Disputed Columbia baseball stadium contract under scrutiny: a Q&A
03/16/2014 8:58 PM
03/16/2014 9:30 PM
The crackle of debate over public funding of a $35 million year-round stadium in Columbia has critics crying foul over excessive risk for taxpayers while equally ardent backers look beyond the fences toward a venue that might revitalize the city center.
City Council could cast its final vote as early as April 1 on a $29 million loan that would be repaid over 30 years using hospitality taxes charged for prepared meals and beverages in the city. The financing plan and a contract with a minor league baseball team owner passed their first test by a one-vote margin March 4, despite pleas for a delay from some residents and a council minority.
The tentative contract calls for Hardball Capital to put up $6 million for construction. Hardball and its owner, Jason Freier of Atlanta, would bring a minor-league team to town and run the city-owned stadium.
City Hall leaders are using the weeks between votes to answer detractors and possibly strengthen the deal with Freier.
Here are some of the key issues in the draft contract that have fueled the battle over baseball:
QUESTION: How much risk are residents taking if taxes collected from restaurant and bar patrons are used to pays for the city’s 76 percent portion of construction costs?
ANSWER: City-hired consultants who performed the feasibility study said it’s common practice that stadiums are constructed using mostly public funds. The average public investment among the 19 minor-league ballparks built in the U.S. since 1996 is 83 percent, compared with 17 percent private money, the Brailsford & Dunlavey consulting firm said.
The city manager is looking for a consultant to run a cost/benefit analysis that would include associated expenses, such as street maintenance, fire and police, trash pickup and other city services related to the stadium, which would host baseball, concerts and other community events. That study would help determine the real cost of the project.
Critics say the benefits of a stadium have been trumpeted, but it makes no sense for council to risk so much public money until it has such an analysis providing clear answers on costs. They dispute figures cited in a Chamber of Commerce-funded economic impact study as well as those in a baseball feasibility study the city paid for.
The search for a cost/benefit analysis consultant has been eased by a recent commitment from Hughes Development Corp. to release more details about its construction plans for the surrounding Bull Street neighborhood, said assistant city manager Missy Gentry. She is the city’s liaison to the company, which is seeking to build a huge mixed-use neighborhood around the stadium. Gentry also is a key negotiator for the city with Hardball Capital.
City manager Teresa Wilson earlier this month said developer Bob Hughes had not released specifics on the square footage of residential, retail or commercial development or the timing for his construction plans. A consultant would need that information to make accurate calculations about city expenses for providing different services for those properties on varying construction timetables.
As of Friday, Wilson had not yet selected a consultant, Gentry said. A cost/benefit study would take roughly one to two months, Gentry said. City officials plan to continue those studies as the Bull Street project is built, she said.
QUESTION: Can any money Hardball puts into maintenance or other long-term accounts to keep the ballpark up to date as the years go by be converted to pay down the debt – even if the annual income is sufficient to fully fund maintenance accounts?
The current contract states specifically that no money from those accounts may be used to offset taxpayers’ debt.
Columbia’s chief financial officer, Jeff Palen, said the city could face higher interests on the $29 million loan if private money goes toward paying off the debt.
Under Internal Revenue Service rules, “If we use those revenues for debt service, it could make it a taxable bond, which means the interest rate would be higher,” Palen said.
He estimates the city’s interest rate might rise 1 percent to 1.5 percent, which could translate to an additional $300,000 annually in interest payments.
The actual impact on the loan if income from the stadium is used toward construction debt would be clearer once the city would learn the terms of hospitality tax loan, Palen said.
QUESTION: So how much total money is Hardball Capital putting up for the stadium?
ANSWER: The Atlanta-based company is investing $6 million to help build the ballpark. The draft contract says Hardball could meet that commitment through city-approved equipment purchases. The draft contract uses a $2 million scoreboard as an example of one way Hardball could begin to reach the $6 million figure.
In addition, Hardball has pledged to make up any difference should the city not generate enough income from the stadium to keep the maintenance and improvement fund at a $250,000 yearly minimum. That pledge extends for the 30-year life of the contract. The fund would be used only for major improvements, not routine maintenance, Gentry said. Hardball would be responsible for routine maintenance.
But the language in the maintenance pledge could increase the company’s commitment to the fund.
For example, if income from a corporate sponsor wishing to put its name on the ballpark reaches certain thresholds, the size of the maintenance fund would grow, Gentry said. That means Hardball’s pledge to help meet the annual minimum also would grow, she said.
Say that naming rights bring in $400,000 but less than $500,000. The maintenance fund then would have a $300,000 annual minimum, Gentry said. Should selling the name bring in more than $500,000, the annual minimum would increase to $350,000.
The effect of higher benchmarks is that Hardball’s contribution would rise yearly if city income does not meet the benchmarks, she said.
“That is intended to make sure there never comes a time that naming rights alone fulfills (Hardball’s) obligation,” she said of the fund. The city wants to tie the fund to high attendance at stadium events as an on-going source of income.
Beyond those commitments, Hardball pledges to contribute up to $516,000 annually if residential, retail or commercial development around the stadium’s 10- to 12-acre site does not reach at least $30 million. That ties the company to the success of the rest of the proposed Bull Street neighborhood, Gentry said.
Hardball’s pledge shrinks at differing benchmarks as the Bull Street property is built. It would be $258,000 yearly if construction reaches $30 million to $45 million; $129,000 annually if construction reaches $45 million to $60 million.
Once development in the neighborhood reaches $60 million, Hardball is freed of that pledge, she said.
Bull Street developer Hughes has said publicly that a company wants to convert the historic Babcock Building into a hotel – contingent upon the ballpark being constructed. That likely would satisfy much of the $60 million benchmark.
Altogether, Hardball could be contracted to contribute up to $744,000 annually to offset shortfalls in city revenues from the ballpark, Palen said.
Critics call this a sweetheart arrangement for Hardball. They say the pledges to back up the accounts are largely empty because revenue from the ballpark is expected to reach the $250,000 ballpark and $60 million in surrounding construction thresholds quickly.
QUESTION: What is Hardball getting in return for raising its construction investment from the initial $5.5 million to $6 million?
ANSWER: The tentative contract could grant the company free use of almost 40 percent of the parking spaces in one of the two 800-space, city-built garages for any Hardball’s events at the stadium, Gentry said. The reserved 300 spaces would be used by Hardball for its VIP guests.
“He was willing to go up a half-million dollars, but he wanted to recoup that amount over time,” Gentry said. “This is how we worked it out. He’s taking a risk that we may never build the garage in a location that would be feasible for him.”
She estimates it will take the city years for the free parking to reach the $500,000 extra investment before Hardball guests must begin paying the city to park in those assigned spaces.
QUESTION: Will the stadium or the land it sits upon produce tax revenue?
ANSWER: No. Columbia will own the stadium and its surrounding 10- to 12-acre plaza. That means neither will pay property taxes. The city will generate income, however, from business license fees that Hardball Capital would pay.
Columbia’s proposed plan is unlike Greenville’s, where the city generates about $330,000 annually from the privately built stadium and the adjoining mixed-use development.
QUESTION: Why does the tentative contract, which would tie the size of Hardball Capital’s financial commitment to the first $60 million of investment around the stadium, not specify the investment must be taxable property?
ANSWER: The language in the contract will be changed to reflect that the $60 million must be on the tax rolls and generate property taxes, Gentry said. The change will be made before council casts its final vote, she said.
QUESTION: What is the city’s share of income from ballpark operations?
ANSWER: All the tickets sales and half of the rest of the revenue from any city-sponsored events. But the money must go into the stadium maintenance fund – not into city coffers.
If attendance for any event exceeds 275,000 per year, the city would receive $1 for every ticket sold. That money also would be deposited into the maintenance fund.
The city receives nothing if attendance does not reach the 275,000 annual benchmark.
Hardball keeps all advertising and broadcast rights to its own events.
QUESTION: Is Hardball or the city responsible for providing services outside the ballpark but within the stadium plaza?
ANSWER: Hardball will be responsible for all costs related to the stadium site, including the plaza, Gentry said. The city is responsible for everything else. Hardball will reimburse the city for traffic control expenses at Hardball events, she said.
QUESTION: What will the Bull Street ballpark look like?
ANSWER: Neither Hardball nor the city has released design details of the stadium. Hardball owner Freier has said the Columbia facility will be similar to the one he runs for the city of Fort Wayne, Ind., but with an entrance fashioned after Columbia’s brick City Hall during the early 1900s when it shared space with an opera house at Main and Gervais streets.
Gentry, who is working closely with Freier, said, “It will impress people every bit as much as Carolina Stadium (home of the two-time national championship University of South Carolina team).
“And that’s coming from a devoted USC alumna.”
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