Business Escambia County Politics

Why use developer for arena and field house? Does Escambia County need both?

October 4, 2017

After months of anticipation, Jay Patel unveiled his plan for a $100-million project that includes a 100,000 square-foot field house for basketball, volleyball and indoor soccer tournaments, a 6,500 fixed-seat arena for hockey, basketball and concerts, a 120-150 room hotel, 800-space parking garage, mixed-use development, and a Pensacola Sports Hall of Fame museum. In other words, something for everyone.

The proposal before the Escambia Board of County Commissioners is for the taxpayers to repay the developer $65 million for the construction of the field house and arena, at a 4.5-percent debt cost over 30 years.

There is little or no risk to the developer, as far as I can see.

According to financial details on the county website, the estimated lease payments could range from $3-5 million annually over the first five years, then between $2.3-$4.3 million a year over remaining 25 years.

Taxpayers are on the hook for any operating losses. The county currently subsidizes Bay Center operations to the tune of $1.3 million annually. If by any chance the new facilities turn a profit, they will be shared with the developer.

The initial investment by the developer may be reduced by any New Market Tax Credits. Any Triumph grants will be used to lower the lease payments.

The presentation does not mention who will pay for demolition of the Bay Center if that site is chosen. There are no proformas on the estimated operational revenue and expenses of the arena and field house.

The City of Pensacola isn’t participating in the guarantee of the lease payments or operational losses.

There is no proposal to increase the bed taxes to reduce the burden on taxpayers.

WHY BUILD THE ARENA?

Is the arena the big loser financially?

What would be cost to only build the field house and focus on sports tourism? Could the field house operate profitably and handle any lease payments without using tax dollars?

I think the economic impact in the Crossroads Study, which Patel uses in his presentation, didn’t include a 6,500-seat arena.

The preferred site in the Crossroads Study was the former ECUA site owned by Rishy and Quint Studer – projected construction cost $36.2 million:

If the County got the $25-million grant from Triumph Gulf Coast that Patel mentions, the field house and accompanying fields would only cost taxpayers $11.2 million. The county could pay itself back in less than three years at the rate of $3.73 million annually. There would be no need for lease payments.

There is another issue: has Escambia County waited too long to build the sports complex? The Crossroads Study was done two years ago. Since then, OWA has opened adjacent to the Foley Sports Tourism Complex. The sports complex has 16 state-of-the-art sports fields and a 90,000 square-foot event center. OWA has a hotel, retail and an amusement park.

Can the Jay Patel field house compete with the Foley Sports Tourism Complex? Remember all the risk is taken on by the taxpayers.

MORE QUESTIONS

The plan mentions the economic impact of the project, but what is the impact on county tax revenues? How many years will it take for the increase in tax collections to cover the cost of the lease payments and operational shortfalls? What’s the ROI for taxpayers?

Who insures the facility? If it’s destroyed by a hurricane, what is the taxpayers’ obligation?

Does downtown need another hotel with Holiday Inn Express opening soon, two hotels planned near Gulf Power, and two boutique hotels being discussed on or near Palafox Place?

What will make the 30-year life of this project different than the 30-year of the original Bay Center? I don’t think the BCC thought they would be subsidizing the civic center 32 years after it opened in January 1985.

And lastly, if all the risk is on the taxpayers, why not just borrow the money and build it without a developer?

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2 Comments

  • Reply Max Watson October 5, 2017 at 10:52 am

    I agree wholeheartedly with this post. Especially about not building this Arena in a flood zone. That’s insane. I’m also a yes vote in building in a central location.

  • Reply CJ Lewis October 4, 2017 at 10:17 am

    Give all we have heard about the county’s financial woes related to the ongoing operation of the jail, the construction of the new jail, issues related to mass transportation, the expanding OLF-8 snafu, the county’s inability to pay Deputies a competitive wage, etc. and more, it is hard to see why “county government” should be involved the proposed project. Let the private sector build it, keep all the profits and absorb all the losses. The three fiscal conservatives on the commission – Underhill, Barry and Bergosh – should show some backbone and keep county taxpayers from getting ensnared in this project. As for the location of the project, it would be interesting to know the extent to which both sites are in storm surge zones and/or subject to heavy flooding. Perhaps the county should hire a consultant to build a model to show what would happen to downtown in the event of a Cat 3, 4 and/or 5 storm if it made a direct hit on downtown to include at high tide. If Escambia County wants to be resilient in the face of such storms that are inevitable, it should build a new county headquarters on higher ground and in a more centralized location with better access for more county residents. In addition, the county should do everything possible to avoid having to spent any taxpayer money in areas likely to suffer water damage during such storm events. Every time I past University Mall I see that most of it is a parking lot. There are plenty of nearby hotels and places to eat. Perhaps a better location for such a facility might be on the part of the site now occupied by Sears and the Sears Automotive Center. Lastly, if the county government were to get involved in such a project, then do it right. Appoint an independent commission whose members are not likely to profit from the project. Let all of the groups who want something pitch their requirements to include the performing arts. The county commission can then have a consultant put together a plan that serves the needs of Escambia County for the next 50-75 years vice building something, as is the case here, that is obviously too small and too lacking in vision. By the way, looking at the graphic of the Studer property above, what a waste of precious space using it for surface parking. That makes zero sense especially since Phase II of the stagnated Community Maritime Park economic development project calls for a 976-space parking garage. More than anything, that parking garage needs to be built ASAP unless we are content to see most of the Community Maritime Park remain fallow growing grass hardly what city voters were told would happen when they voted in the 2006 referendum.

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