From the Chattanooga Times Free Press: Knoxville and Knox County officials say construction of a minor league baseball stadium for the Tennessee Smokies has seen its anticipated cost increase by $14 million, raising questions about what kind of price hike Chattanooga might expect for a new Lookouts stadium.
Knox County Chief Financial Officer Chris Caldwell said in a phone call Tuesday that the guaranteed maximum price for the Knoxville project is now $114 million, up from $100 million in spring 2022. He believes most of that jump comes from the effects of inflation on the cost of construction materials.
Tennessee Smokies owner Randy Boyd has committed to cover the difference, Caldwell said, meaning there won’t be additional impact to taxpayers.
Chattanooga Mayor Tim Kelly and Hamilton County Mayor Weston Wamp had differing outlooks Tuesday on what the increase for the Knoxville stadium means for a proposed stadium in Chattanooga’s South Broad District. In an interview, Wamp said he has serious concerns.
“Because all signs point to a stadium here going tens of millions of dollars over budget just like the one in Knoxville is, and we don’t have a champion like Randy Boyd who will cover the overages,” he said. “Knoxville is maintaining that the cost to taxpayers is the same.”
Wamp, who took office after the project was approved, added that there hasn’t been any private money provided up front for the project in Chattanooga.
“I think that’s the most problematic part of the deal,” he said. “We have always had a similar stadium project underway 100 miles up the interstate that has … significant state funding and significant private backing, and it has allowed them to cushion the overages.”
Wamp’s deputy mayor of education and workforce development, Cory Gearrin, said in the same interview that the special tax district drawn around the site will likely cover the cost of the Lookouts stadium, but any additional dollars set aside for overages are still taxpayer funds that could fund other initiatives.
“They’re tax dollars that instead of building schools and funding ambulances and doing the work — the necessary work of government — that would be funding the stadium,” Wamp stated. “That’s another reason why the news out of Knoxville is reason for pause and reflection.”
Wamp has been critical of the project since before he took office. Kelly has been a proponent.
“I’ve had years of experience in development myself and private business,” Kelly said in an interview Tuesday. “As I said back at the beginning of the project, I’ve seen a lot of dicey projects. This is not one of them. This is very exciting and still penciled very conservatively. … I understand there’s skeptics and naysayers, but I’m personally very confident in the success of the project.”
Kelly said there are major differences between the two projects.
“It’ll be a nice development for Knoxville, but in Chattanooga, it’s going to be a transformative development,” he said. “We don’t talk about this enough: It’s a brownfield currently. It is a blighted industrial wasteland that’s currently producing little or no tax revenue that is an eyesore for the entire city coming into the area from the west.”
The project in Knoxville is moving forward at a quicker clip than the one in Chattanooga, he stated, meaning it’s not operating in the same construction environment. The Federal Reserve is hard at work, the mayor said, trying to get inflation under control.
“Anybody knows that if you quote a dog house right now it’ll scare you to death in terms of what it will cost,” he said. “So, look, inflation is a bear. They’re trying to get that under control.”
It’s hard to say whether the $79.5 million figure is still accurate, he said.
“It’s not possible to know until you actually let the contracts … and it’s way to soon to do that,” Kelly said. “We’re still in the design and engineering phase of the project. Again, we’re a full year behind Knoxville in terms of where this is.”
Knox County and the city of Knoxville will issue $65 million worth of bonds for the stadium, Caldwell said, part of which would be paid back through a lease agreement with Boyd Sports.
The state is providing a $13.5 million grant, and Boyd is also committing $33 million — $20 million of which would be paid back through new property tax revenue generated with a special tax district around the site. Officials expect to receive an additional $2.5 million of interest from the state grant and the bonds.
About 18-20 months ago, officials had estimated the stadium in Knoxville would cost about $80 million based on schematic designs of the project, Caldwell said, an amount that increased to $100 million once complete drawings were put out for pricing.
In Chattanooga, officials have said a joint sports authority created by Hamilton County and the city of Chattanooga would issue the $79.5 million worth of bonds needed to entirely fund construction of a new multiuse stadium for the Chattanooga Lookouts on the former U.S. Pipe/Wheland Foundry site on the Southside.
More than half of the debt issued for the Chattanooga project, 58%, would be paid back using new property tax revenue generated by private development around the stadium, and Kelly said officials are already seeing accelerated interest from developers hoping to complete projects in that vicinity.
As they were pitching the project, city and county officials estimated the multiuse stadium could spur upwards of $1 billion worth of development around the site.
“There was some anxiety about how much development can we count on,” Kelly said. “Well, I think it’s safe to say we’re going to blow the doors off the early estimates anyway. The percentage of that that we dedicate to the stadium, we want that to be as little as possible for the taxpayer’s interest. But if it weren’t for the stadium, there wouldn’t be the development.”
Kelly said officials have designed the project with the goal of ensuring new property tax revenue pays for as much of the stadium as possible and produces little risk for taxpayers.
“We are feeling increasingly comfortable that the project as a whole will comfortably foot the bill for the stadium,” Kelly said. “That being said, we are also trying to be as good of stewards as taxpayer dollars as possible and stick to our original commitment.”
The amount of contiguous land around the site in the South Broad District, which the mayor said totals more than 200 acres, is also vastly greater than that of the Knoxville project, Kelly said.
“That creates a hell of a lot more lift from the (special tax district),” Kelly said.
Another 22% of the Lookouts project loan would be covered by a $1 million annual lease payment during the next 30 years by the team, and the next largest portion, 12%, would come from state sales tax generated in the new stadium. The remaining cost would come from a combination of parking revenue from stadium events, local sales tax generated in the new stadium and $1.4 million apiece from the city and county.
Jason Freier, managing owner of the Chattanooga Lookouts minor league baseball club, said in a phone interview Tuesday that inflation will “very possibly” drive up the cost of the planned new multiuse South Broad ballpark.
But Freier said inflation also will increase the costs of private development around the stadium and boost the taxable value to Chattanooga and Hamilton County.
“Inflation cuts both ways,” he said. “That should balance that out.”
Freier said he didn’t have any new cost estimate for the proposed ballpark. Still, he said it’s been 18 months or so since the early cost estimates were proposed.
“There has been significant and unexpected inflation,” he said. “It turns out it wasn’t so transitory.”
Officials had said late last year that plans were to issue no more than $80 million in bonds for the proposed stadium that would replace AT&T Field near downtown’s riverfront. The number was arrived at based on pricing at that time and on similar ballparks under construction 18 or 20 months ago, Freier said.
Asked about the idea of value engineering, Freier said his company “always goes through that sort of process. You try to balance out the things you’d like to have.”
Freier’s company, Hardball Capital, also owns minor league clubs in Columbia, South Carolina, and Fort Wayne, Indiana, where new stadiums have been constructed.
He said once officials have a better sense of the South Broad development numbers, “we’ll absolutely work with partners to find a solution” to possible rising costs.
“We’re open to how we can be part of the solution,” Freier said. “If the numbers come back higher … we’ll figure out what else we can do.”
He said work on the design of the old U.S. Pipe/Wheland Foundry site is underway with the help of Jim Irwin, president of New City Properties of Atlanta, who was hired as the master developer of the foundry property.
“The entire site is being planned,” Freier said, adding that the ballpark can’t be priced until there’s a design.