SPORTS AUTHORITY: Memphis Can’t Afford More Bad Public Deals
Local & National News | September 24, 2024
Local & National News | September 24, 2024
After a 20 yr. run of bad deals, even Councilor Chase Carlisle said that Memphis cannot afford any more bad deals. But local government keeps allowing bad public deals to occur. The Memphis/Shelby Sports Authority is a bad, publicly reckless deal, with an estimated $1.2 Billion in spending scheduled to occur downtown over 25 years. Much of the $1.2B comes from erroneously dedicated local government funding streams. This needs to be halted before it gets off the ground.
As a result of local legislative conformity, this reckless fiscally liberal deal is a product of the City Council, County Commission, Mayors and Shelby County State Legislative Delegation led by Senators Brent Taylor and Raumesh Akbari and Representatives Kevin Vaughan and Antonio Parkinson.
Have other cities done bad public arena deals? Sure, but they can afford them. Charlotte and Indianapolis are two examples of bad arena deals. Charlotte is the fastest growing City in the Southeast and Indy, having spent time there, is clean, with adequate public transportation, well maintained public schools and community colleges with progressive programming.
Chaired by Alan Crone and most alarming, the Sports Authority is operating in secrecy much like Crone's Riverfront Task Force that launched the failed Memphis River Parks Partnership (MRPP). The public now knows that MRPP was a public rip. In fact, all this public economic development stuff, going back years, can be shown to be a public rip while actually killing the City.
An indicator of a vitally dead city is the lack of public debate regarding the Sports Authority and this massive public spend associated with FedEx Forum renovations. Get this, not even a column in the mainstream media has been published about concerns over Sports Authority scheduled spend and erroneously dedicated funding sources. The Memphis public really does know that none of this stuff is about economic growth but instead about elitists ripping the taxpayer. In Memphis, the elitists have killed their and any city's most valuable asset, its vitality.
If Memphis is ever to be brought back to life, another bad public deal is just not in the cards. No way. After a survey of Sports Arenas using Wikipedia, it can be concluded that public-private participation in arena construction and operations is about 50/50. One will find 100% private deals and 100% public deals. But most are some mix of facility revenue and cost sharing. Many professional sports partnershiips involve owership based in and committed to their individual cities.
Like other smaller markets, Memphis cannot afford an uncommitted owner. And then again, as with Memphis public-private partnerships generally, the Sports Authority involves local elitist interests gernerationally ripping the taxpayer. The Sports Authority is a bad deal for Memphis.
The above table was updated from the previous blog inputting 2% escalators where appropriate for inflation and/or growth, consistent with Sports Authority public documentation. This resulted in $1.2B in projected Sports Authority downtown public spend, over 25 yrs. and a bad public deal, that Memphis cannot afford, even if it means losing the Grizzlies.
For example, in a bad deal, Charlotte paid 100% for construction of Spectrum Arena but with no operational subsidies. In another bad deal, Indy paid both for Gainbridge Arena, with a relatively small $65M contribution from the Pacers, and operational subsidies. Both cities can absorb a bad deal, unlike Memphis.
Agreed to in 2019, Indy is on the hook for construction, maintenance, and operational subsidies for $800M over 25 yrs. No way the Pacers even begin to approach $800M in marginal tax revenue over 25 yrs.
On the other hand, in a City that cannot afford a bad deal like Charlotte or Indy, the Memphis Sports authority is set to spend $1.2 Billion over 25 yrs. Remember, an economic impact study has not been published for the Grizzlies. Given the absence of such a study, the estimate of marginal taxes from the Grizzlies is $5M per year or $125M over 25 yrs. and nowhere close to $1.2B.
Of all cities in the United States, Memphis cannot afford to get into arena wars. Can Memphis afford a nice facility with the help of a $230M grant from the state and recurring NBA tax and seating fees? Absolutely! The likely result would be not the best but one of the best NBA arenas in the country with a total constructed estimated value of approximately $650M. After all, land and site acquisitions in many of these larger cities are much more expensive than Memphis, driving up costs making $650M in Memphis much larger on a national scale. See NBA arenas in Check the Facts.
In addition to FedEx Forum renovation and maintenance, no way can Memphis and Shelby County afford surrendering an additional $30M in recurring annual local tax revenue from traditional local governtment revenue streams, with already high local taxes and massive local transit and infrastructure needs. That is $30M more for already excessive downtown spending that, along with excessive corporate incentives, have crippled and killed the City of Memphis. No way Memphis/Shelby can afford the former. Something must be done.
Again, the Sports Authority is following the same trek of secrecy that Crone’s Riverfront Task Force followed where we have a complete MRPP public failure on our hands. Heck, going to secrecy, one cannot even get a complete roster of Sports Authority Board members unless they compile it themselves. Local government has yet to publish a complete roster. The one above has been compiled and the Sports Authority is another corporate board.
Other information on the Sports Authority, to include a complete 25yr projected spend, is on the site of the Taxpayer Justice Institute (TJI) and can be accessed in Check the Facts. Any questions, concerns or corrections regarding the data published on TJI, should be emailed to me. My email is available on the site, and I would like to get this right for all. But no doubt the current trek of the Sports Authority is wholly reckless and must be stopped.
It’s really sad that once elitists get a loan, PILOT, or tax funding source, after promising public windfalls at the end of a public subsidy, the subsidy never ends, returns to the general fund and materializes for community betterment. Or its significantly delayed into the distant future with no material benefit to taxpayers as tax rates climb. Examples include PILOT extensions, renewed PILOTs on the same property, loans with 50yr terms or loans where no payments of interest or principal are made over the 30-yr course of a low interest loan as is the case with DMC's Peabody garage loan. All the former drive local taxes higher and higher.
After the massive public ripoff and outright failure of downtown development projects such as Tom Lee Park, Cobblestones, Beale Street Landing and Mud Island, along with the unneeded construction of the $40M Downtown Mobility Center, only the small few are benefitting, while the local ecosystem declines, and local taxes go higher. Additionally, there are numerous other PILOTs and cash that have been granted to downtown District 8 for development and none of this has worked for community betterment.
The solution is for the Sports Authority to administer FedEx Forum improvements with $230M in cash from the State and with annually $10M recurring NBA Sales tax and seat fees. Accruing to the local government general funds are the MLGW PILOT, Car Rental and Hotel and Motel Taxes for Memphis and Shelby County betterment for all and not just for the small few downtown.
