Tuesday, December 06, 2011

Lurking in tonight's council consent agenda

Even as the NBA is about to start a truncated season, our neighbor to the west, Memphis, has positioned itself to sue its professional basketball team, the Grizzlies and the league for any revenues it loses to this year's work stoppage should the loss require extra taxes to pay expenses. In the past few weeks, the Nashville news media has covered Metro Nashville's plan to fund improvements to LP Field without reference to the real question of how we would pay for these improvements in the case of an NFL/Titans work stoppage.

Here is the council analysis of the bill for stadium improvements on tonight's consent agenda (the latter term means that the bill will be lumped in with other bills on first reading and passed as a bundle rather than debated)

This resolution approves the issuance of taxable public improvement revenue bonds in a principal amount not to exceed $28 million to finance improvements to LP Field. The original bonds to finance the construction of LP Field were issued in 1996. The Titans have identified a number of capital improvements they believe are necessary to keep the facility comparable to other similar facilities ....

The total cost of these new projects will be approximately $25 million. The estimated useful life expectancy for the improvements, averaging 18 years, is as follows:
• Elevators and Fan Hospitality Areas – 30-plus years
• Sound System – approximately 15 years
• Video Boards – approximately 15 years
• LED Ribbon Boards – approximately 15 years
• Control Room – approximately 10 years ....

The new bonds to be issued for the capital improvements will be taxable since they will be paid from the ticket tax revenue .... In order to build a capital fund for future needs, the Titans have requested that the ticket tax be increased to $3 effective for events scheduled on or after August 1, 2013, which is the subject matter of Ordinance No. BL2011-40 on third and final reading. This will allow funds to accumulate at a rate of approximately $900,000 per year for future improvements. The council would need to issue additional bonds if and when the seat replacement project is initiated.

In the event the ticket tax revenues are insufficient to pay the debt service on these revenue bonds, Metro is pledging its non-tax revenues. These revenues include, but are not limited to, permit fees; franchise fees (cable, gas, and telephone); fines; court clerk fees; forfeitures and penalties; charges for services; and revenues from the sale of surplus property. This is the same backstop revenue pledge for the convention center debt. However, the pledge of the non-tax revenues for the convention center bonds is subordinate to the pledge to the sports authority for stadium and arena revenue bonds. Further, this resolution provides that the additional one dollar tax levied by Ordinance No. BL2011-40 effective in 2013 would be used to pay any debt service deficiency before the non-tax revenues are used.

Because the quasi-public capital expenses on the Mayor's agenda continue to expand and because money is often shifted around in a kind of shell game where insider knowledge brings greater influence and fiat, it is important that we keep up with these details.

UPDATE: Council approved as expected. Disappointing to me: council progressives seem to cede all questions of equity in capital spending to conservatives, a couple of whom raised questions regarding future drops in ticket demand and getting greater obligation from the Tennessee Titans to assume an equitable amount of risk to that which the public assumes. If council progressives are not afraid of the wrath of the Mayor's Office what are they afraid of in seeking greater equity?

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