Arthur Blank Taps DeKalb for $12M, Because He Can

The public’s natural reaction to government plans for sports stadium “investments” is inchoate incandescent rage. Taxpayers could have been convinced, once upon a time, before Russia’s winter Olympics, before the FIFA scandals, before John Oliver’s weekly rants went viral. Not anymore.

Stadiums as bad government policy are cliché sports bar conversation fodder today, especially as we contemplate traffic on Braves game days in 2017. The idea should be dead on contact.

And yet, here we are. Again.

DeKalb County’s commission will vote Tuesday to turn over 40 acres of public land for the use of a private sports team for 30 years, tax free, spending (they think) $5 million to prepare the property and paying a billionaire $7 million for the privilege.

Arthur Blank wants to build Atlanta United’s $30 million soccer training complex behind the DeKalb County jail, near MARTA’s Kensington Station. It would be the perfect place to stage a re-enactment of “Mean Machine” or “Victory.” Which commissioners should play which prisoners’ roles is something I’ll leave to your imagination.  

I’ll tune my rage back into the visible spectrum long enough to consider the rationale for putting public money on the line here. The station at the intersection of Memorial Drive and I-285 is a New Urbanist nightmare, a giant parking lot surrounded by blight, underused office space, low density neighborhoods and a jail.

Arguably, the county needs to see healthy commercial districts develop in areas that cities can’t annex or incorporate. Building around MARTA stops makes long-term sense, and Kensington may be the best candidate.

Consider how well downtown Decatur works, with MARTA in the middle of a vibrant commercial district. Lee May, the county’s interim CEO, wants to duplicate that at other MARTA stations.

The irony. The county budget anticipates about $24 million more, net, this year. Disproportionately, that money will come from city property owners. Property values rose much faster in cities than in unincorporated DeKalb this year, and the county changed how it duns cities for county services, raising their taxes.

May floated a plan earlier this year to move some county offices to the facility across from the county jail — and a five-minute walk from Kensington — as a catalyst to redevelopment. The stadium deal looks like a piece of that plan, by moving the Parks Department to the facility.

On top of that, DeKalb County’s shifting demography, driven in part by immigration, makes soccer an attractive sport for public support.

That doesn’t make spending money on a sports complex less stupid in this case. But it’s the argument we’re going to hear and I want to give it an honest airing. None of that gets past the obvious: the financial profile induces vomiting.

The county plans to spend $7 million for the privilege of moving its Parks Department to a 6,000 square foot facility at the new complex. That much Class A office space around here sells for about $600,000; most is under a million. The extra $6 million? Gravy.

I can understand lending land for development, and spending money to prep it for development. Tax breaks can be debated. But an extra $6 million to Blank — and to whichever politically-connected developer gets the construction contract — on top of all of that? Insane.

Six million dollars. That’s what we spend on the county’s summer recreation programs. For thirty years.

The memorandum of understanding calls on Blank to cover his end of operation and maintenance costs. But the document doesn’t say what those costs might be. The county will be generously allowed to host a limited number of special events at the facility during the season. It doesn’t say how many. Will DeKalb’s school soccer teams be allowed to regularly use the facility for games? It doesn’t say. What would that cost? It doesn’t say.

Blank pays DeKalb 15 percent of naming rights revenue, which I suspect will be minimal. All of the other revenue (except for the county’s generous allotment of special events) goes to Blank. The county gets no share of ticket revenue.

The agreement calls for at least 10 percent of the jobs related to building maintenance and operations be reserved for DeKalb County residents. My reading of the documents shows that the first 83 jobs have an average salary of about $200,000. The second tranche of 40 jobs has an average salary of about $55,000. I suspect most of the construction, maintenance and facility operations job fall in that latter slice. The agreement doesn’t say.

The agreement requires Blank to keep Atlanta United’s practice facility there. It does not require Blank to keep operating Atlanta United. If the league goes the way of the USFL, DeKalb’s only bankruptcy protection is it taking possession of the facility at the end of the term … along with all of the upkeep costs of a single-purpose structure.

Six million dollars. I contemplate the long list of extremely pressing needs in DeKalb County that could be met with $6 million. The county festers with blight that it can’t afford to condemn and tear down. Emergency shelter space remains extraordinarily tight, especially for women with children. Road repair and infrastructure maintenance has a backlog of years if not decades. Even funding for an animal shelter — and I note that the current facility must be torn down, according to this agreement — appears unstable. Animal activists in DeKalb are complaining about a broken deal over that funding.

That touches on the second problem. Trust.

DeKalb County government has had a bad couple of weeks, even by the degraded standards by which we’re left to measure such things.

Last week, commissioners passed a mid-year budget that cut spending requests for corruption investigations. The DeKalb district attorney’s office asked for $200,000 to hire investigators and an assistant DA in its public integrity unit. Denied. The CEO wanted to continue $500,000 in funding the Bowers internal investigation — a preliminary report is due sometime in August, by the way. Denied. (The CEO says he’ll find the money somewhere else.)

A few days later, we were left to boil tap water for days because the water department apparently doesn’t know how to find the right valve to turn anymore.

And now, Blank decided that the nine-figure concession he managed to squeeze out of Atlanta wasn’t enough. He’s chasing DeKalb for a few million more.

The design and construction of the sports facility will be done in partnership with Decide DeKalb. That’s the newly-rebranded DeKalb Development Authority, headed by Vaughn Irons.

Over the last couple of months, I’ve come to respect Irons’ acumen as a businessman and an agent for economic development. I’m as shocked as anyone. But as I discovered listening to him at the debates to fill the commission seat, there’s a reason he’s been asked to take responsibility by civic leaders; he’s smart and experienced and understands the nuances and limitations of the government’s role in economic development. I respect the quality of his mind.

But he’s still under a cloud of ethics questions which limit his power to make the case to the public.

A skeptical public needs to know what it’s getting for its money. Barring that, it needs to know that if it doesn’t have all the data, it can trust the people who do. But now? Given all of this? The well of trust is too dry for this game.

16 comments

  1. gcp says:

    Dekalb County has a successful private soccer facility; Siverback Park at Northcrest and 85.

    The Memorial/285 area is a dump and needs improvement but a county subsidized facility is not the answer. Let the county market the property to any developer with limited tax breaks, some property improvement but not a six million dollar subsidy.

    As for Vaughn Irons, isn’t he the guy on the Developement Board whose company got a million dollar county contract? Not sure county leaders should take advice from him.

    • Jiminy Cricket says:

      While I like your idea, there is nothing on the table as of this point.

      This use may be far enough away from Silverback not to compete or it will doom that venue. I respect your POV.

    • ATLguy says:

      @gcp:

      I am a capitalist, but please realize that even in the complete and total absence of taxation, some areas are never going to be desirable for developers. At some point, your side has to acknowledge that some of the areas in this country (and in our very own state) with the lowest tax burdens are also among the chronically poorest. Some of the most vexing generational poverty challenges in this country are not in high tax, high regulation, high crime, heavily unionized urban areas but instead in Appalachia. So the question is whether any developer feels that businesses or residences will locate in the Memorial/285 area even if the property is improved? Give me the list of developers that would choose that area over:

      A) the northern suburbs
      B) north Atlanta
      C) downtown/midtown Atlanta
      D) some of the more desirable areas in the southern suburbs

      It is probably pretty short. And if that is the reality that you are dealing with, are you supposed to merely sit back and do nothing while that area just rots (and we all know that rotting, decaying areas spread beyond their borders, unless some sort of physical barrier like an interstate highway or rail line is erected to contain the rot) merely because of some ideological notion that no action should take place other than free market action?

      Sorry, but the main people that would disagree with you: Cobb County commissioners. Not only are they going to spend at least a half-billion dollars of taxpayer money to get the Braves (and are seeing several companies and high end residential development projects locate/relocate to the area around the Braves’ stadium already) but they are buying up and demolishing apartments along several problematic corridors to reduce crime (and rid the county of low income residents, who will be forced to take up elsewhere in the metro area).

      There is a huge, wide vast gulf between government acting to spur economic growth/development in some sectors and areas (which our governments did on national, state and local levels in a massive way from the 1950s until at least the late 1980s) and actual socialism, where government is the primary economic planner and mover. Big, big difference between the feds building Hoover Dam and creating the REA to get electricity and phone service in areas were private energy and utility companies would have never made a profit in extending lines to because the distance was too far and the population too sparse, and having the feds (or the state) assume ownership of Georgia Power. (Granted, the state of Georgia could probably actually do a better job with that Savannah River nuclear power plant expansion than Georgia Power is, but that is another story for another day.)

      • gcp says:

        Seen Silverback Park? It abuts 85 and there was nothing there but rocks and fallen trees as a result of the 85/285 makeover many years ago. Silverbacks took a big chance when they developed that property and to my knowledge there was little or no county money involved. Also look at the Wal-Mart on Memorial near Hairston.

        As for the Memorial/285, possibilities could include a softball/baseball complex or a soccer facility. I like the softball/baseball idea.

        What Dekalb needs is a lot less corruption and a lot more creativity.

        • ATLguy says:

          How long would it have taken for electricity to come to the desert and for major hydroelectric projects in general had it not been for Hoover Dam? How long would it have been for electricity and telephone service to come to south Georgia, the Ozarks, Appalachia etc. had it not been for the TVA, REA etc.?

          “What Dekalb needs is a lot less corruption and a lot more creativity.”

          True. But I have given you a huge example of less corrupt and somewhat more creative (not really) folks did in Cobb. Was Cobb County right to spend half a billion dollars on the Braves and dismantle those apartments for low-income renters or were they wrong?

          • gcp says:

            And I gave you an example of a private facility (Siverbacks) that works.

            As for government projects that are not quite successful check Cool Ray Field in Gwinnett. While not totally a failure, it sure did not generate commercial development in the area.

            As for Cobb, they gave up too much for the Braves. Marketwatch recently called that deal one of the five worst current stadium deals.

  2. Jiminy Cricket says:

    If Atlanta is a family empire, DeKalb is the dysfunctional sibling that has a Board seat, with a significant vote.

    DeKalb’s many problems are rooted in mistrust and greed; the ‘take.’ With a $1B budget the line is long.

    Something needs to be done on the Memorial Drive/285 ‘node’ and this project is a wholesome use. Maybe the financing angle and its’ players are not ideal, but having this type of use could get ‘heads in beds,’ and add much needed new revenue to a formerly successful area. People visiting are there for a positive reason, developing good kids through a safe and competitive sport, the value of either cannot be under-estimated.

    Thinking ten years forward, with the brilliant re-use of the GM Plant, the Memorial Drive node becomes the Southern Perimeter Gateway to the Northern Arc, and all that entails. Leaving the area in its’ present state is not Forward DeKalb.

  3. MediateIt says:

    It’s all about trust, and that’s proving hard to come by.  This deal has clearly been in the works for some time without the knowledge of, nor participation in, the negotiations by at least three of the commissioners.  That is unacceptable and raises major issues regarding back door deals worked out by the other players in this game.  Of particular concern to me is the fact that Vaughn Irons remains the chair of the Development Authority/Decide DeKalb, Lee May has not nominated anyone to replace him (although he has tendered nominations for the other six seats), and as far as I know Stan Watson is still on Irons’ payroll at ADP as a consultant.  I don’t see anything about this deal benefitting taxpayers, but I do see the opportunity for significant financial gains to the above, especially given that proceeds from the naming rights (the only money that the county will receive in this deal) will be handled by Direct DeKalb instead of going into the general fund, or Parks & Rec.

    And then there’s this. Regarding the short timeline to get the deal done, could it be that the contract was purposefully delayed by the commissioners working on the proposal until the 5th District Commissioner was elected in hopes of ensuring a majority vote in favor of the terms as set out today?  Will Commissioner Mereda Johnson be willing to consider modifications to the proposal that she didn’t participate in negotiating, probably didn’t know anything about until two weeks ago, yet is co-sponsoring with Stan Watson? I guess we’ll see.

    • Jiminy Cricket says:

      AS we agree, DeKalb rolls on.

      At least it is not the Soap Box Derby, or the casino being ‘iron’ ed out for us.

  4. cmr says:

    I support attracting much needed business investment to Dekalb County. I also support public incentives and cooperation in order to secure such investment.
    However, I fail to see how this particular deal would generate dividends in line with the investment of our tax dollars and public assets.

    This current proposal presents more questions than it answers.

    First and foremost, how does this benefit Dekalb County citizens?

    Why would Dekalb County invest our public land, pay for site preparation, waive the property tax on the facility and then pay a substantial premium (approx. $233k annually for 30 years, paid up front) for 6000 square feet of office space?

    This proposal makes no economic sense. This is a practice facility for a soccer team and corporate office space. It is not an NFL or MLB stadium designed to generate revenue. The job creation is minimal. Are naming rights to a soccer training facility even nominal?

    Why were these discussions held outside of public view only to be voted upon within one week?
    I understand closed door negotiations but a vote by commissioners in early August, leaves little time for due diligence.

    Dekalb County currently has too many cracks (gaping holes) in it’s foundation to pursue prestige. Addressing our schools, infrastructure, public safety, high incidents of graft and corruption should remain a priority. We should not be looking to add a luxury addition to Dekalb’s house until its’ foundation is shored up.

  5. saltycracker says:

    DeKalb residents should look forward to a property tax decrease thanks to new found Blank revenue. ⚽️? cough, oh this is to avoid a big tax increase and everything will be fixed, oh

  6. Progressive Dem says:

    Suppose the County asked the private sector for proposals? The County offers up 41 acres across from a Marta station, near I-285, and offers $7 million in site preparation. What kind of response would the County get? That’s what they are providing Blank, but they get no sales or property taxes or jobs. Beyond stupid.

  7. cmr says:

    In Case you missed it… Here is interim Dekalb CEO Lee May’s pitch published today:

    The text below is a direct cut and paste of the text from his email/press release.

    Major League Soccer gives DeKalb a “Kick”
    Project a Boost for Downtown DeKalb

    Total Investment in DeKalb:
    $30+ million in investment from Arthur Blank/Atlanta United FC
    150% Return on the County’s $12 million investment

    What DeKalb receives:
    The largest economic investment in Central DeKalb in decades
    123 high-wage jobs with 10% of new jobs targeted to DeKalb residents
    Atlanta United FC Corporate Headquarters
    The only professional soccer sportsplex in the region
    Phase 1: 3 soccer fields and a 3,500 seat stadium (4 fields total)
    Phase 2: Indoor training facility and at least 3 additional fields
    New office space for the DeKalb County Recreation, Parks and Cultural Affairs Department
    15% of revenues for naming rights
    Complete ownership of all developed property at the end of the lease
    An inevitable increase to area property values
    A catalyst for new development and tourism along Memorial Drive
    An increase in commercial activity will increase value in the Tax Allocation District (TAD) which already exists in this area

    DeKalb’s Investment:
    Access in the form of a lease for up to 41 acres of county-owned land
    $3 – $5 million for land demolition and preparation for the new development
    $2.33 million each year for three years to Atlanta United FC

    Additional Benefits:
    There is no property tax increase. The property is currently tax exempt and will remain so.
    The “break-even” point on the DeKalb contribution is surprisingly low. Using a high estimate of a $12 million contribution, DeKalb only needs to see an additional $96 million of new growth in property values over the life of the lease (approximately $3.2 million annually). This is equal to 450-500 new mid-sized houses over 30 years.
    Increased sales tax revenue: The current sales tax revenue in this area is almost zero. Any new commercial activity in this area will propel additional sales tax revenue primarily toward property relief for DeKalb homeowners, which includes any retail activity (ticket sales) due to the new stadium’s existence.
    With this new sports complex, DeKalb will be able to host select elite academy tournaments.
    With this new sports complex, DeKalb will be able to host other sporting events such as Lacrosse, 3v3 Soccer, Rugby, Field Hockey, Kickball and Ultimate Frisbee.
    The influx of activity will spur tourism to the area, which contributes to commercial and retail growth in the Memorial Drive Corridor.

    The Bottom Line: Atlanta United FC improves DeKalb County’s “Bottom Line”

    • cmr says:

      Fuzzy Math in Dekalb Soccer Complex From Lee May and One Dekalb (Part 1):

      Let us take a closer look at these numbers and overall investment:

      Per Mr. May’s Statement, Total Investment in DeKalb:
      $30+ million in investment from Arthur Blank/Atlanta United FC
      150% Return on the County’s $12 million investment

      -Not exactly Mr. May.
      If I follow YOUR MATH, you calculate that “OUR” $12 million dollar investment today, will result in a $30 million dollar return in the form of an asset reverting to Dekalb County in 30 years, or a 150% return over the course of 30 years.

      First, let’s see what 30 years looks like for other sports venues in the Atlanta area over the last few decades:
      -Fulton County Stadium built in 1966, was 30 years old when it was finally demolished following the 96 Summer Games in Atlanta.
      -The Georgia Dome built in 1991, a state of the art facility at the time, is slated for demolition by 2016, a 25 year life span.
      -Turner Field, constructed for the 1996 Olympics, will be vacated by the Atlanta Braves after only 20 years. One major concern is the estimated cost to maintain. “Turner Field requires $150 million in renovation costs merely for structural upkeep”.

      Secondly, lets understand how this really works in favor of Arthur Blank/Atlanta United FC: The land is “prepared”, demolition, water, sewer, power, basic infrastructure at zero cost to the “operator”. You approximate on “the high side” a cost of $5 million, funded by the tax payer for said preparation. (Please pay careful attention to who gets this contract and the actual final cost). The land, now improved, is leased to Arthur Blank/Atlanta United FC (the operator) for 30 years at zero cost. The operator pays zero property tax for the duration. So far you have $5 million in the deal, you still following me?

      Next, Arthur Blank/Atlanta United FC build a $30 million practice facility with corporate headquarters on said 41 acres of improved property. (I assume he would have to build it somewhere.)
      Here is where it gets even better for his organization: He has already acquired a tenant (Dekalb County Parks and Rec.) to rent out 6000 square feet of office space for $7 million dollars up front (paid in the first 3 years). For that kind of rent, it must be some pretty swanky office space.
      In addition, Dekalb County will be required to fund/ pay for any maintenance or capital improvements to this space for 30 years. So you now have $12 million in the deal, 5 million in actual property improvements, and 7 million dollars in rent, plus maintenance costs. For the record, rent is actually an expense, not an asset.

      At the end of the 30 year land lease the ownership of the asset (complex) reverts to Dekalb County. However until then, and this is the real beauty, Arthur Blank’s Club will get to capture the full depreciation on the structure he built. In 30 years, on paper the complex will be worth pennies on the dollar and in need of significant updating, a potential liability.

      Finally, let’s look at return on investment, using just the numbers you provided above.

      If Dekalb County instead invested $12 million into a well diversified index fund for 30 years, compounded at an annual rate of 7%, it would be worth $96 million dollars, or a return of 800% over that same period.

      If Arthur Blank/Atlanta United FC, collects the $7 million rent they receive after three years, and then invests it at the same rate for the remaining 27 years of the lease, it will be worth $43.5 million.

      No wonder they are referred to as “the operator” in the MOU.

      • cmr says:

        Fuzzy Math in Dekalb Soccer Complex From Lee May and One Dekalb (Part 2):

        What DeKalb receives:

        The largest economic investment in Central DeKalb in decades
        -Actually, the largest economic investment in this region has been Dekalb County Schools. How’s that working out?

        123 high-wage jobs with 10% of new jobs targeted to DeKalb residents
        -So a net of 12.3 jobs for Dekalb residents.

        Atlanta United FC Corporate Headquarters
        – Pure prestige.

        The only professional soccer sportsplex in the region
        – Not accurate. The Atlanta Silverbacks are located in Dekalb County and have a stadium that seats 5000. They also have additional playing fields.

        Phase 1: 3 soccer fields and a 3,500 seat stadium (4 fields total)

        Phase 2: Indoor training facility and at least 3 additional fields

        New office space for the DeKalb County Recreation, Parks and Cultural Affairs Department
        – Exactly who benefits from this? Rent of approx. $233k annually for 30 years, paid up front) for 6000 square feet of office space?

        15% of revenues for naming rights
        – Per the “MOU”, only for naming rights that are entered into by the operator and third parties that include monetary consideration. For example, Blank could name it Home Depot Field, and acquire naming rights for $1.

        Complete ownership of all developed property at the end of the lease
        – White Elephant.

        An inevitable increase to area property values
        – Inevitably

        A catalyst for new development and tourism along Memorial Drive
        -Much like Turner Field, spectators may come for the game, but they sure as hell aren’t gonna hang around.

        An increase in commercial activity will increase value in the Tax Allocation District (TAD) which already exists in this area.
        -I honestly don’t know what this means.

        DeKalb’s Investment:
        Access in the form of a lease for up to 41 acres of county-owned land
        $3 – $5 million for land demolition and preparation for the new development
        $2.33 million each year for three years to Atlanta United FC

        -This was covered in Fuzzy Math Part 1 (see above comment).

        Additional Benefits:
        There is no property tax increase. The property is currently tax exempt and will remain so.
        -This statement is completely useless, other than to include the phrase “no property tax increase”. Unless Mr. May wants to emphasize once again that no property tax will be collected on this proposed commercial business.

        The “break-even” point on the DeKalb contribution is surprisingly low. Using a high estimate of a $12 million contribution, DeKalb only needs to see an additional $96 million of new growth in property values over the life of the lease (approximately $3.2 million annually). This is equal to 450-500 new mid-sized houses over 30 years.
        -“Only $96 million” in additional private property investment yet to be made, in order for the tax payers to fund this from taxes yet to be collected.

        Increased sales tax revenue: The current sales tax revenue in this area is almost zero. Any new commercial activity in this area will propel additional sales tax revenue primarily toward property relief for DeKalb homeowners, which includes any retail activity (ticket sales) due to the new stadium’s existence.
        -This is a practice field, not the actual stadium where ticket sales might actually have an impact. Please stop presenting this as a windfall of revenue for Dekalb homeowners.

        With this new sports complex, DeKalb will be able to host select elite academy tournaments.
        -Has Dekalb ever sought out hosting these events at existing venues? Why not?

        With this new sports complex, DeKalb will be able to host other sporting events such as Lacrosse, 3v3 Soccer, Rugby, Field Hockey, Kickball and Ultimate Frisbee.
        -Rugby already has a home in Dekalb at the Silverbacks facility. But Kickball and Ultimate Frisbee, now I think your on to something.
        The influx of activity will spur tourism to the area, which contributes to commercial and retail growth in the Memorial Drive Corridor.
        – Look at the growth and tourism spurred by Turner Field with 88 home games and a stadium capacity of 55 thousand. Another “empowerment zone”. No one will be seeking out tourism on Memorial Drive.

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