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Philips Arena Funding May Be Key Issue in Mayoral Race

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Copyright 2016 The Atlanta Journal-Constitution

The Atlanta Journal-Constitution

 

While Atlanta won't choose a new mayor until next November, the plan to spend millions in taxpayer dollars to renovate Philips Arena is revealing early differences among those looking to succeed Kasim Reed.

The dust-up over Philips Arena is a sign the mayor's race is finally capturing political oxygen in the wake of last month's presidential election. Taxpayer funding of arenas is highly controversial, with most economic studies finding they are not wise uses of public dollars, yet the Hawks deal also would be the third major publicly financed pro sports arena project in the Atlanta area in the past few years.

Candidates Cathy Woolard and Vincent Fort have come out swinging against the proposal, calling it a giveaway to a billionaire. Councilwoman Keisha Lance Bottoms,

a key negotiator in the deal, is a hearty backer, while competitors including Atlanta City Council President Ceasar Mitchell, Councilwoman Mary Norwood and businessman Peter Aman, have been more sanguine.

Bottoms, who threw her hat in the ring to run for mayor just days before news of the Hawks deal broke, is also head of the Atlanta-Fulton Recreational Authority that owns Philips and will recuse herself from voting. But she said the project would be a boon to Atlanta's hospitality community.

"It's not just about sports," she said. "It's an arena that has a lot going on. It's about being a good steward of a city-owned asset."

By contrast, Fort said recently, "This is another instance where billionaires are making out like nobody's business and the citizens of the city are getting very little in return."

Candidate Peter Aman, Reed's one-time chief operating officer, said there are a lot of questions that still need to be answered before anyone can back or reject the plan and wonders if some are jumping the gun.

"I believe in problem solving not scoring political points," he said.

Michael Leo Owens, a political science professor at Emory University, said candidates are jockeying for position in a crowded field, with opponents casting themselves as "defenders of the public purse."

In the case of Woolard, a former City Council president, Owens said she also is re-introducing herself to the electorate.

"This remains one of the big cleavages: To what degree should municipal revenue be devoted to private activity?" Owens said.

Though many voters are outspoken in their distaste for public arena funding, Reed suffered no political consequences for making a deal with the Falcons, cruising to re-election against weak competition. Key members of the city's electorate are what Owens called "pro-growth" voters.

Reed agreed to spend $142.5 million upfront on the Philips overhaul, mostly from car rental taxes. The Hawks committed to$50 million and agreed to extend their lease by 18 years to 2046. After current arena debt is paid off, the team would pay $5.9 million per year in annual rent through the life of the lease, which includes a $200 million "break-up fee" to keep the franchise from leaving.

A lure for development

The deal, which essentially will extend current car rental taxes being collected for infrastructure improvements near Philips, must be authorized by the City Council. Reed's office said a long-form version of the agreement is currently being drafted, with final terms expected to be ready in early January. Discussions with council members are expected to begin soon.

Reed calls the deal a lure for potentially $1.5 billion in additional development around the stadium and the nearby Gulch, a series of parking lots and massive under-developed tracts that leaders have long sought to turnaround.

The mayor, who is nearing the end of his two terms in office, has specifically mentioned Hawks owner Tony Ressler's brother, Richard Ressler, and his company CIM Group, as a candidate to spur downtown development.

Five Atlanta City Council members--Bottoms, Michael Julian Bond, potential mayoral candidate Kwanza Hall, Carla Smith and Ivory Young -- attended the Hawks announcement, a sign the deal has some support.

While others have hedged, Bottoms enthusiastically backs the plan, acknowledging that Philips' health is an important part of her day job. As a candidate, however, she said the city needs to avoid the loss of another sports team.

She said the upgrade also helps Philips stay competitive in attracting concerts and other events, lucrative business for city coffers and downtown restaurants, hotels and cab drivers.

Former council president Woolard denounced the public spending on sports teams during a press conference held outside Philips last month and called for vigorous debate on the proposal.

The Falcons project received $200 million in upfront financing backed by hotel-motel taxes, but when capital improvements and financing costs are factored in over time, the public portion could rise to $700 million. With the Hawks deal, long-term costs for both stadiums could approach $1 billion over the next three decades, Woolard said.

Attracting a Super Bowl and college sports championships, she said, isn't enough of a return on the public's investment.

"As a city we are assuming all of the risk for these investments and we are getting none of the revenue that comes as a result of that," she said. "I think that formula needs to be disrupted pretty tremendously."

Reed's office has pushed back on the criticism, assailing Woolard as "desparate" to gain traction for her campaign.

Norwood, who narrowly lost to Reed nearly eight years ago. said she needs more details of the Philips deal before rendering judgment.

"We all need to be thoughtful about the source of the funds," she said. "I don't have a real strong opinion about it."

Downtown and details

Mitchell, the current council president, said downtown needs investment as well as jobs and if the deal can do that, it's worth looking at. He also said the city has a responsibility to invest in the property as the part owner of the facility so some type of funding is going to be necessary to keep it competitive. The question is how much.

"Downtown is in need of a boost so we have to be intentional in these public-private partnerships," he said.

But he stopped short of staking a position, saying he preferred to wait for the authorization request when it comes before the City Council next year.

Aman, a former partner at Bain & Co. who also helped former Mayor Shirley Franklin develop a turnaround plan for the city, also said the details matter. Downtown revitalization and jobs are important, and there's also consideration about what losing the Hawks could mean to Atlanta.

"This is complicated," he said. "I don't know how you can be so definitive when we don't know enough."

Woolard said there was little risk of losing the Hawks after Cobb County Commission Chairman Tim Lee was ousted by voters following his deal with the Atlanta Braves.

"I'll call that bet," she said. "I'm not sure the NBA would let Atlanta not have a pro team. And what other jurisdiction in metro Atlanta is going to do this deal after Tim Lee lost [re-election] after the Braves deal?"

Fort also criticized the lack of a legally binding agreement that outlines how the Hawks or its partners must perform to see that dream of Gulch revitalization happen.

"Neighborhoods are hurting," he said. "This city is one of the worst for income immobility and we're pushing money into the pockets of billionaires."

 

PHILIPS ARENA DEAL

The Philips Arena renovation will be the third publicly financed pro sports arena project in the Atlanta area in recent years.

| Projected renovation cost: $192.5 million | Upfront taxpayer commitment: $142.5 million | Sources of public funding: An extension of the city's rental car tax, approved by state lawmakers earlier this year, and proceeds from Turner Field and other expected city land sales. A ticket surcharge for long-term maintenance costs.

| Expected long-term public costs: Interest and other long-term expenses not immediately known.

| Team costs: $50 million upfront, annual payments of $5.9 million starting in 2029, totaling more than $100 million. The team controls the naming rights revenue. The deal with Philips ends in 2019.

| Team commitments: 18-year lease extension, minority-and women-owned business commitments and $200 million breakup fee for early termination of the lease.

SOURCE: CITY OF ATLANTA

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