The city and county may borrow another $32 million for a new stadium
Officials are considering a big loan, on top of $80 million in bonds, to pay for the Lookouts' next ballpark. Here's the payment plan.
By William Newlin
Where we are now
Price estimates for the Lookouts stadium have increased by tens of millions of dollars due to inflation and rising construction costs, planners say. Now, the city and county are deciding whether to borrow an additional $32 million to cover extra costs.
The $32 million would come as a private loan from the Lookouts ownership and the developers of the Wheland Foundry site to the city and county sports authority, which was created to finance and construct the stadium.
Both Chattanooga City Council and the Hamilton County Commission plan to decide on the measure at their meetings next week after delaying the vote earlier this month.
How we got here
Eighteen months ago, the city and county approved the sports authority to issue $80 million in bonds to help pay for the stadium. The sports authority is responsible for paying off the debt incurred to raise stadium funds, which it will do in part using a 30-year Tax Increment Financing (TIF) agreement.
At the Jan. 30 City Council meeting, Mayor Tim Kelly was confident in the proposal for the sports authority to borrow an additional $32 million, saying he's staking his “office and reputation” on the stadium project.
Officials say the ballpark will spur more than $1 billion in economic development in the South Broad area over the life of the TIF.
Quick refresh — how does a TIF work?
A TIF relies on new public infrastructure to encourage private development in blighted or unused areas. Under Tennessee law, local governments can use a TIF to fund certain public facilities.
The idea is that development in the TIF District will make property values, and property taxes, go up. Any increased tax revenues would go toward paying off the up-front costs (such as borrowed funds) rather than going toward government's general funds. There is an exception for the South Broad TIF District — Hamilton County Schools will still get its regular portion of county taxes.
See the video above for a more in-depth TIF explainer.
Payment plan: bond takes priority
The sports authority will use incremental property tax revenue from the district to make its annual payments on both the $80 million bond release and the $32 million dollar loan. However, the bond payment takes priority.
If the tax increment generated in the district is higher than what's needed for the bond payments, then the sports authority will use the additional revenue to start paying back the loan. If the TIF is unsuccessful, the developer and the Lookouts will not be reimbursed for their loan, and the city and county would not be liable for the debt.
“So they are highly incentivized to fully develop the Wheland Foundry site,” said Mark Mamantov, bond counsel for the City of Chattanooga and the sports authority at the Jan. 30 City Council meeting.
A recent estimate showed that development in the TIF District around the stadium site would need to reach $500 to $550 million for the sports authority to be able to make its annual payments on the $80 million bond release. Bond debt payments will start coming due in about two years.
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