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.
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?