Wednesday, May 03, 2023

CM Thom Druffel explains why the new stadium deal is a good deal for the taxpayers.

Thom Druffel
by Councilmember District 23 Thom Druffel, April 26, 2023, email newsletter-  I have had a few questions come in about the Titans stadium project, and I wanted to send another email with more answers. Let me begin again by stating that this is not a decision on whether to build an NFL stadium. If that were the decision, I would look at it in different terms.

We have a stadium. Because of the 1997 contract surrounding that project, we are now forced to decide whether to renovate (at metro expense) or build new (at state, NFL and stadium user expense). Given those options, I am voting for the new stadium.

At-Large CM Suara and At-Large CM Allen have both posted opinions about why they do support the stadium. I urge you to read both of these for more information.

Here are the comparisons:


Metro owes $32M on past due capital repairs on the current stadium. There is no additional capacity from stadium related funds for capital repairs and improvement obligations. The Team assumed those costs and Metro is responsible for reimbursing them under the existing contract,

Metro owes an additional $30M under the current stadium debt obligation. Under the new proposal, the Titans waive this obligation. If it fails, Metro must continue to pay it.

Metro must fund renovations and repairs under the existing contract. Immediate stadium repairs totaling $362M plus an additional $235M in repairs projected over the remaining life of the lease, creating a total funding deficit of $229M and a total annual debt service deficit of $22M. Most, if not all of this, would require a payment through General Obligation Bonds funded by the taxpayer. Metro's outside consultants estimated that taxpayers should be prepared to fund between $1-$2B of renovation projects over the remaining life of the lease. Neither the State nor the Team are obligated to provide funding under the existing lease. Funding from the Sports Authority and Metro are not sufficient to pay for even basic capital repairs liability. It will come back to us taxpayers.

Under the proposed new stadium deal, the funds for construction will come from the State, the Team and from revenue bonds paid by dedicated sales taxes and ticket assessments. Property taxes are not a part of the calculations. The revenues anticipated by the dedicated taxes collected on the stadium and its uses are more than sufficient to cover the construction of the new stadium, along with the contributions by the state and the team. In fact, analysts have projected excess revenues. The 3% ticket contribution will go into the metro general fund and will be available for any metro use.

As an example of excess tax funds going to good use in the general fund, we were able to fully fund our metro schools for the 2022/23 budget despite shortfalls from the state contribution. In 2021, as Chair of the Education Committee, I was proud to recommend and approve a MNPS aspirational budget.

East Bank Development

The Stadium Project does not require metro to develop the entire east bank.

The rest of the area will be developed over a decade or so. A master developer will be selected, and the goal is to have the developer fund infrastructure of the campus.

The development of the east bank also provides some huge opportunities for our city. There was significant community involvement in imagining development of this area. Things like parks, greenways, affordable housing were high on the list.

The other piece of the east bank development is the significant increase in property tax revenue that will follow. Except for the stadium, the campus has basically been sitting as an empty parking lot, generating nothing in sales and property taxes. Metro will keep the property taxes and ground rents from development. Without the new stadium, we are locked into a parking lot, that generates little or no revenue, for the next 17 years.

Sports Betting

Someone asked about whether the new stadium was a way to allow the Titans to open an onsite, in-person sports betting venue. Online sports betting is legal in Tennessee and can be done by anyone with a smart phone. The Titans agreed to an amendment, both in the stadium and in the surrounding campus, prohibiting casinos unless specifically approved by the Metro Council and the Sports Authority.

To legalize casinos in Tennessee would require a constitutional amendment, which is a years long process. Governor Lee has specifically threatened to veto any expansion of in-person sports betting.

None of this was mentioned when Geodis soccer stadium, Bridgestone Arena or First Tennessee Baseball park were contemplated, and no restrictions are in place on any of those venues.

Increase in hotel tax for stadium v. other uses

CM Mendes mentioned voters deciding against using hotel tax to pay for a transit plan, and questioned why we would prioritize a stadium over transit. The truth is that they are not mutually exclusive. One does not preclude the other. The transit vote involved more than a sales tax issue-there was a question about whether a downtown tunnel, and all of the blasting and expense for that single site, would really provide a good transit option. The state authorized the 1% HOT increase for a new stadium only. Other than the Improve Act, the only way for the council to use HOT for transit would be to request and obtain state legislative approval.

The stadium proposal does not prohibit Metro from adding other hotel occupancy taxes and revenue sources that could be raised to support transit initiatives.

The proposed financing plan is designed to retire HOT-backed stadium revenue bonds as quickly as possible. The hospitality industry is carrying a massive part of the funding for the new stadium and would be a great partner on any new transit initiatives if designed as part of the right plan and supported by the public.

Sports Authority

Metro has been trying to negotiate with the state regarding control of the Sports Authority. Regardless of what happens going forward, legislation has been amended to ensure that Metro maintains control of the Sports Authority through appointment of the majority of seats and it does not go into effect until January 1, 2024. The current version of the legislation still gives metro a majority of the appointees, similar to other NFL cities like Tampa, New Orleans, Phoenix and Baltimore. But, even if complete state control did occur, the contract and bonds will be issued under the current Sports Authority and the terms of the contract are constitutionally protected from state interference.

Will the Titans leave if we do not approve a new stadium, and do we care?

Regardless of feelings about football, the fact remains that we owe a significant amount of money on an aging stadium. If we wait until 2028 to see if they leave, and they do, we have bypassed state funds and Titans financial contributions, and we are left with an aging and empty stadium. What revenue can be generated on the property at that point, and at what cost. For those who wonder whether these funds could be better spent on schools, transit and affordable housing, I would answer that while we have an immense need for improvement on these matters, the money coming from the state and the titans is available only for the stadium. So it is not a question of Metro priorities. It is a decision we are making in light of our circumstance: a costly renovation or a well-funded new stadium.

Rod's comment:  I supported the new stadium deal. Initially, I opposed it but as I learned more, I became a proponent. The facts stated in the above post by CM Druffel and a post by CM Courtney Johnston explain why the stadium deal was a good deal for the taxpayers. Many people I talk to were opposed and I understand the opposition. In principle, I do not think cities should be in the business of building sports stadiums. However, that is the world we live in and almost all are funded by government.  As explained by CM Druffel above, however, this is not about building a stadium or not building a stadium but whether to repair an existing stadium and remain in a bad deal or replace a bad deal with a good deal. 

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