City of Atlanta in pivotal position to benefit from new Falcons stadium deal

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.

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16 comments
Guest
Guest

Transaction is unconstitutional.  Will get tied up in litigation and then ultimately struck down by Georgia Supreme Court.  They are wasting their time on this one. 

jbridgers23
jbridgers23

The Falcons put up $700 million, no new tax increases and we get hundreds of new jobs and a new stadium? What everyone's problem? This money can't be used for roads, sewers or anything else Atlanta needs according to the law so I say build it.

writes_of_weigh
writes_of_weigh

Maria - How magnanimous of a local billionaire who has generously provided the public with a place to go see fish, and now soon wants to do the same....(provide a place for the public to go see) for fowl. One wonders if this individual might consider an investment in the public ability to simply....go....given the abject failures of those whose job that is.  I have a "napkin sketch" plan I'm certain I could interest him in.....or perhaps some Kabbage Kash or a IndieGOGO or Kickstarter loan might suffice. It's really quite simple......and boxes in those who continue to play the "No transit for you" game in Atlanta. The fish tank is done. The bird cage is about to commence. Any choo choo takers?

TheSmartOne
TheSmartOne

Shouldn't the Falcons actually win something before being rewarded with a new stadium?

The Last Democrat in Georgia
The Last Democrat in Georgia

{{"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)."}}

 

Heck, one should be thankful that the legislature at least got that much done in light of the disarray that was going on in the legislature at the time.

2010 was Sonny Perdue's last full year as Governor.  

David Ralston had just taken over as Speaker of the Statehouse before the 2010 session, which begin just after former House Speaker Glenn Richardson was forced to resign after details had come to light of him having an affair with a lobbyist, falling into a deep depression and attempting to commit suicide.

The 2010 legislative session was also part of the build-up to the time when a couple of State Senators led a group of other senators in an unsuccessful coup attempt to overtake Lt. Governor Casey Cagle and diminish the powers that the Lt. Governor position had over the State Senate in a "Leadership-by-Committee Experiment" which ultimately failed miserably.

2010 was kind of a volatile and unsettled time in the legislature.

n
n

I wish the city put this much thought & effort into how it could repair the horribly neglected city sidewalks and maintain public thoroughfares and infrastructure..

Many residents of Ormewood Park received notices giving them 45 days to repair the sidewalks abutting their property (but within the city right-of-way) or the City would do the work and bill them--thousands of dollars each. The letters were draconian and unnecessarily confrontational. Not much thought put into the letters, and not much gained for the Mayor or the city in the way of good will.

NewsJReview
NewsJReview

Let's do the deal for the Falcon's. I couldn't agree more with you. No haggling is a safe bet...Remember the "Cleveland" Brown's back in the day. They are now the NFL Superbowl champion "Baltimore" Ravens. It's showtime. Time to get it done. If the Parking space is a concern....Then "Internationally" design, design, design...multipurpose, cretative, all public access revenue generating experience. NewsJReview

DH-ATL
DH-ATL

Great article-- a rational analysis that shows plenty of upside in the stadium deal (as opposed to the tea party like hysteria now associated with the word tax of any kind)-- Thank you, this is what folks have come to expect from your excellent Reporting--

BPJ
BPJ

Two points:

1. The Falcons should not have control over the current Dome site - that should be for future expansion of the GWCC.

2. The new stadium should not be surrounded by parking lots, which are deadly for city life. (Some decks, with sidewalk level retail, and housing above, could work.)

And a question: if there is excess hotel/motel tax revenue, could it be used for a new symphony hall?

JinGP
JinGP

"Since 2006, with only one exception, the tax has brought in at least $18 million a year."

 

Is that for the entire 7% tax or the 39.3% of the 7%?

Al Gray
Al Gray

Good job Maria! Digesting all of the data to write this report and the last one took time and thought. The Saporta report is the only media covering this stadium scam and you have been on target.

Burroughston Broch
Burroughston Broch

 @BPJ With all of the City's needs, a new Symphony Hall ranks alongside a new Falcon's stadium at the bottom of the list of priorities.

The Last Democrat in Georgia
The Last Democrat in Georgia

 @BPJ     

{{"And a question: if there is excess hotel/motel tax revenue, could it be used for a new symphony hall?"}}

 

As far as I am aware, and from many of the repeated conversations about the stadium issue that I have heard over and over again, state law would be have to changed for any excess hotel/motel tax revenues to be spent on anything or any place other than the Georgia World Congress Center property.

Right now, to the best of my knowledge, state law limits the spending of hotel/motel tax revenues only to the GWCC property.

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  1. […] suggested when it comes to the hidden cost to look at Maria’s Metro blog that details “how the funding mechanisms will most likely change.  It looks like we will have to […]

  2. […] suggested when it comes to the hidden cost to look at Maria’s Metro blog that details “how the funding mechanisms will most likely change.  It looks like we will have to […]

  3. […] suggested when it comes to the hidden cost to look at Maria’s Metro blog that details “how the funding mechanisms will most likely change.  It looks like we will have to […]