Jim Pehrson, Cobb’s finance director, said after an appeals period ends in about two weeks, officials will begin the process of issuing bonds to fund the new home of the Atlanta Braves.
“I’m anticipating it to be somewhere in the $380 (million range) — mid-$380, high $380 — but we just don’t know what the interest rates will be when we get to market. But $368 million will be put into the project,” he said.
Tim Lee, chairman of the Cobb Board of Commissioners, agreed with the estimate, and said decreasing interest rates is the reason the amount of the bonds keeps going down.
“When we passed the resolution, we passed that we could borrow up to $400 million just to protect ourselves because of the costs associated with issuing the money and the interest costs associated with it,” he said. “So it really is lower than what we initially thought it would be.”
To help the Atlanta Braves build a new $672 million stadium in Cobb County, officials plan on using five sources of revenue: 0.33 mills worth of property taxes from around the county; property taxes generated from a specially created district near the stadium’s proposed location; funds generated from a $3 per night fee on hotel rooms within the Cumberland Community Improvement District; excess funds from the county’s 8 percent hotel/motel tax; and a 3 percent tax on rental cars.
Pehrson said although the county has identified these revenue sources to help finance the stadium, it is not contractually obligated to use them.
“We have not specifically identified any revenues (that are) backed by our pledge. But we are looking at those revenues specifically, even though they’re not identified in the agreements.”
Lee said if one of the revenue sources is not used, funds would have to be taken from the county’s general fund to make up the difference.
Cobb County will generate about $17.9 million each year and a total of $537 million from these revenue sources over the course of the 30-year deal with the Braves.
Issuing the bonds
Financing the stadium, however, begins with a bond issuance.
The Cobb-Marietta Coliseum and Exhibit Hall Authority, which will own the stadium, could issue the bonds within the next few months, according to Pehrson.
Before the bonds can be officially issued, however, they must be validated. Superior Court Judge Robert Leonard validated the bond issuance July 25, but the authority must wait one month to allow for an appeal to be filed.
“The timeline on the bonding process — we’re still waiting on the validation to see if there’s going to be an appeal. And that appeal time expires August 25,” Pehrson said. “And if there is an appeal, then we have to go through some additional court, which will push the process out.”
If there is no appeal — or if an appeal is filed and fails — the authority will begin the bond issuance.
“Once they’ve been officially validated, then we will begin the bond process, which will take about 45 to 60 days,” Pehrson said. “And (in) that process, we will competitively bid an underwriter, who will buy the bonds and market them.”
Pehrson said the underwriter will purchase the total amount of the bonds, then sell the bonds to investors. These investors purchase the bonds on the understanding they will be paid back their initial investment plus interest accrued over the course of the 30-year bond period, he added.
Anyone with $5,000 — the likely increment of the bonds — can purchase the bond from the underwriter, Pehrson said.
After the county receives the funds from the underwriter, the funds will be deposited with the county’s trustee, U.S. Bank.
“U.S. Bank will hold the moneys — $368 million. They will invest it according to conservative state guidelines, per Georgia law,” Pehrson said.
The trustee will have an account for the bond proceeds and one for the Atlanta Braves, he said. When invoices for construction costs come in, Pehrson said, the trustee will use agreed-upon guidelines to determine what percentage of the bill will be paid from each account.
Repaying the new debt after paying off the old
Once the bonds are issued and sold, they have to be repaid over the course of 30 years. Based on current estimates, the county will need to pay $24 million each year, Pehrson said.
According to the development agreements between the county and the Braves, the ballclub will pay $6.1 million, or about 25 percent, to service the bond, no matter what the yearly debt payment might be.
“That, plus the additional $17.9 (million) … makes up the $24 million. If it’s $22 million, our portion comes down. The Braves’ portion remains constant,” Pehrson said. “So, we would make up the difference to whatever that annual debt service amount is.”
The first three years of the debt service are unlike the other 27. First, as part of the terms of the development agreement, the Braves do not begin making their $6.1 million contribution until 2017. Commissioner Bob Ott, who represents the area where the new Braves stadium will be built, said the Braves will be contributing funds to the stadium’s construction during that time, just not to the debt service.
“The Braves are paying a ton of money right now. All the work that’s being done out there is being done by the Braves,” he said.
Second, one of the main revenue sources — 0.33 mills worth of property taxes, expected to collect $8.67 million— will not be available until 2017.
In addition to the 7.32 mills the county collects in property taxes next year, it will also collect 0.33 mills to service a different set of bonds, which were used to buy parkland.
Pehrson explained what the county plans to do once the bonds have been repaid.
“Those (bonds) expire (in) 2017, and there’s one last payment on the 2008 park bond, which is Jan. 1, 2018. There’s currently 0.33 mills in the debt service fund. Once those are paid off, we will reduce the millage in the debt service fund by 0.33 mills, so that goes down to zero,” he said. “We will simultaneously increase the millage in the general fund by 0.33 mills, and those would be general revenues of the county. And … the revenue from those 0.33 mills would be dedicated toward the payment of the bonds.”
Ott said Lee has told him he will lower this millage rate to zero as revenue from the other four revenue streams increases and after public safety concerns in the area are addressed. By doing so, the average taxpayer in Cobb County will not be contributing to the debt service.
The chairman is supposed to provide a resolution stating this arrangement, but has not done so yet, Ott said.
Lee said the resolution will come before the end of the year, but he doesn’t have a specific timeline on bringing it before the board.
Ott said although property tax bills through the county will stay constant after the park bonds are paid off, taxes are, in fact, increasing.
“Technically, they are going up because (the bond fund) was going to go down regardless. But that’s why I came in and said it is my firm belief that the taxpayers of the county should … be taken care of first.”
Other funding sources
The second of the revenue streams the county plans to use to finance the bond will come from property taxes in a newly created tax district.
“The county has created a special district, which overlays the Cumberland (Community Improvement District) and is called the Cumberland Special Service District II. And … in that district, all the residential properties have been carved out. And that will be taxed at a millage rate so that $5.15 million is generated. Currently, this year, that millage rate would be 2.7 mills,” Pehrson said.
Lee originally thought the district would be taxed at 3 mills, but a $222 million increase in the digest from 2013 to 2014 in the district allowed commissioners to lower the rate to 2.7 mills, which was approved at their meeting on July 22.
The third revenue source comes from another specially created district, Pehrson said.
“We’ve also, within the CID created another district for the collection of hotel-per-night room fees of $3 per night. And that’s expected to generate … $2.74 (million), and that will also be dedicated to the … county’s contribution to the (Exhibit Hall Authority) for the payment of the bonds,” he said.
The $2.74 million figure is based on current occupancy rates in the area, Pehrson added. Because the stadium’s opening will likely increase the occupancy rates at nearby hotels, the $3 fee could generate a much larger amount of revenue.
“On the hotel rooms, it’s very likely that the excess here will go toward the operating cost of the commuter service within the CID that they’re talking about,” Pehrson said. “So we keep that at the $2.74 million and the excess will be dedicated, most likely, toward … the commuter line.”
Lee said the possible commuter service is still being studied, but in general it will follow a set route around the Cumberland area to bring people to and from the ballpark.
The fourth revenue source will also come from hotels, but in the form of the county’s existing 8 percent hotel/motel tax, Pehrson said.
Revenue from the 8 percent tax is split toward servicing two other bonds, with the excess going to the county. According to Pehrson, 62.5 percent of the revenue goes to the Exhibit Hall Authority so it can service its own bonds.
The remaining 37.5 percent goes to the county, but before it can be used to finance the stadium bonds, the county must service yet another bond issuance, this one for the Cobb Energy Performing Arts Centre.
“Our first priority with that 37.5 percent is the (Cobb Performing Arts Centre) bond,” Pehrson said. “And then, the excess after that will be dedicated toward the (stadium) bonds.
“Every year, the board makes the decision on where those (excesses) go. They have to be spent on travel (and) tourism. But it’s certainly right now anticipated that these moneys, after the performing arts center debt, will go to the debt service,” he added.
After those debt payments have been made, projections show the county should have about $940,000 each year to contribute to the stadium bonds, Pehrson said.
The final source of revenue will come from a 3 percent tax on rental cars in the county, which is set to generate about $400,000 each year, Pehrson said.
After the 0.33 mills in the general fund is reduced, Ott said, the other revenue sources will all come from sources which will directly benefit from the stadium’s opening.
“The whole rest of the money package, except for the 0.33 mills, is all related to business and tourism. And they’re the ones that are going to benefit from any increased commerce from the mixed-use and stadium complex. And the reality is that lots of studies show that stadiums do not produce economic development. But, you have a $400 million mixed-use development that will.”