We want to build the capacity for people in the community to operate their businesses as part of the multi-use stadium project,” said Phyllis Nichols, executive director of the Urban League. “We have to prepare our workforce, we have to provide a bridge to the training opportunities that exist.”
Three agreements need to be finalized and approved before the stadium could be built. Most important is the stadium development agreement, which officials insist will be a turn-key deal.
“We’ll be guaranteeing any cost overruns,” Boyd said after the meeting. “We’ll be responsible for that.”
The other agreements are the Smokies’ stadium lease and a deal committing GEM to building the three primary buildings of the private development, worth at least $100 million, at the same time as the stadium is under construction.
During the public forum portion of the workshop, supporters of the project spoke in support of the stadium. They included Renee Kesler, executive director of the Beck Cultural Exchange Center, Amy Nolan of the Knoxville Chamber, Michele Hummel of the Downtown Knoxville Alliance, Hancen Sale of the Knoxville Area Association of Realtors and Robin Easter of the Old City Association. No one spoke in opposition.
After the meeting, Commission Chair Larsen Jay said the information presented was thorough and comprehensive in scope.
“It will help us fill in the pieces of the puzzle,” he said, adding that the city-county cooperation was welcome. “For the first time, we are talking about a vision for the future rather than griping about the past.”
The project now enters the approval phase, even as negotiations continue for the agreements. The Knoxville-Knox County Planning Commission is scheduled to consider approval of the project as a planned development next month. The Sports Authority should take up the agreements in September as well, and Commission and Council could vote on the agreements in October.