With a stamp of approval by the Sports Authority Board on May 9, local government officially will fund the Smokies baseball stadium in downtown Knoxville with $65 million in bonds. The borrowed money will be repaid if the facility and nearby developments generate revenue as planned.
Understandably for taxpayers, that’s a big “if."
But the Sports Authority has a plan, and the vote allows the bond process to move forward before closing June 7. No additional votes related to the bonds are needed.
Tennessee Smokies CEO Doug Kirchhofer previously told Knox News the approval of bonds is a "symbolic" milestone. Though construction is underway, this approval precedes a groundbreaking ceremony scheduled to happen within the next month.
"This (vote) allows us to get into the market, tell people we have all the authorizations for the bonds," Mark Mamantov, bond attorney for Knoxville and Knox County, told Knox News.
With the stadium price now at $114 million, Tennessee Smokies owner Randy Boyd has stepped up to the plate to fill significant funding gaps.
While some of Boyd’s money will be coming directly out of his pocket, up to $20 million will be in the form of a loan. The loan would be repaid only if the stadium’s tax increment financing district is first successful in covering an estimated $14 million in infrastructure improvements around the stadium – another big “if.”
How is the downtown Knoxville stadium being paid for?
Local government bonds: $65 million
State of Tennessee grant: $13.5 million
Investment earnings on bonds and state grant: $2.5 million
Payment from Knoxville Smokies owner Randy Boyd: $13 million
Loan from Randy Boyd: Up to $20 million to KCDC, transferred to Sports Authority for construction
Total: $114 million
Who does the baseball stadium debt belong to?
Will taxes repay Knoxville and Knox County?
Sales taxes generated inside the stadium would go toward repaying the bond debt over 30 years.
That includes state sales tax of 5.5% and all local sales taxes.
How else would Smokies stadium debt be repaid?
Local government will be repaid $1 million each year by the Smokies to rent the publicly owned stadium.
Money from payment in lieu of taxes, or PILOTs, related to two adjacent residential buildings that will be built also will be used to repay the bond debt.
PILOTs transfer property to the city's Industrial Development Board, which then leases the property back to the owner in place of traditional tax payments.
PILOTs for both buildings will last 30 years, Knoxville's Community Development Corporation CEO Ben Bentley told Knox News. For the first 20 years, 50% of the appraised tax value will be charged as rent to repay the stadium costs. After that, payments will reflect the full tax value.
The PILOT for the condo building only applies to the two floors with commercial space. Tax increment financing, separate from the TIF district funding infrastructure improvements, will be applied to the floors with residential units to repay debt.
Important dates for the financing schedule
May 15: Underwriters due diligence call
May 15: Finalize bond purchase agreement
May 16: Post preliminary official statement and investor presentation
May 24: Pricing of bonds
May 30: Distribute final official statement
June 6: Pre-closing
June 7: Closing
How much of an economic impact is expected?
An independent analysis cited by the city predicts the stadium could have a $480 million economic impact over the next 30 years. The project could create 3,000 jobs, including 400 full-time positions.
When is the stadium scheduled to open?
The facility is scheduled to be ready in time for Minor League Baseball’s opening day in spring 2025.
What is a tax increment financing district?
Local government has made it clear Boyd will not be repaid for his $20 million loan until the tax increment financing district, commonly called a TIF district, pays for the needed infrastructure improvements around the stadium.
TIF districts bank on an anticipated increase in property tax revenues that would come only from new development within a designated area.
There's an opportunity cost for city and county residents if the TIF is in place because the property taxes collected cannot be spent on projects outside the tiny TIF district. On the other hand, city and county taxpayers both gain new housing and amenities in developments that likely will generate tax revenue far beyond the life of the TIF.
Understanding the TIF: Randy Boyd will loan up to $20 million to cover Smokies stadium cost
Are diverse workers involved in stadium construction as planned?
The stadium project has not yet met its goal for contracts with disadvantaged businesses to represent 17% of the stadium's full $114 million cost. However, the project team said it expects more minority workers to join in later phases.
Mohamed Abbas, senior project manager for Denark Construction, told Knox News via text message that participation hasn't changed since March when Knox News reported 15% of the stadium's $101 million contract value was awarded to disadvantaged businesses.
Specifically, minority-owned businesses are receiving 5.5% of that $101 million, with a caveat: That number includes Elite Diversified Construction Incorporated, which is part of the construction management team − not a contractor.
The Sports Authority Board has since decided EDCI should not be included in the goal, Abbas said, though having a minority-owed business in the construction management role certainly is a win for a development team committed to diversifying.
Knox News previously reported project delays might have caused interest from minority-owned businesses and workers to dwindle.
What else is being built alongside the stadium?
GEM Community Development Group, the development partner to Boyd Sports, has unveiled plans to build two seven-story apartment buildings – connected by a sky bridge – next to the stadium.
The apartments would be named Yardley Flats, after William Francis Yardley, a civil rights advocate believed to be the first African American to bring a case to the Tennessee Supreme Court.
This $70 million residential development along the third-base line is in addition to the nine-story condo building that would be named after Beauford Delaney, a Black modernist painter and Knoxville native known best for his contributions to the Harlem Renaissance.
How has investment changed around the stadium?
The promise of a stadium, alone, helped spur interest and investment in the area even before the project was approved by local government.
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This article originally appeared on Knoxville News Sentinel: Smokies stadium bond funding approved for downtown Knoxville facility