Chattanooga Lookouts to recoup $3 million upfront stadium payment

Staff Photo by Robin Rudd / Utility lines can be seen at the former site of U.S. Pipe and Wheland Foundry, where the Chattanooga Lookouts ballpark is proposed. Utility costs for the public sports authority overseeing the project were questioned by City Council member Jenny Hill on Tuesday.
Staff Photo by Robin Rudd / Utility lines can be seen at the former site of U.S. Pipe and Wheland Foundry, where the Chattanooga Lookouts ballpark is proposed. Utility costs for the public sports authority overseeing the project were questioned by City Council member Jenny Hill on Tuesday.

When a newly negotiated deal for a Chattanooga Lookouts stadium was unveiled Monday, officials pointed to a $3 million up-front payment from the baseball team as an important concession as the City Council and County Commission prepare to take a new vote of approval on the $120 million project next week.

"It was good for us to see some skin in the game," Chattanooga Mayor Tim Kelly told the Chattanooga Times Free Press on Monday, when asked about the $3 million. "I mean, typically, like I sold cars for a long, long time. And typically, when you're leasing something, you know, over time, you don't want to put money in up front. That's the whole idea. You don't sink money up front, you cash-flow it over the course of time, but it does show good faith and it will reduce our exposure."

But at a council meeting Tuesday, new details about the project began to emerge, including up to a $250,000 annual payment by the public sports authority to the team for utilities for 12 years after the stadium opens — allowing the Lookouts to recoup the $3 million initial payment.

The South Broad District stadium to replace 23-year-old AT&T Field was originally pegged at $80 million, and officials are considering an increase to $120 million, with a maximum public contribution through special tax financing of $112 million.


Chattanooga City Council members Tuesday heard a rundown of the new funding proposal, which Kelly termed "a great deal for us and taxpayers."

"It's not as much about the stadium as it is about the larger development," he told the council.

A study has projected that more than $1 billion in new development is projected over 30 years within the 120-acre old foundry site where the stadium is to sit.

Among the new details discussed Tuesday was that the team and site owner would pay the Chattanooga-Hamilton County Sports Authority $250,000 annually for parking rights for the first 12 years after the stadium's opening.

(READ MORE: Lookouts site could hold 12-story buildings)

City Council Member Jenny Hill, of North Chattanooga, raised questions about the new aspects of the funding proposal involving parking rights, utility expenses and the $3 million the Lookouts are pledging under the new deal.

"I'm just wondering what is the benefit to the taxpayer other than feel-good skin in the game?" she asked.

Kelly said the deal has to stand up to scrutiny from the city and Hamilton County.

"Some of this, frankly, is optical," he said.

According to officials, the sports authority is guaranteed $250,000 per year in parking revenues and will pay the stadium's utilities annually up to $250,000 through the 12 years, with the Lookouts responsible for any excess. If utility expenses are less than $250,000, the sports authority will keep the difference between parking and utilities for debt service, officials said.

Andy Stone of Perimeter Properties, which owns the 120-acre U.S. Pipe/Wheland Foundry site between Broad Street and Interstate 24 where the ballpark would go, said the $3 million assures "the Lookouts will have money into the stadium day one."

He said at the meeting the Lookouts also are guaranteeing "a complete stadium."

Many of the revenue projections focus on the 120-acre site upon which the stadium sits. But City Council Member Darrin Ledford, of East Brainerd, said at the meeting he has found it "kind of comforting" that future development in a 350-acre area near the foundry site hasn't all been taken into consideration yet.

"There is money out there that has not been accounted for," he said.

A study forecast $127 million in new development is eyed within the 350 acres around the stadium and outside the foundry property.

Stone said that $127 million only relates to four projects that are completed or almost so. He said there are at least seven other projects in the pipeline.

"We're tracking right now somewhere between $500 million and $600 million in work inside the South Broad District that's not covered by the study," he said. "Some of them have been in the newspaper and some have not. We feel very confident about what's to come and what this will do to catalyze South Broad."

City Council Member Chip Henderson, of Lookout Valley, asked about the source of a planned $10 million in city money for infrastructure for the stadium site.

Jermaine Freeman, Kelly's chief of staff, said at the meeting it's estimated the city and county will see more than $100 million in new tax revenue.

"We feel strongly that a $10 million investment for public infrastructure ... that we'll get back over time," he said.

Kelly said the $10 million "seems like a modest investment."

Henderson asked if the $10 million could come from the city's capital budget.

Freeman said that could potentially take place, and it could be done over more than one year.

Last month, city and county officials said they expect the cost of constructing the stadium will be about $120 million, an increase over the $80 million estimate from the summer of 2022.

But officials said earlier this week that a new $120 million ballpark will cost taxpayers less than anticipated.

(READ MORE: Taxpayer cost for Lookouts stadium will hold to $112 million, according to officials.)

While officials have not yet settled on a guaranteed maximum price for the multiuse stadium, they have determined any costs that exceed $112 million will be absorbed by Hardball Capital, the owner of the team, and Perimeter Properties, owner of the land.

Officials said the new deal has reduced the public's exposure in the project from $120 million to $112 million, and the private partners will now pay any cost over $112 million. Additionally, the team will provide the $3 million of cash up front to fund construction.

Officials intend to fund construction of the stadium through two borrowings. One is an $80 million bond issuance by the city-county sports authority. The other is a $32 million private loan by the Lookouts and Perimeter Properties, which would be paid back by additional tax money generated by the project using a special tax district. The Lookouts also are paying $1 million annual lease payments.

Through the type of special tax district being used for the project, officials typically use new property tax revenue generated by development in a defined area to fund costs like infrastructure. It's a tool reserved for blighted areas. Locally, any new tax revenue generated for education continues to flow unabated to schools.

In this case, future taxpayer money would fund a significant portion of the Lookouts stadium cost, but it will only come from property taxes paid by property owners within the 470-acre tax district and sales tax collected on concessions and other purchases in the new stadium.

Hamilton County Mayor Weston Wamp has said the proposed new deal that could be taken up next week by city and county officials barely improves "this boondoggle."

Wamp said at a public meeting last week that "taxpayers at this juncture have all the leverage."

Contact Mike Pare at mpare@timesfreepress.com or 423-757-6318.

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