money What to know before Smokies stadium breaks ground (soon) in downtown Knoxville
The Sports Authority Board will finalize a plan in May to issue $65 million in bonds, the last step before the downtown Knoxville baseball stadium ceremoniously breaks ground.
Early foundation work already has started at the site just east of the Old City, but Tennessee Smokies CEO Doug Kirchhofer told Knox News the approval of bonds is a "symbolic" milestone.
"We'd like to get that behind us before we have a formal groundbreaking," he said. "We could have done the groundbreaking three or four months ago if we wanted to. But bonds are kind of the last piece, and then it's all done."
The official groundbreaking could happen in the next four-to-six weeks, Kirchhofer said at the board's April 25 meeting.
The borrowed $65 million, approved by the county and city, is just part of the stadium’s $114 million cost. The remainder will be covered using a $13.5 million state grant and private money from Tennessee Smokies owner Randy Boyd.
The bond debt would belong to the Sports Authority and would not be on county or city books, according to Grand Slam Knox, a stadium blog by Boyd Sports.
Knoxville and Knox County bond attorney Mark Mamantov said sales taxes generated inside the stadium would go toward repaying the debt over 30 years. That includes state sales tax at a 5.5% rate and all local sales taxes.
Local government will be repaid $1 million each year by the Smokies to rent the publicly owned stadium, which is scheduled to be ready in time for Minor League Baseball’s opening day in spring 2025.
More from the Knoxville Sports Authority Board meeting
The Sports Authority Board, whose members are appointed by local government to help plan the stadium, also received an update on the involvement of disadvantaged businesses in construction.
The stadium project has not yet met its goal for contracts with disadvantaged businesses to represent 17% of the stadium's full $113.95 million cost. However, the project team said it expects more minority workers to join in later phases.
Knox News previously reported project delays might have caused interest from minority-owned businesses and workers to dwindle.
What's included in the $114 million downtown stadium cost?
Stadium construction: $101 million
Furniture, fixtures and equipment: $750,000
Architecture, design and engineering: $8.4 million
Project management: $1.6 million
Additional soft costs: $2.2 million
Total: $113.95 million
Who will pay for the downtown Knoxville stadium?
We break down how the $114 million stadium will be funded.
Knoxville and Knox County bonds - $65 million
Knoxville and Knox County will not pay more than the $65 million in bonds, which will be repaid through sales tax revenues.
Knox County Finance Director Chris Caldwell previously told Knox News he expects roughly $2.5 million in investment earnings on the bonds and state grant, bringing local government's commitment to $67.5 million.
Running total: $67.5 million
State of Tennessee grant - $13.5 million
Gov. Bill Lee compromised with the Sports Authority Board in 2021, offering a $13.5 million grant for the project. This amount was to keep from expanding the sales tax district, as previously reported by Knox News.
Running total: $81 million
Tennessee Smokies owner Randy Boyd - $6 million
When schematics showed the stadium could cost more than early estimates, Boyd committed $6 million to keep the project moving.
Running total: $87 million
Tennessee Smokies owner Randy Boyd - $20 million loan
With an unpredictable construction market, Boyd pledged in August to loan up to $20 million to cover the difference between an early $80.1 million estimate and whatever the guaranteed maximum price ended up being.
That loan would be repaid through an expanded tax increment financing district (more on that in a bit).
But with the guaranteed maximum price now set at $114 million, there's still $7 million to cover.
Running total: $107 million
Tennessee Smokies owner Randy Boyd - $7 million
Caldwell told Knox News that Boyd will cover the remaining $7 million out of pocket.
Boyd's development team also is planning to construct a condo building just outside the stadium. This development, along with apartments planned nearby, represent at least $130 million in additional investment.
The residential buildings are expected to open along with the stadium.
Any cost overruns beyond the guaranteed maximum price also will be covered by Boyd, according to officials.
Running total: $114 million
Understanding the stadium's TIF district
Boyd will not be repaid for his $20 million loan until the tax increment financing district, commonly called a TIF, pays for infrastructure improvements around the stadium.
What is a TIF district?
TIF districts bank on an anticipated increase in property tax revenues that would come from new developments within a designated area.
Where is the TIF district?
The original TIF district only went as far west of the stadium site as James White Parkway and Hall of Fame Drive.
It was later expanded farther west of Hall of Fame Drive to South Central Street between Interstate 40 and Summit Hill Drive.
What's the effect on property owners in the TIF district?
If you own property in the TIF district, you'd be taxed with or without a TIF, so it doesn't change the payment amount.
If you're a customer at a business that is paying property taxes, same thing: Businesses are paying the tax no matter what and already building it into prices.
How does a TIF district make money? Is there a cost?
There's an opportunity cost for city and county residents if the TIF is in place because the property taxes collected cannot be spent on projects outside the tiny TIF district, which is just a fraction of the city's larger TIF district in the South Waterfront area.
On the other hand, city and county taxpayers both gain new developments that likely will generate tax revenue far beyond the life of the TIF.
An independent analysis cited in a news release predicts the stadium could have a $480 million economic impact over the next 30 years. The project could create 3,000 jobs, including 400 full-time positions.
Ryan Wilusz is a downtown growth and development reporter. Phone 865-317-5138. Email ryan.wilusz@knoxnews.com. Instagram @knoxscruff.
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This article originally appeared on Knoxville News Sentinel: Smokies baseball stadium ready to break ground near downtown Knoxville
