Falcons’ Rookery Nearly Perfected?
Birds’ offense scores a $1.17 Billion Stadium for Free, GWCCA gets a Safety, Deal Hangs on a Thin Reed
By Al Gray
Dear Arthur Blank:
Contracts, commonly dismissed as mere tools, can become art forms. Under your Picasso-like direction, the Falcons’ negotiators of terms to build a new stadium with the Georgia World Congress Center (GWCCA) had delivered the workings of a masterpiece. The deal exhibited the key elements of the art form in carefully extracting more profits than the other parties would ever recognize without help. The agreement approached genius in getting the GWCCA to make it so lucrative. Now that plan has been punted over to Atlanta’s Mayor Kasim Reed by Georgia Governor Nathan Deal. Can you still pull this off? Absolutely!
The situation is perfect, too. The World Congress Center owns the existing Georgia Dome, where your Atlanta Falcons have contracted to play through 2017. With that lease expiring, the Congress Center and city are anxious about the future of their complex. Insuring that the Falcons stay downtown is of paramount importance to the politicians.
A key Citi presentation obtained by agraynation.com completes a trail of cost estimates and studies posted by GWCCA that show that the Falcons may have to pay $43 million or less for the $1.17 billion stadium.
Please forgive the brashness in barging into your team of artisans. This author was initially seeking to provide pro bono services to the Atlanta City Council and the State of Georgia, but multidisciplinary techniques grounded in documents can assess either side of a major transaction like this one. The evidence has been gathered and in this instance has shown how masterful the Falcons’ team has been in negotiations! Here is the scorecard on their effectiveness.
Hyperlinks appear in blue to the supporting documents.
|
Sources of Funds |
|
|
Description |
Amount |
|
Debt Funded by GWCCA Contribution of Hotel/Motel Tax & Seats Rights |
|
|
State/local Bond Proceeds from Hotel/Motel tax in Initial Years* |
$359,985,041.00 |
|
State/local Debt backed by GWCCA Seats Rights Contribution, primarily Private Seat Licenses. |
$150,000,000.00 |
|
State/local Funding from Leveraging Excess Hotel/Motel tax into Subordinated Debt (If not used for financing, as much as a nominal estimated $246 million is designated by the Term Sheet for stadium maintenance and future improvements) |
$178,271,016.90 |
|
Total GWCCA Contribution |
$688,256,057.90 |
|
|
|
|
State and City Funds |
|
|
$30,000,000.00 |
|
|
Land** |
$24,500,000.00 |
|
$53,000,000.00 |
|
|
Total State of Georgia and City of Atlanta Contributions |
$107,500,000.00 |
|
|
|
|
Enterprise Debt/Equity supported by Revenues Ceded by GWCCA |
|
|
New Debt backed by Stadium Naming Rights surrendered by GWCCA to Falcons, over the first 20 years reduced to present value |
$73,324,149.00 |
|
New Equity backed by Food and Beverage Rights donated by GWCCA to Falcons, over the first 20 years reduced to present value |
$55,579,705.00 |
|
Total Funds from GWCCA Contract Rights Ceded to Falcons |
$128,903,854.00 |
|
Public-sourced Funds Total |
$924,659,911.90 |
|
|
|
|
NFL G-4 Funds Program |
|
|
$100,000,000.00 |
|
|
$50,000,000.00 |
|
|
$50,000,000.00 |
|
|
Total Funds from NFL G-4 Program |
$200,000,000.00 |
|
|
|
|
Funds to be provided by Falcons out of current finances and operations |
|
|
Falcon’s Funding to meet Estimated Project and Financial Costs |
$43,017,265.10 |
|
Total Funds from Existing Falcons’ Operations |
$43,017,265.10 |
|
Private-sourced Funds Total |
$243,017,265.10 |
|
|
|
|
Total Sources of Funds |
$1,167,677,177.00 |
|
Uses of Funds |
|
|
Description |
Amount |
|
$1,032,000,000.00 |
|
|
$60,000,000.00 |
|
|
$53,000,000.00 |
|
|
Debt Service Retirement Account, Cost of Issuance, Underwriters' Fees* |
$22,677,177.00 |
|
|
|
|
Total Uses of Funds |
$1,167,677,177.00 |
*The total funds shown on the Citi presentation, $359,985,041.00, less Dome debt retirement of $60,000,000.00 and Debt costs of $22,677,177.00 ties to the $277,307,864.00 shown on the BSG Sept. 2012 report (cites the Citi report) containing the $1,032,000,000.00 total funding and cost figure.
** Land is not shown as a Use of Funds item, as it is included in the $1,032,000,000 project cost total.
Of course this is just one opinion, although one has to believe the negotiating team will find the documents most familiar. It can be imagined here that they would find some holes to shoot in this analysis, but there are more supporting arguments for it than can be recited here. It would be a boat-load of fun to participate in a city council meeting for a debate over the basic concepts.
On Wednesday February 20, the Falcons and GWCCA artisans of this transaction were heard before the Atlanta City Council saying that the football club was funding “$500 million to $700 million” of the new stadium project and that the public would be pitching in $200 million. That PR seemed to be working pretty well for enough of the Council to be willing to pass the new arrangements, whatever those may be. The Council seemed resigned that this is a “done deal.” Atlanta should get a better deal – to the tune of $250 to $400 million - but will it?
From this vantage point in the pine woods of east central Georgia, it looks like the Falcons are well on their way to getting $1.12 billion from the public and the NFL. All that is left is for your football club to come up with the other $43 million. Thanks to the lawyers and certain “options” in the Term Sheet, last minute funding “waterfall” diversions, and looseness of the scope between what the Falcons are providing and the public is furnishing, massaging at least another $43 million should be a cakewalk. Getting a $1.17 billion stadium for free should top anyone’s business career!
Getting this agreement, or a similar one, signed, sealed and delivered is job one. Once that is done, the Falcons Special Teams in Program Management can take to the field and shift another $100 million or more in costs over to Atlanta. Hire a savvy program director who knows how to play this game with the same gutsy aplomb which the Term Sheet negotiators used playing theirs. Winning coaches have winning strategies from start to finish. Winning projects do much the same.
After the stadium is built, more $hundreds of millions can flow from operations and costs shifts. Those opportunities are another article for another day.
Vigilance builds victory. The Falcons have been vigilant. Any owner would be proud.
-AG
The author is President of Cost Recovery Works, Inc. a firm focused on delivering superior returns for clients undertaking major projects including local governments searching for cost recovery in large construction, maintenance, entertainment venue, and other large contracted efforts. Clients and employers have included 9 Fortune 500 Companies, with 5 more served under subcontracts. Mr. Gray has been working on a pro bono basis for the Augusta, Georgia Commission since January 2012 in a comeback effort from early retirement, finding that stresses on local governments foster growing prospects for multidisciplinary cost recovery approaches. A foray into public policy is an opportunity to further multiple objectives, including public service.
Categories: Atlanta New Stadium Project, Cost Avoidance, Georgia Gold Dome, Public Policy
Tags: Atlanta New Stadium Atlanta Falcons Georgia World Congress Center Georgia Legislature Atlanta City Council Arthur Blank
Very interesting post. I will quibble with the forty three million dollar figure since one hundred a fifth million of the money from the NFL will ultimately come from the Falcons. Nevertheless, the amount paid for by the public is absolutely breathtaking. I can see why they want to shove this through as quickly as possible to prevent the public from knowing just how badly they're getting abused.
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I second your quibble. The point that if anything, other costs over time will be shifted to the public is well taken.
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The wording of that term sheet is pretty creative. This will be the subject of another post.
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I see that point. However, the public funding is going to be a lot higher. At one point Reed was saying that the infrastructure that the city would provide would cost $250 million but now the city says it can only assist to the tune of 5%.
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https://www.change.org/petitions/mayor-kasim-reed-and-the-atlanta-city-council-hold-a-referendum-on-public-financing-of-a-new-stadium-for-the-falcons
So far, over 1000 signatures!
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PSL revenue is not public funds and the Falcons are liable for the $200 million G4 loan.
Do you realize that you included the over $178 million for "future stadium maintenance and future improvements" in "Total Construction, Site and Land Costs" which isn't accurate at all.
You're being just as disingenuous as Blank and the others. I understand your agenda but you're killing your credibility with this stuff.
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This article limited the public infrastructure costs to the $53 million that Atlanta most recently said it could afford and not the $200 million or so that was discussed last fall. This article did not use the high case revenue growth scenario from the BSG report in 2011, which would have added in the $hundreds of millions to the revenue side, even though revenues are much higher. The report did not include that 3 different sources of bond information indicated $15 to $20 million more in bond premium than Citi did. The report did not use the $564 million high end bonding potential (from the earlier BSG report) . It used the Sept. 2012 report figures, including the site and construction costs from that report.
Hence, this article was based on the most recent GWCCA data and was based in GWCCA data.
Interestingly, there is little mention of responsibility for maintenance in the term sheet section entitled Maintenance, but the two maintenance and capital accounts in the funding waterfall provide funding out of hotel/motel tax of $178 million and that is $178 million that the Falcons would be paying if it was their stadium (and the lease makes it better than theirs).
Instead of putting the $hundreds of millions into future maintenance and capital accounts the term sheet language allows those monies into the funding stream for construction and perhaps even demand it. (term sheet directs maximization of the funding out of hotel motel tax.)
The PSL's will cover all premium seating,even for the 60% of attendance that was non-Falcon. The PSL's will cover seat rights that are clearly the public's/GWCCA'S at present. This author considers PSL's public funding on that basis.
The "agenda" is not to kill this stadium, but it is to get about $200 to $300 million more for the public if it is built, because $300 million only gets the public close to breaking even.
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First off I read the GWCCA, I understand exactly what's being discussed. Throwing the cost of "future stadium maintenance and future improvement" into "Total Construction, Site and Land Costs" is not accurate, your spin exposes your agenda.
Personal Seat Licenses (PSLs) are rights contracts purchased by fans for the right to buy season tickets. PSLs are not subject to revenue sharing and it's completely ridiculous to contend those are public funds. The revenue from PSLs is surrendered/donated by the Falcon to the GWCCA to avoid taxation. They are not public funds. BTW, they only cover Falcon seating and have nothing to do with premium seating.
It's clear your agenda is to fight against public funding for the stadium but no one can take your argument seriously when you don't even understand the basic concept of PSLs. There are plenty of real reasons to be against the deal, stick to the facts.
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The funds labeled "future stadium maintenance and future improvement" can be used either that way or, more likely, more borrowings, because the revenues are from the HM tax, which the term sheet clearly says is to be maximized for funding. The waterfall is specifically open to 'last dollars' and can be modified to assure that the HM tax is maximized. The $178 million was treated this way, with the potential for use in maintenance etc listed secondarily because of how the term sheet reads. In either case, the money is public money that has not been disclosed except for in this article.
As for whether the PSL's are public or not, the term sheet says this "StadCo will have exclusive rights to sell,
market, service and contract for (and retain all revenues from) club seats and suites for all StadCo Events, Georgia Dome Legacy Events and GWCCA Events." The last I checked only 40% of Dome attendance was Falcon games and prior to this deal the Falcons did not have the rights to the revenue to nonFalcon premium seats.
The "agenda" is to do one huge show and tell on this transaction, which is going to be rammed through come hell or high water. It would be nice to be part of getting another $250 million out of the Falcons, which is absolutely do-able. Even there, the Falcons come far out ahead!
Here there is 30 years of experience on big contracts and deals like this -with strategies and legal trapdoors like here - and there has ALWAYS been someone to give proper motivation. Thanks.
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