In a luncheon meeting of city council and county commission members, the NBA pursuit team revealed a majority of its funding plans for a new downtown arena. City Mayor Willie Herenton and County Mayor Jim Rout submitted six prerequisites for them to support the construction of a new arena. First, the mayors felt that a significant portion of the funding comes from revenue paid by those who attend the new arena for NBA events. Second, the funding should be diverse and flexible, so as to not rely on only one source of revenue. Third, the state’s contribution should compare with the state’s level of participation for Aldelphia Stadium in Nashville, which was built in part with state funds. Fourth, the use of property taxes should be minimized, and fifth, the schools should remain the number one priority of the city and county. Working in tandem with that list, Marlin Mosby, formerly a financial executive of the city of Memphis and now a consultant with SMG (the firm in charge of running the Pyramid) representing both the city and county governments, along with other members of the pursuit team, walked the assembled law-makers through an arena package. Below is the 7 point list. [NOTE: The following numbers are cumulative over the next 25 years]
  • Point 1: Sales Tax Rebate from NBA Events: Existing state legislation allows the sales tax from all NBA related sales in the arena to be brought back to the arena. This includes ticket tax, food and concession tax, merchandise tax, and any other revenues. Only NBA events would be included in this. Estimated result: 70 million dollars.
  • Point 2: Facility Associated Revenues: The Pyramid has a seating charge of 1 dollar per seat per event. That charge results in Pyramid revenue of 250-500 thousand dollars a year. The pursuit team used this formula and took into account the number of seats in the new arena, the average number of tickets sold per NBA contest, and the number of dates in an NBA home schedule. Estimated result: 16 million dollars
  • Point 3: Tourism Development Financing: The Cook Convention Center currently receives incremental tax returns when the revenues of the center as well as the rest of the tourism zone (i.e. hotels, shops, and restaurants in the district) exceed the amount of revenues from its base year. In normal circumstances, the state would allow an area to be a tourist development zone one year prior to the opening of the facility. However, the pursuit team successfully argued to have their first year be concurrent with the Cook Convention Center, thus missing the significant revenue increase that has occurred downtown in just the past two years as its base level. The result is a much higher incremental revenue. Estimated result: 35 million dollars
  • Point 4: City Hotel/Motel Tax: The Cook Convention Center actually holds a bond on this tax until the year 2016. However, after that, the arena can use that tax toward its construction. Estimated result: 10 million dollars
  • Point 5: Payments in Lieu of Taxes (PILOT): Public utilities usually pay a PILOT instead of a tax. The pursuit team would take those payments on Electric, Sewers, and Gas. They would take the Water payments as well, but those funds are spoken for until 3 years from now, at which point the water PILOT will go to the arena. Estimated Result: 30 million dollars [without water PILOT]
  • Point 6: State Funding: The pursuit team is asking for equivalent funding as did Nashville with Aldelphia Coliseum. The pursuit team says that state government has promised the same sort of support. There will be a special briefing of the Shelby County delegation of the legislature on April 9th. Estimated Result: 40 million dollars
  • Point 7: 2% Car Rental Surcharge: There is already an existing 5% sales-tax on rental cars by the state but not by the city. The addition of a 2% city tax would put Memphis on the national average for car-rental taxes. This will require a change in legislation via a unanimous vote by the Shelby County State Delegation or upon passage by the State legislature itself, though that would require enactment by the County Commission. Estimated Result: 25 million dollars
Adding the 7 points together results in 226 million dollars worth of public money not a result of property tax revenues. The remaining 24 million dollars would come out of the general funds of the city and state governments. The 24 million is 10% of the total cost of the arena and a contribution equal to the city and county’s contribution to AutoZone park. The construction of the arena would be repaid over a 25-year period without, according to the pursuit team, a change in the city or county’s bond rating.



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