The Sports Authority Board passed two resolutions on Thursday morning that will move the new baseball stadium off South Broad Street forward. An agreement was authorized between the city of Chattanooga, Hamilton County and the Sports Authority for services that the city will provide for the development.
Administrative services such as legal and financial assistance will come from Chattanooga because the Sports Authority does not have staff to do it, and it will be provided free of charge. The city has entered into agreements such as this in the past. Enterprise South, prior to Volkswagen locating there, was an example. The resolution was approved by the board. It will still need approval from both the city and the county.
The second resolution that passed at the meeting was for J.P. Morgan to provide underwriting services for the project. The board hired PFM as financial advisors to guide them through the process. They issued Requests for Proposals for financial institutions and received 17 responses for senior managers and co-managers, said Lauren Lowe with PFM. She said that Chattanooga and Hamilton County both have excellent credit scores, but the stadium project is different because it is a new, unknown entity with no history. Both big name banks and smaller institutions run by minorities, women or veterans were considered, she said.
Questions that were asked of the banking groups included asking how the bonds would be marketed since it is new and unknown, how investors would be approached, what is their expected outcome, and what is their capital position in the event that investors are not there. They were also asked about their experience with related cases and how they would expect to set prices.
PFM narrowed down the banks to a short list of recommended senior managers and co-managers and ultimately recommended J.P. Morgan Securities as senior managers and three co-managers, FHN, Academy Security and Estrada Hino Josa & Co. The banking team will be paid $290,000.
Chattanooga CFO Brent Goldberg presented three items to the board that will need action. First will be a lease agreement between the Sports Authority and the Lookouts. To create a lease, documentation of the donation of land where the stadium will be built and a development agreement will have to be completed.
Attorney Mark Mamantov is advising the board regarding the financing and the processes needed. First a legal description is needed and the agreement for the land donation. A survey will have to be done to define a plat and establish the exact location of the stadium and access roads to it. The location will become a separate parcel so it can be conveyed to the Sports Authority.
Parking around the site will have to be identified. In the short term it will be temporary, using easements, and eventually they will transition into structured parking. Triggers to guarantee a time line will be needed to ensure dates, such as when construction will start, to guarantee the project is moving along.
The lease itself will include just exactly what the Sports Authority will be leasing out and the agreement that it will be leased consistent with the design. The biggest item, said Mr. Mamantov, will be that as the stadium ages and AA requirements change over time, the Sports Authority Board must know what its obligation will be to make changes to the facility.
The recommendation is to rent the stadium for $1 million a year versus sharing in the revenue generated by the stadium, such as from naming rights, concession sales and parking. He said rent is a certainty and depending on various revenue streams would be a gamble. The 30-year lease will match the 30-year term of financing, he said, so that all revenue streams match up.
Who is responsible for maintaining the stadium and for the day-to-day expenses and repairs and on-going capital expenses needs to be established. He recommends having a capital reserve fund that will be built up for these uses. And there is the need for the property to be insured and the team will have the liability. Also, a brownfield agreement has to be made so the Sports Authority will not be responsible for prior or on-going environmental issues.
The terms and tiffs transfers are needed with Hardball, which owns the team. He said major league baseball wants to have a seat at the table in case their team goes down the tubes.
The Authority Board, in consultation with the developer and team, will design the facility. The attorney recommends hiring a local design firm and contractor that knows and understands major league baseball’s requirements, as well as the site and the city. Locals would more likely consider things such as the history of the area and connectivity to the greenways around it.
The first draft of the land agreements, the lease and the development agreements should be ready by next week, said Mr. Mamanatov, and it is recommended that the agreements are all in place before the bonds are issued.
Mr. Goldberg said that any community benefits will have to be made between the community and the team owner. The government cannot address neighborhood needs, he said. These would include items such as affordable housing and day care. The city will not be part of these agreements.
These agreements will be on the Chattanooga City Council’s agenda at the Nov. 22 meeting. The next meeting of the Sports Authority will be Dec. 8.