The Falcons Rookery Project

Falcon’s Rookery Project

Originally posted March 7, 2012 at 12:05AM

by Al Gray

Over the last 2 years the Georgia World Congress Center Authority and the Atlanta Falcons Management have negotiated a Term Sheet for the construction and operations of a new stadium whereby the WWC relinquishes its 39.3% hotel motel tax funding stream, management of the stadium, and the Georgia Dome, which is to be demolished.

Agraynation.com saw this $1.2 billion transaction as an opportunity to kill 3 birds with one stone:

The first objective was Public Service for the City of Atlanta, who was handed this project after it grew too hot for the State Legislature to handle, in evaluating the Terms.

A second goal was demonstration of the Aurelius Principle employing a multidisciplinary approach which uses the other party to a transaction’s own documents to present a counterargument.

Evaluation of the Falcon’s Claim that the team was spending $700 million to the public’s $200 million.

This site compiled a restatement of the sources and uses of funds for the project after securing a key document that was missing from the GWCCA’s stadium development web page.

The detailed report, which features link to the source GWCCA documents and consultant reports was posted on the Agraynation.com site for inspection.

The Conclusion? The Falcons might spend nothing for the $1.2 billion stadium because the H/M tax stream, would exceed $1.2 billion over 35 years and could be borrowed against for as much as $650 million. (Key omission is out-year revenue stream, as alluded to by Atlanta Business Writer Maria Saporta and AJC columnist Tim Tucker.) Seats rights that GWCCA is giving up pitch in another $150 million to $200 million, and other revenues ceded by Atlanta and Georgia make up the rest.

Coming up –

In POINT BLANK, we take an irreverent look at the benefits to Falcon owner Arthur Blank’s net worth, followed by

A Well-Orchestrated Trick Play? – a look at how the GWCCA seems covered against an otherwise suicidal Term Sheet that they agreed to.

Legal Twigs in a Falcon Nest – a look at Term Sheet Trick Plays and ways to shift costs to the public

Finally – White Flag Negotiators Serve Whom?

Agraynation.com – A public service site brought to you by Cost Recovery Works.com, where the Aurelius Principle now serves clients, after 30 years in development and implementation at ever-higher levels of business and government.

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

February 25, 2013

 

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

 

Sales Tax Rebate on Construction Materials

$30,000,000.00

Land**

$24,500,000.00

Atlanta Infrastructure Costs

$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

 

Advance from NFL

$100,000,000.00

Grant from NFL

$50,000,000.00

NFL Loan

$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

Total Construction, Site and Land Costs*

$1,032,000,000.00

Retirement of Georgia Dome Debt*

$60,000,000.00

Atlanta Infrastructure Costs

$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

Originally posted February 25, 2012 at 10:40 PM

 

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.