Falcons Blow Early Lead…On New Stadium

January 14, 2013 13:00 pm

by Charlie · 25 comments

Today’s Courier Herald Column:

The Falcons won another close one at the Georgia Dome on Sunday.  It didn’t start out close, as they led 20-0 at the half.  Yet they had to come from behind in the final seconds to win the playoff game that could have ended their season.  Such has been the story of the 2012-13 Falcons.  It may also be the story of the plight of their new stadium.

During the tumultuous 2010 session of the General Assembly, one of the least talked about measures that passed the body was one categorized as “local legislation” for the City of Atlanta.  Their hotel motel tax was extended until the year 2050 allowing for 7 percent to be added to all hotel bills within the city.  28.56% of that amount goes to the City of Atlanta. 22.5% of that goes to the Atlanta Convention and Visitors Bureau.  9.64% goes to the Georgia World Congress Center.  Finally, 39.3% of that goes to finance debt service on the Georgia Dome, expected to be paid off in roughly 2017.

Of course, there was no need to extend a tax until 2050 for a building that will be debt free within the decade.  The extension of the existing tax revenue was to lay the funding groundwork to build a new stadium – before the public could weigh in with their opinion.

The public, now significantly more aware of the plans, has yet to buy in to the concept.  The Atlanta Journal-Constitution is reporting a new poll of statewide residents have 72% opposing the measure.  The problem with proceeding isn’t the tax – that was taken care of in 2010.  The issue is that the legislature must approve the borrowing capacity of the Georgia World Congress Center to $300 Million, up from its current statutory requirement of $200 Million.

The matter had been previously handled.   The language allowing this was included in a 2011 bill that was ultimately vetoed by Governor Nathan Deal.  Had it been signed, this would not be a debate.  We would just be sitting around waiting for the Falcons to finish their season and announcements of the various groundbreakings and construction schedules to be forthcoming.

Instead, a stadium debate which the Falcons appeared to have won two years ago now has them playing from behind with respect to public perception.  A Governor beginning a two year cycle of re-election isn’t likely wanting to overtly irritate a prickly electorate, and a legislature that has become a bit more aware of their own public perception courtesy of a failed T-SPLOST vote and a strong demand for ethics reform seems less committed to direct $300 Million of tax payer dollars to a stadium whose primary beneficiary is one of Atlanta’s wealthiest citizens.

The repayment of the debt isn’t the crux of the issue.  The Falcons are responsible for paying the GWCC approximately $2.5 Million per year under the proposed new arrangement, but the bonds Georgia taxpayers are asked to guarantee will be repaid not by the team but by hotel motel revenue taxes, set to be underwritten at a 1.5 coverage ratio.  That means that so long as hotel revenues in the city don’t drop by more than a third, then the money will be generated to pay these bonds.

The Congress Center, likewise, is in a difficult situation.  While they continue to have a world class facility that attracts events such as the SEC Championship game, Final Four tournaments, and other national events which bring visitors to the city, they understand that if the Falcons move off their campus – either for Atlanta’s suburbs or another city entirely – they will turn what would be a positive operating income to an annual loss.  They, therefore, have become somewhat of the focal point making the case for the new stadium as proposed as part of their campus.  It is being billed as a way to ensure that the GWCC can stay relevant well until the middle part of this century.

The problem with this perspective, however, remains one of priorities.  A new stadium, next door to and ultimately replacing the current Georgia Dome, would be a nice thing to have.  The question will remain, throughout this debate, is whether there are not more pressing needs that could be addressed with this same revenue stream.

This was a debate that the Falcons once had won, before it seemed to have even started.  Now, as the debate will continue throughout this session, there are other points of view to be considered and a skeptical public to be won over.  The Falcons will want the debate to be focused on the history and importance of the Georgia World Congress Center.  Critics will point to continued infrastructure needs within the City of Atlanta which continue to go unfulfilled.

Both perspectives will receive deeper examination here as the legislature takes up this issue.  The battle remains uphill.  Most observers and even critics note the parallel between the team’s on field performance and the field they will play on in four or five years.  All agreeing, of course, that a win next week against San Francisco and one more in New Orleans a couple weeks later would give the stadium plan a needed boost.

griftdrift January 14, 2013 at 1:31 pm

I think most of the discussion around the stadium is much thunder with little heat, but how can I resist a tete-a-tete with Charlie Harper?

One of the arguments that keeps coming up, and it’s a strong one I will admit, is that we have more pressing needs. My understanding is that without a change in law by the legislature, the hotel tax revenues cannot be delegated to those more “pressing needs”, i.e. transportation.

Now, I need someone to explain to me, how a legislature that has at best been cold to Atlanta’s needs (Grady) all the way to utter disdain (MARTA) is going to suddenly be amenable to steering $300 million from investment in facilities that have a state connection away to the “pressing needs” (see examples above) of a city that on kind days it merely uses as a hobby horse to win votes from the affluent suburbs?

Charlie January 14, 2013 at 3:20 pm

OK, let’s start with the lay up here, which is your second paragraph. For the stadium to be built, it requires a law change. This item is clearly before the legislature. That’s where laws are changed.

So instead of changing the law to say “Georgians will assume $300 Million of new debt to replace a fully functional piece of infrastrucure so we can tear it down and replace it with a newer, arguably better one”, it would seem germain to the bill to be able to say “The 39.3% of Atlanta’s hotel motel tax earmarked for the Georgia Dome shall be directed to transportation infrastructure within the city of Atlanta when all currenlty existing debts on the Georgia Dome are repaid”.

If we’re going to have to change a law, shouldn’t we be arguing about how best to change it and not arbitrarily confine ourselves to only the part that Arthur Blank is asking to be changed?

Mike Hassinger January 14, 2013 at 3:29 pm

“The State of Georgia established the Georgia World Congress Center Authority to develop and operate the Georgia World Congress Center, the Georgia Dome, Centennial Olympic Park, and related facilities.
These facilities exist for the primary purpose of promoting and facilitating events and activities that generate economic benefits to the citizens of the State of Georgia and the City of Atlanta as well as enhance the quality of life for every Georgian.”

Charlie January 14, 2013 at 4:04 pm

Yes, but there’s nothing about the hotel/motel tax that requires it to go to the GWCC. In fact, less than 10% of the revenue from the tax does now (excluding the part going to pay the bonds on the dome).

In fact, notice that the City of Atlanta gets a bit more than 28.5% straight to it’s general fund.

So again, if we’re going to have to change a law, is it not up for debate what is the best use to change it for?

griftdrift January 14, 2013 at 3:46 pm

I’m not saying they can change it. I’m not saying changing it would be wrong. I’m saying that after arguably not lifting a finger to aid Atlanta for a decade why would they do it now? The why vexes me. Not the how.

griftdrift January 14, 2013 at 3:49 pm

Obviously should have been “I’m not saying they can’t change it”

bgsmallz January 14, 2013 at 4:16 pm

“If the Falcons move off their campus – either for Atlanta’s suburbs or another city entirely – they will turn what would be a positive operating income to an annual loss.”

” The question will remain, throughout this debate, is whether there are not more pressing needs that could be addressed with this same revenue stream.”

If we have finally conceded that the Falcons subsidize the state run GWCC, which is seemingly important to the grand scheme of things in relation to the City of Atlanta Hotel/motel tax….then I would offer the following correction…

“The question will remain, throughout this debate, is whether there are not more pressing needs that could be addressed with the same revenue stream remaining after covering the annual 1.5M to $2M in losses of the GWCC .”

Respectfully, how do you have the same revenues remaining to put towards other ‘more important’ things when you have up to $2M in losses a year to subsidize just to maintain the status quo.

Anyway, I though Galloway did a nice job on the issue this weekend.

http://blogs.ajc.com/political-insider-jim-galloway/2013/01/12/why-the-atlanta-stadium-debate-remains-alive-location-location-location/

bgsmallz January 14, 2013 at 4:17 pm

Wow…that ended up looking just awful…that’s why I’m not allowed to play with sharp items…

Here is my edit without trying the bells and whistles…

“The question will remain, throughout this debate, is whether there are not more pressing needs that could be addressed with the same revenue stream remaining after covering the annual 1.5M to $2M in losses of the GWCC .”

Respectfully, how do you have the same revenues remaining to put towards other ‘more important’ things when you have up to $2M in losses a year to subsidize just to maintain the status quo.

Anyway, I though Galloway did a nice job on the issue this weekend.

http://blogs.ajc.com/political-insider-jim-galloway/2013/01/12/why-the-atlanta-stadium-debate-remains-alive-location-location-location/

Charlie January 14, 2013 at 4:24 pm

OK, do this math for me.

GWCC, with Falcons: $2.5M per year
GWCC, without Falcons: -$1.5M per year.

That’s a net difference of $4M per year if the Falcons move.

To protect this $4M per year, we’re asked to cough up $300 Million, plus land, plus sales tax waiver, +++?

Tell me again how this is a great return on investment?

bgsmallz January 14, 2013 at 5:05 pm

I’m admittingly dismissive of the land and sales tax issue because I don’t think it is a net loss…I doubt someone is coming to buy up that land anytime soon if a stadium doesn’t go there and the Dome doesn’t have a tenant. No one is spending $700M on construction and materials in that area if the Falcons don’t. There will be a little down tick from sales tax dollars from the hobos at the CNN food court…but alas….I’m not sure it is lost revenue or lost opportunity. IMO.

$300M/30 Years is $10M annually. For argument’s sake, let’s forget about interest and time value, etc.

So $10M – $4M = $6M annually to spend on other things, right? Well…what about the Dome? Is it not going to need ANY improvements over the next 30 years to stay competitive? Can you really imagine a scenario where we don’t have to chip in at least $100M in renovations over the next 30 years to keep the stadium competitive? For example, if the Falcons do build a stadium in the burbs, they will be competing for the same events, game, etc. that the GWCC is now, right? Not to mention other cities that we will compete with.

Here is an interesting nugget from another market about a stadium that is only a little newer than the Dome…

http://www.stltoday.com/news/local/metro/edward-jones-dome-arbitration-begins-today/article_bd91f77f-73b9-54b4-b19c-8d999295df1f.html

Would there be any other lost revenue? Would the hotels and motels be able to deliver the same occupancy without 10 Falcons home games each year?

The problem is that while I get the idea of having ‘all of this money to spend’ if we don’t add more debt, I just don’t see it with very rosy glasses. To me…replacing the Dome is inevitable and probably necessary within the 30 year window. I get driving a hard line…but why cut your nose to spite your face?…rather than trying to get all mine on the front end, I would focus more on the back end, if I was the state. Mandate certain revenue expenditures throughout the lease for improvements to the building and to the surrounding area by the team… maybe even add a poison pill to make sure we aren’t doing the same thing in 20 years. Make it a partnership that one person can’t just walk away from in 25 years.

Just my thoughts…

Charlie January 14, 2013 at 4:06 pm

I’ll be getting to more of that in the next column on this matter (later this week or next). Atlanta may have boxed itself in (or out) on this one. Like it or not, the new Stadium will give those in the suburbs who don’t want to help Atlanta anyway reason to say they don’t need more state dollars when they squander the resources they have on luxuries like this instead of the necessities they would like state help with.

griftdrift January 14, 2013 at 4:11 pm

An interesting point but the obvious question, why would Atlanta ever think they are going to get anything from the ‘burbs….ever? At some point, the Oliver Twist pease I’d like some more has to wear out. If there’s no chance Atlanta would EVER get anything from the state, and at this point, please point to any evidence that contradicts, then why not get what they want?

Which leads into the politics of this, the heaviest hitter in this argument is not Arthur, it’s the Mayor. And as I’ve said before, no matter what he thinks, Kasim Reed is not going to let the first line of his obituary read, “lost the city’s NFL franchise”.

Charlie January 14, 2013 at 4:27 pm

You have more cooperation between an Atlanta Mayor and state leadership than I can remember in my lifetime (with possible exception of Andy Young, but I can’t claim to really remember that).

If not now, when?

As for Mayor Reed’s thoughts, that’s almost exactly what he said to me while answering a question at the Atlatna Press Club a year ago. Which brings me back to my central point/issue with this. If that’s his first priority, the Mayor that constantly talks about making sure “we don’t miss this opportunity” has his priorities of opportunities really mixed up.

griftdrift January 14, 2013 at 4:35 pm

I don’t disagree that the relationship is the best ever with the possible exception of Andy Young. And that certainly would make you think it’s a possibility. But did you really answer my question?

Is the answer that after a decade of a thumb to the nose at Atlanta, as well as other digits closer to the middle of the hand, including the ridiculous poison pilled TSPLOST, don’t even get me started about the 50/50 MARTA split, that because the Mayor and the Governor are now BFFs, Atlanta is now going to get exactly what it needs from the legislature?

I mean c’mon Charlie. It’s not like Atlanta is Georgia Power or anything.

bgsmallz January 14, 2013 at 4:27 pm

I would assume that any state legislator voting against increasing the borrowing limit would also pledge to oppose any taxpayer funding in an alternate location…cough cough cough…so someone like Sen Albers couldn’t vote against extending the borrowing limit on the one hand, and then lay out the red carpet for the team to build a new stadium in Alpharetta on the other hand.

Also…note that the state, not the city is on the hook for a lot of the investment downtown. The city needs the GWCC for revenue streams (like the hotel/motel tax)…but the state needs the city to keep paying money to the GWCC from their tax, too, right? It gets real nasty if the state tries to make the city cover the losses to the GWCC from the city’s hotel/motel tax after ushering the Falcons to the suburbs. The state has poured a lot of money into downtown Atlanta…and it’s an investment and a relationship that has paid off so far …one of the few real city/state relationships that has worked so far in this town.

BTW- one interesting nugget from the Galloway article. It would cost about $700M to build an open-air stadium in the suburbs…if Blank is so greedy, why doesn’t he skip the hassle and move the team to Johns Creek? It’s costing him the same amount, right? I don’t know…I just find it interesting that he is getting painted as the bad guy because he is apparently trying to keep the stadium downtown when it would cost him the same or less to move it to the burbs.

Just some thoughts…

gchidi January 14, 2013 at 4:15 pm

As far as I can tell, the whole and complete purpose of this plan is to shift the mix of stadium revenue from the GWCC to the Falcons and Arthur Blank. Media revenue sharing in the NFL means that the only way Blank can continue to increase firm value out of proportion to overall football business growth is to improve the financials for the stadium.

Blank wants to minimize the amount of personal equity he needs to build a new stadium with luxury boxes. He’s looking for a hurdle rate that gets him to an 8.2 percent-or-better return on invested dollars.

UpHere January 14, 2013 at 6:08 pm

Follow the money on this one….

Who authored the bill to extend the hotel-motel sales tax? Mark Burkhater. Who does he work for now? McKenna Long who is the main lobbyist for the stadium. This stinks.

Baker January 14, 2013 at 6:11 pm

+1

Baker January 14, 2013 at 6:11 pm

I’ll keep it short:

I refuse to accept the answer that “this is just the way it’s done” when we’re talking about handing over $300 MILL to a BILLIONAIRE so that his company would be able to move into a new location in which to do business. Particularly since his current office location is great and barely 20 years old, and was also sponsored with public money.

http://www.facebook.com/pages/Save-Falcons-Habitat-Keep-the-Dome/147025202029129?ref=hl

bgsmallz January 14, 2013 at 6:25 pm

Maybe more accurate would be that you refuse to hear any other answer besides ‘this is just the way it’s done”, no?

It’s always interesting to me when the people who claim they support the free market are the first ones to cry foul when it ends up costing them more money because of competition.

Read the Galloway article. We aren’t handing him $300M to move into a new office. We are paying him $300M to stay downtown in an office with a retractable roof. He could use his $700M to build his stadium anywhere he wants and exactly how he wants it.

Now give me some line about how the Falcons have a non-monetary duty to stay in the Dome or in Atlanta out of some sort of non-free market obligation to the area….bottom line is that the lease on the Dome is through 2017. You want to keep the Dome…that’s great. I want to keep the Falcons.

Baker January 14, 2013 at 9:42 pm

Mssr BG: I refer you to Nonchalant’s post below…save the part about the Cyclorama, there’s nothing they can do with that. It just doesn’t have wide appeal.

griftdrift January 14, 2013 at 7:17 pm

Walter Jones on Lawmakers put forth that they may cut the tax altogether. So there’s the possibility Atlanta will be Judge Smailed. Get nothing and like it!

Which given history, actually seems the most likely.

Nonchalant January 14, 2013 at 7:44 pm

I am opposed, and I do believe Mr. Blank has a weak hand.

1. I doubt he can actually move to the suburbs. To name a likely candidate, Gwinnett County’s commissioners are hardly likely to touch a new stadium, regardless of financing, because of the corruption issues the previous group of commissioners had, and the failure of the Gwinnett Braves stadium. Infrastructure would have to be upgraded, and I’m not sure the county citizens are going to go for that. There is no rapid mass transit, and there isn’t going to be. And having viewed the fan base during the Tampa Bay and Seattle game, as well experienced the real convenience of Marta, it seems to me that Mr. Blank needs a central location, instead of one off in some corner of the metro area. In addition, those of us old enough to remember the original Dome debate (“we must have a dome to get the Super Bowl”) might wonder about this open-air stadium we would now have (and that would cause the same problems for the Chick-fil-A Bowl (for I assume the Dome would be finished as a going concern) as before.)

2. Is Mr. Blank *really* going to forfeit the connection he and the Falcons have to Atlanta, and in a way that makes him the epitome of the publically dispirited citizen? Atlanta certainly seems to be be the upswing, the potential center of the universe, as it were. Would he want to miss that excitement? I think not.

3. 300 million dollars is a lot of money. Someone could perhaps change the world if he had that kind of capital–or even a fraction of a fraction of a fraction. To use it to build an unneeded stadium seems foolish–and a discouragement to start-ups wondering why the state never loved them.

4. I am an American. I just had a chance to look over the Dome ceiling yesterday. To say American know-how can’t make that roof retractable, and in an affordable way, is an insult to the national and state character. The best engineering institute in the world sits mere miles away. That Dome can be made retractable, for we are Americans, and we can do anything that mortal man is capable of doing.

Overall, I think it would be best for Mr. Blank to count the blessings of a life well-lived, and enjoy the Dome (whose outside color-scheme I abhor, and always have), and enjoy Atlanta, and for him and the State to help figure out what to do with the Cyclorama, as a fitting memorial to those, North and South, who helped build this prosperous land we have inherited, where we live in such wealth (wealth that they never had) that we can even debate about having *one* massive entertainment venue to start with, much less funding a superfluous one.

Daddy Got A Gun January 14, 2013 at 7:52 pm

The best engineering institute in the world sits mere miles away….. hopefully they do better with the roof than they did with their Parking Deck that collapsed.

The Last Democrat in Georgia January 14, 2013 at 10:11 pm

“Atlanta certainly seems to be [on] the upswing, the potential center of the universe, as it were. Would he want to miss that excitement? I think not.”

Atlanta on the upswing? Man…I don’t know what you’ve been smoking, but whatever it is sounds like some [darned] good and powerful [stuff].

Atlanta on the upswing (record-high numbers of foreclosures, leads the nation in bank failures, severely corrupt and incompetent governance, failure and outright refusal to invest in transportation infrastructure, worsening water shortages due to past and continuing failures to properly manage existing water resources and invest in new water infrastructure, dismal education system, continued high unemployment, etc.)?

…Yeah, I can see it. You’re definitely right….Atlanta IS on the upswing! You got me.

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