By Maria Saporta
The City of Atlanta has now become the center of gravity for a new deal on a proposed stadium for the Atlanta Falcons.
The city government was put in that position because state elected officials chose to bypass voting to raise the bonding capacity of the Georgia World Congress Center Authority (GWCCA) because they were concerned about a possible political backlash.
Consider this statement Gov. Nathan Deal shared with me on Jan. 25: “I have tried my best to relieve the members of the General Assembly from difficult decisions that they have to make that have political consequences.”
So instead of explaining to state legislators the merits of the deal that had been painstakingly negotiated between the Atlanta Falcons and GWCCA — and letting them vote it up or down, the decision was made to turn it over to the City of Atlanta to issue the public bonds.
Along the way, the governor’s office did muddy the waters by negotiating a revised term sheet, which appears to give the Falcons more leeway on the project.
But now it’s a whole new ball game, so to speak. The city now has home field advantage — a power that it should use responsibly and strategically.
Much focus has been given on the amount of taxes that will go towards the $1 billion stadium deal. Last week’s Maria’s Metro column explained that the amount of hotel-motel taxes collected would remain the same no matter whether $300 million or $200 million in revenue bonds are issued.
To refresh the details, currently 39.3 percent of the 7 cents of hotel-motel taxes collected in the City of Atlanta and unincorporated Fulton County is earmarked to pay off the debt for the Georgia Dome.
In 2010, state legislature extended that provision for another 30 years for a new stadium as long as it was built on GWCCA property. (For the life of me, I don’t know why they didn’t increase GWCCA’s bonding capacity when they extended the hotel-motel tax).
So this week, I started asking how much could that hotel-motel tax bring in each year.
Since 2006, with only one exception, the tax has brought in at least $18 million a year. The exception was for fiscal year 2010, when it dipped down to $16.7 million.
But it has since rebounded. And estimates are that it will generate about $19.5 million for the current fiscal year ending June 30.
When the tax was first collected for the Georgia Dome in the early 1990s, it brought in less than $10 million a year.
It would be safe to assume that between 2020 and 2050, the annual tax generated would be at least $20 million a year — or $600 million over the life of the bonds.
In conversations with municipal bond experts, it is not unusual to have a 2-1 ratio of projected revenue to debt, so issuing bonds of $300 million probably is a prudent way to go to pay for financing costs as well as to protect bond buyers.
Atlanta Mayor Kasim Reed said the city is weighing the possibility of issuing $200 million in bonds. But Blank could get a subordinated loan or second bond issue backed by the hotel-motel taxes to cover the $100 million or $150 million gap. That would front-load the costs of the deal, but the ultimate tax revenue would be the same.
Given that the current hotel-motel tax projections are conservative, the upside potential is great.
The GWCCA-Falcons agreement outlined that once the annual debt was paid off, the additional hotel-motel tax revenue would go into a waterfall fund that could be used to repay other debt or go to capital improvements and repairs.
The revised term sheet negotiated by the governor’s office basically handed most of those waterfall dollars to the Falcons in return for the lower bonding capacity.
Here is where the city has some leverage. Because the city now is putting its own skin in the game, it should explore revising the term sheet and participating in the upside potential of the hotel-motel tax revenue.
For example, we know that the city will need to make infrastructure investments around the new stadium to make the area more attractive for residents and visitors alike. Perhaps it could carve out a piece of the surplus hotel-motel taxes earmarked for the project to go into public stadium improvements.
The city also could work with GWCCA to make sure that the area around the new stadium, including the site of the current Georgia Dome, contribute as much to the urban experience as possible.
The governor’s revised term sheet gave the Falcons total control of the current Georgia Dome site, which would be used for parking — not necessarily the highest and best use of that space.
What is known is that the Atlanta Falcons have a loyal and devoted advocate at City Hall with Atlanta Mayor Kasim Reed.
When state leaders got cold feet, Reed readily agreed to step in to find a financing solution for the project. That is despite the fact that he is running for re-election this year — granted so far no real opposition has emerged.
But he also knows that City Council members also will be facing their own re-election fights, and he has said City Council will need to vote on the stadium deal. The mayor also has pledged that the stadium deal process will be open and transparent.
Along the way, Reed will need to make sure the Atlanta Falcons are comfortable with any revisions and that any changes to the deal will make it attractive to the city’s elected leaders.
At the same time, Reed and city officials will need to work closely with the GWCCA, which has been integrally involved in the negotiations from the beginning. Plus it is the entity that will own the new stadium once it’s built.
In short, the city and the mayor will need to play smart to do what is in the best interest of Atlanta without playing hardball to the point of alienating the Falcons.