First pass thru the stadium term sheet
UPDATED ON OCTOBER 29, 2022. I’m including a link to a spreadsheet which basically has the same information as this post — just in the form of a chart. I’ve also included a few other updates in the text below based on information from the East Bank Stadium Committee meeting on October 26.
The Metro Council received a copy of the proposed non-binding term sheet for a new football stadium on October 20. Here are some thoughts after a first pass through the document.
To start, the term sheet “is not a binding commitment” and “is delivered solely for the purpose of facilitating ongoing discussions...” (page 23) The timing to get to a final agreement on all unnegotiated terms is “as expeditiously as possible.” (page 23)
There three different geographic areas described. (page 2) The largest is the 105 acre “Campus” shown on Exhibit 3. Included in the Campus is a 15 acre “Stadium Site”, also shown on Exhibit 3. Finally there is a 20 acre “Stadium Village” that is not depicted in the term sheet. The term sheet describes different financing and cost arrangements for each of the three areas. I’ll start with the Stadium Site.
The 15 acre Stadium Site will include a “Base Stadium Plan” that does not exist at this time. (page 5) The Base Stadium Plan does NOT include any parking at all. For construction of the $2.1 billion Stadium Site, Metro will provide $760 million of revenue bonds (page 7) backed by:
in-stadium sales tax (page 9),
50% of the sales tax from a 130 acre outside the stadium (page 10),
1% hotel occupancy tax surcharge (page 9),
rent paid by the team, which is essentially a new $3 ticket tax on non-football events (pages 10, 16),
the existing $3 ticket tax. (page 10), and
the existing $4 per year Metro Water Department payment on the existing bonds for some continuing period of time (page 10).
For the Stadium Site construction, the State of Tennessee will provide $500 million. (page 7) The team will provide the rest of the construction cost through some combination of the sale of PSLs, money from the NFL, team debt, and team equity. (pages 7, 10) We do not know the breakdown of how the team will provide its share of the Stadium Site construction cost.
The public tax dollar revenue streams are being designed to pay not only Metro’s $760 million share of the Stadium Site construction costs, but also to fund long-term capital repairs for the new stadium decades into the future. After making annual construction cost bond payments, public tax dollars will be used to fund a “Capital Repair Reserve Fund” in an amount to be decided in the future. (pages 12, 17, 18) Since the cost to update the current stadium is alleged to be $1.8 billion, we can assume that the Capital Repair Reserve Fund will be very large. In addition to this fund, the term sheet contemplates an additional “surplus fund” that will be at least 20% of the currently undefined Capital Repair Reserve Fund. (page 13) The term sheet says that the Stadium Lease (not yet drafted) will layout the amounts of these capital repair funds and a schedule for accumulating public tax dollars for the funds. (page 13)
UPDATE (10/29/2022): At the East Bank Stadium Committee meeting on October 26, 2022, the Mayor’s Office acknowledged that the Capital Repair Reserve Fund will be some “hundreds of millions of dollars” of public tax dollars That’s the best information as of this update.
Moving to the 20 acre Stadium Village. Again, there is no image that shows the exact location. The term sheet does not describe a cost to build the Stadium Village or who will pay for that. (page 20) This looks to be a topic for future negotiations.
UPDATE (10/29/2022): At the East Bank Stadium Committee meeting on October 26, 2022, the Mayor’s Office said that Metro would be responsible for developing the Stadium Village. They do not know yet what this will cost Metro.
For the larger 105 acre Campus area, the term sheet describes substantial but undefined costs for Metro. The term sheet requires Metro to provide 2,000 parking spaces. (page 20) This cost is NOT included in the $2.1 billion Stadium Site construction costs. If these spaces are provided in structured parking decks, I would estimate the cost to be no less than $25,000 per spot — or at least $50 million of addition cost to Metro. The team would keep all of the revenue from these 2,000 parking spaces for all events held in the new stadium. (page 20)
In addition to the cost of the parking spaces, the term sheet obligates Metro to pay all “Campus Infrastructure” costs. (page 21) The term sheet does not identify a cost for this either.
In addition to breaking cost down by the three geographic areas, here are a few other issues I’m flagging for further review.
The term sheet says that the team would have three 5-year renewal options at the end of a 30 year lease. Since a major part of Metro’s current situation is due to the team having unilateral lease renewal options, I don’t like the idea of signing up again for the team having unilateral renewal terms. (page 14)
Team gets the revenue from concessions inside the stadium. Value not listed. (page 18)
Terms of the team’s promise to not relocate are not clear. (page 15)
On balance, I see the cost to Metro in the non-binding term sheet as:
$760 million in revenue bonds for construction,
Funding Capital Repair Reserve Fund with tax dollars (amount unknown),
Funding surplus fund with tax dollars (minimum of 20% of the unknown Capital Repair Reserve Fund),
Continued $4 million per year Water Department payment-in-lieu-of-taxes for some period of time,
Unknown cost related to Stadium Village,
Cost of 2,000 parking spaces (I project to be at least $50 million), and
Cost of Campus Infrastructure (amount unknown).
Finally, I want to emphasize that after two years of private negotiations behind closed doors, the team and the Mayor’s Office have brought us a non-binding term sheet for the purpose of “facilitating ongoing discussions.” The public and the Council should engage meaningfully to understand where they are in the process…but we shouldn’t be hurried.