Commissioners originally said the county will issue $368 million in bonds to pay for the $672 million stadium.
But to obtain the $368 million needed for the project, the county is building in a $29 million cushion to allow for flexibility, said county finance director Jim Pehrson.
Flexibility is needed, he said, because if the county exceeds the maximum cost listed in the bond resolution, the bond process must be reset.
The $29 million breaks down into three parts.
The first is $20.4 million set aside for capitalized interest. Interest may be funded out of pocket or borrowed during the construction period. When it’s borrowed, it’s called capitalized interest. The county needs to borrow about 15 months of capitalized interest to get to 2017, when all the needed revenue streams kick in to start making the required $24 million a year debt service payments on the bonds, Pehrson said.
The second part is a $4.7 million earmark for the cost of issuance covering such expenses as legal fees, the financial adviser, rating agencies and the underwriter.
A $3.6 million sum, the third part, is included if the bonds are bid
or purchased below par by a broker dealer.
The amount totals $28.7 million, which added to the $368 million needed for the project, totals $396.7 million.
Pehrson said the county rounded the number to $397 million for its “not to exceed” number to be included in Tuesday’s bond resolution.
When the county issued a fact sheet last November for how it intended to finance the stadium, it said the Braves would pay for $372 million and the county $300 million, along with $35 million for capital maintenance costs over the 30-year life of the deal.
“That’s a number we stand behind,” Pehrson said.
The $300 million cap assumes a total annual debt payment of $24 million, with the county paying $17.9 million and the Braves paying $6.1 million.
Based on current market conditions, the annual debt service would be about $22 million per year were the county to issue the bonds now. But if someone challenges the bond validation process in court, it could set the process back until next year, when interest rates may rise, Pehrson said.
“If an intervention is filed and it goes to the court system, it could be spring of next year, or even summer before the bonds could actually get issued and go to market, so what are the interest rates going to do?” he said. “We have no idea. So our financial adviser put in an interest rate that we think would be the tops of what we would anticipate, 7 percent.”
Commissioner Bob Ott, who represents the Cumberland area where the stadium will be built, said it’s all part of the bond process.
“This is not $29 million extra to build the stadium. It’s not increasing the county’s contribution beyond the $300 million. This is purely a result of how bond markets work with capitalized interest and interest payments,” Ott said.
Pehrson compared the financing to the $200 million in public bonds being used to build the stadium for the Falcons.
“The Falcons’ $200 million project, they did a not-to-exceed $278 million that was 30-some percent greater than their project cost,” he said. “We’re only 8 percent greater than our project cost, but you have to go into this with flexibility for changes in market conditions — for the unknown of what the investors want — whether it’s going to be premium bonds or discount bonds or par bonds. They’re a lot of market-driven factors that can change what the issuance is going to be required to do a $368 million project funded with bonds.”