Triple Play Completed
A contentious City Council joins County Commission and the Sports Authority in approving a new stadium financing plan.
After a lengthy and sometimes testy debate at City Council on Tuesday, a new financing plan for the stadium planned for the warehouse district east of the Old City is now in place.
The new financing plan aims to address rising construction materials costs.
Council approved the plan, which includes an expanded tax-increment financing district in anticipation of a construction loan from Tennessee Smokies owner Randy Boyd, by a 6-3 vote.
The stormy meeting stood in sharp contrast to Knox County Commission’s unanimous vote with no discussion on Monday (though commissioners talked about it briefly at last week’s work session) and Tuesday morning’s unanimous approval from the city-county Sports Authority.
“From the very beginning of the stadium project, I’ve said I will support this if the benefits to the people of the city of Knoxville outweigh the costs to the people of Knoxville,” Knoxville Mayor Indya Kincannon said. “The bottom line is, this is a good deal for the city of Knoxville.”
Officials came up with the new financing plan in response to soaring construction materials prices, which rendered the previous construction estimate of $80.1 million obsolete.
Though the new plan doesn’t come with a firm cost estimate, it does contain a provision that would allow Boyd to make a loan of up to $20 million to cover the rising costs. The amount of the loan won’t be determined until the project’s final budget is set later this year, and its terms are still under negotiation.
The expanded tax-increment financing (TIF) district, which covers much of the Magnolia Avenue Warehouse District, including the eastern half of the Old City, would provide the funding to repay the loan and $14 million in infrastructure costs to be incurred by the city. The money would come from new property tax revenues generated by new developments in the TIF district.
The stadium construction will be funded through a $13.5 million state grant, a $65 million bond issue, $6 million previously committed by Boyd and the loan of up to $20 million. Boyd will donate the land for the stadium, an estimated $10 million value.
The state grant and Boyd’s $6 million investment won’t need to be paid back. To service the debt on the bond issue, the Sports Authority will use new tax revenues from stadium operations and the surrounding private development, and $1 million annual lease payments from the Smokies, with the last dollars coming from existing tax revenues. Revenues generated from the TIF district beyond what’s needed to cover the infrastructure costs would be used to pay off the loan from Boyd.
Boyd didn’t speak during the meeting but a promise he made last year to personally cover cost overruns on the project occupied a central portion of the debate.
Several speakers during public forum referred to the pledge, and Gary Loe, chair of the Tennessee Conservative Union, even used his smartphone to play a recording of Boyd making the statement during a meeting last year.
“We are going to guarantee any cost overruns,” Boyd said at the time.
Some Council members brought it up as well. Councilwoman Seema Singh said she could no longer support the project.
“I feel very much lied to at this point,” she said. “Anything moving forward, I don’t think I could trust.”
Councilwoman Amelia Parker said Council had been lied to about the project and that the language making Boyd responsible for cost overruns in the development agreement is clear. The development agreement between Boyd and the Sports Authority hasn’t been signed, however, because the project lacks a final budget.
“We need to see a finalized agreement before we discuss more financing,” Parker said. “It’s extremely irresponsible for us to move forward without those agreements in place.”
Other Council members, city Economic and Community Development Director Stephanie Welch, and Sports Authority bond counsel Mark Mamantov emphasized that preliminary estimates like the working number of $80.1 million aren’t budgets. He said until a budget is set with a guaranteed maximum price, there is technically no cost limit to exceed.
Councilwoman Lynne Fugate said the construction materials price increase — about 20 percent overall during the past year — was an unforeseen event that developed before the contract with a maximum guaranteed price was in effect.
“Until you have a contract you don’t have a price,” she said. “Once you have a contract, you have a price and cost overruns.”
Vice Mayor Andrew Roberto and Councilman Tommy Smith said cost overruns occur with regularity in construction projects, noting that two change orders for other projects were also on the agenda Tuesday. Smith said the city doesn’t usually require that a contractor pay cost overruns out of pocket, as will be the case once a stadium budget is set.
“This idea that we’ve been misled just isn’t true,” he said.
Costs and Benefits
Parker broached the idea of postponing a vote on the plan until Council could hold a workshop, but her proposal didn’t gain much traction. She said approval of the bond issue showed the city’s commitment, but Boyd’s development team has taken its time moving the project forward and Council shouldn’t be rushed to a decision on a new financing plan.
Councilman Charles Thomas initially supported the project, despite his discomfort subsidizing professional sports, but said he could not support the new financing plan because its benefits no longer outweigh the cost.
“If Mr Boyd has $20 million to loan, he has $20 million to contribute,” he said.
Councilwoman Janet Testerman, however, noted that Boyd is putting skin in the game — about $46 million toward the stadium project itself, including the land donation and annual lease payments, plus millions more in philanthropic efforts in the community.
“If that isn't a reflection of someone who puts his money where his mouth is, I don’t know what is,” she said, adding that without the stadium, there is no economic catalyst for the warehouse district.
“Blight generates a whole lot of nothing, and you can’t spend what you don’t have,” she said.
Councilwoman Gwen McKenzie, whose district includes the stadium site, said the project could lead to generational wealth in one of Knoxville’s most economically challenged areas.
“Economic development in my community requires economic investment,” she said. “This project provides that.”
Council members Roberto, Testerman, Smith, McKenzie, Fugate and Lauren Rider voted to approve the plan, while Singh, Thomas and Parker voted against it.
Time and Friction
The discussion got heated at times during the subsequent consideration of a companion resolution that raised the interest rate limit on the bond issue from 5 percent to 6 percent, and gave the Sports Authority veto power over project-based tax incentives in the expanded TIF district.
Mamantov said the higher cap on the bond issue’s interest rate is needed to give some headroom because of market conditions. When the 5 percent cap was set, interest rates were around 3.2 percent, he said. Now the rate is around 4.6 percent.
Neither the interest rate cap nor the Sports Authority’s role in project-based incentives generated much debate, though Thomas and Parker raised concerns that discouraging project-based incentives could keep some investors out of the area.
As the discussion entered its third hour without a break, nerves began to fray.
Council members’ speaking times are officially limited to five minutes, though the restriction is almost never observed. Parker held the floor for extended periods three times during the stadium discussion, once for nearly 30 minutes, drawing reminders from Kincannon that other Council members were waiting to speak. The two traded barbs.
Council members then took the unusual step of voting to ask the mayor to time them as they spoke. After Parker continued to raise questions about Boyd’s loan, accountability and other topics covered during the first two hours of the discussion, Rider pointedly questioned her about her preparation. She asked if Parker had reached out to Welch, the city’s point person on the project, to gain an understanding of the issues.
“Did you not reach out to Miss Welch prior to this meeting?” Rider asked.
When Parker said she hadn’t had time, Rider asked each of their colleagues in turn whether they had discussed the financing plan with Welch. Every one of them said they had, with the exception of Singh, who registered her displeasure with the question: “Councilwoman Rider, I find this really disturbing.”
Rider responded, “We all have a chance to ask questions and have our questions answered.”
The interest rate cap and TIF approval authorization for the Sports Authority passed on a 6-2 vote. Once again, Roberto, Testerman, Smith, McKenzie, Fugate and Rider voted for approval. Thomas and Parker voted against the resolution. Singh left the room before the vote was held.
After the vote, Boyd said he was turning his attention to getting the project started this fall. The Smokies, an affiliate of the Chicago Cubs, will be the managing tenant of the stadium.
“We’re excited about moving forward as soon as possible and playing baseball in 2025,” he said.