Downtown Baseball Stadium FAQ
Frequently Asked Questions Relating to Baseball Stadium Agreement
Q. Does this agreement raise city taxes?
A. No. The city’s debt service will be covered by lease payments received from Brookstown Development Partners and stadium revenues.
Q. Does it anticipate subsidizing the baseball team with tax revenues?
Q. Does it put any public money in the pockets of Mr. Prim or the other private investors in the project?
Q. Does it permit those investors to make any profit from the project during any year, unless the city's obligations are paid first?
Q. What does the city get in return for its $12.7 million investment?
A. Ownership title to the land and the stadium, and a guaranteed place in line for the team and stadium revenues, ahead of any investor payments or profits.
Q. What will be used to pay the principal and interest payments on the city loan?
A. Lease payments from Brookstown Development Partners (BDP) and revenues from the operation of the ballpark, including ticket sales, concessions, advertising, and sponsorships.
Q. What indications do we have that those revenues will be adequate to cover all obligations?
A. Pre-sales of tickets and sponsorships support the revenue projections. Professional analysis for the banks projects strong revenues from the new stadium. Performance of the Greensboro minor league team in its new stadium already exceeds what Winston-Salem would need here.
Q. What other security will the city have to protect its interests?
A. We will continue to have veto power over sale or relocation of the team franchise. Winston-Salem has always been a strong market for minor league baseball so they're going to want to keep a team here, especially with the most modern new stadium in the league. We will also still have the letter of credit, paid for by the developer in advance, to cover shortfalls in the ticket surcharge due the city.
Q. What guarantees will the city have of timely completion of stadium construction, and responsible use of our loaned funds in that completion?
A. Failure to complete construction on time would accelerate the loan, and the city will have a stronger interest in the assets of the land and stadium. Performance and payment bonds will also be in place to ensure completion of the project. We also will receive biweekly progress and expenditure reports during the construction period, including what's been spent on what, and the updated estimated completion date.
Q. What ongoing monitoring will the city have of team finances after completion of the stadium?
A. We will receive quarterly financial reports from the team owners, to be reviewed by our accountants, summaries of which will be made public.
Q. At what point did the city turn over the $12 million to Mr. Prim? Please tell the public what happened and why there was an absence of standard lending practices?
A. The payments to Sports Menagerie were reimbursements to the developer for expenses actually incurred based on invoices. These payments were made after the developer demonstrated that he had a bank letter of credit for the construction. Payments were made between November 2007 and July 2008. Total expenses during this period were $19,884,100.
The first $12 million was a grant to the project that has perfomance conditions attached to the project. It was not a loan.
Q. Will there be traditional safe-guards for disbursing the money or does BDP simply get a $12.7 million check?
A. None of the funds will go to Brookstown Development Partners or the previous partner. The funds will be disbursed by the bank consortium based upon actual invoices from the contractors and lien holders.
Q. Why would foreclosure cost the city more than $12.7 million to complete the stadium?
A. The city’s initial $12 million is behind an $18 million Regions Bank land loan and $10 million is owed to the contractors. A settlement would have to be reached with each of these parties. The city would then have to borrow funds to complete the construction of the stadium at an estimated cost of $13.5 million.
Q. Is the stadium being built on land that has not been bought? Who has title to the land?
A. The land is owned by BDP. That land and the land for phase II was all bought by BDP using the original proceeds from the $18 Regions Bank loan
Q. Why would the city "give" $2 million to Brookstown Development
Partners (BDP)? Is this legal? I know that it may or may not be a federal
grant (still tax dollars)? What happens to the original project that these funds were intended for?
A. The $2 million is coming from capital reserves that are set up in the Broad Street improvement project. That project provides for intersection and roadway improvements along Broad Street from Business 40 to 5th Street. We have already received a $2 million federal grant for improvements on roads around the stadium, but Broad Street was left off the bill language, a technical error. We are seeking a technical amendment to add Broad Street. The local funds provided to the project would be used for transportation, site work and other improvements that are allowed by law. Once the technical amendment is approved, we would replenish the capital project funds and the Broad Street project could be completed.
Q. Has construction progressed too far to scale back the "upgrades"?
A. Yes, the vast majority of the upgrades has already been done. The remaining items like the completion of the play yard are not significant cost components.
Q. Is the amount owed for existing work $10 million or $475,000?
A. The amount owed is $10 million.
Q. Why would the city purchase Phase II Land before the stadium proves itself?
A. The city’s investment goes towards paying off the outstanding Phase I debt and towards completion of the stadium. These funds are not be used to purchase land in Phase II.
Q. What does Mr. Prim have in the project?
A. Mr. Prim has to place millions on deposit as collateral for the remaining Regions Bank $10 million land loan and the BOA $15 million bank loan. He also had to expend millions to buy out his former partner in the ownership of the team.
Q. Will the city verify through legal documents that Mr. Filipowski's interests have been satisfied and he is clearly and completely out of the picture?
Q. What is the impact to city taxpayers when BDP does not make the loan
A. Bank of America advises that the team’s management company, Mandalay is one of the best in the country. When you look at the current attendance of over 400,000 in Greensboro, and the fact that the Dash has sold more sponsorships and pre-season ticket packages than Greensboro did in its first year, it is likely that the team will be able to pay the lease to the city. We have actually reviewed signed sponsorships that total over $2.5 million and a signed multi million dollar naming rights contract. We have stressed a very detailed pro forma on the team operations to ensure that there will be funds available to cover our loan. The banks have reviewed all of this information with us. Unfortunately because of the credit freeze their rules will not allow them to loan more than $15 million directly. If the projections are totally wrong and the team cannot meet the obligations, in the worst case scenario, the city would have to fund the $800,000 annual debt service payment.
Q. Please specify who the 'outside consultants' are and how they were funded. Do these consultants have any connection to the developers?
A. All of the costs for outside consultants (attorneys, financial advisors, and auditors) are included in the closing cost for the loan to the developer. The costs will be paid by the developer, just like home closing costs are charged to the buyer by the bank. We were very careful to select outside consultants that had no ties to the developer or any of his partners. To ensure this, most of the help came from Charlotte or Raleigh firms.
Q. When will the funding of this stadium cease?
A. We have reviewed detailed engineering and construction estimates with an independent consultant hired by the banks and are very confident that the stadium will be completed for the total cost of $40.7 million.
Q. Will the city be able to utilize the stadium as a multi-purpose arena and hold concerts or similar events there?
A. The developer intends to have concerts and other events in the stadium year round.
Q. Why is there no legal contract between the city and the developer regarding these loans?
A. The city already has a legal contract for the $12 million that we invested two years ago. For this new loan we have an agreed on term sheet. By law, the city manager cannot sign and execute a written contact for this loan until the City Council has voted to approve the terms and given the city manager the authority to execute such an agreement.
Q. When will the stadium be ready?
A. The goal is to have the stadium completed in the fall of this year.
Q. What happens if the franchise relocates the baseball team outside the city or sell the team?
A. If the developer sells or relocates the team outside of the city, the debt to the city becomes due and payable immediately. A relocation of the team will also cause an event of default under the bank groups’ loan. This is a huge financial disincentive for the franchise to relocate the team, without first obtaining the necessary approvals.
Q. Why can’t Mr. Prim use funds from the $340 million sale of Blue Rhino to finish the ballpark?
A. Blue Rhino was sold to Ferrellgas in 2004 for $17 a share. According to filings with the United States Securities and Exchange Commission, at the time of the sale, Mr. Prim owned 1,646,352 shares, 11.5% of the company. Mr. Prim sold these shares to Ferrellgas for $27,900,000. Mr. Prim has indicated that most of the funds from the proceeds of the sale were invested in Ferrellgas or in his new company Primo Water. An independent auditor has confirmed that all of Mr. Prim’s current assets are pledged as collateral in other ventures or for the bank loans associated with the team, stadium, and adjoining property.
Questions Relating to the Baseball stadium (Public Input Session)
Q. What was the original $12 million investment in the project used for?
A. These funds were used to help off-set costs associated with the development of the stadium, including public infrastructure improvements, site preparation, stadium construction and land acquisition.
Q. Why were there not more safeguards in the original agreement?
A. There is a contract with the developer that requires completion of the stadium by March 2010. If the project is not completed the city would have the option of suing the developer, but from a subordinated interest behind the lenders and contractors.
Q. Did the city receive any legal advice in drafting/reviewing the original agreement?
A. No, the original agreement was prepared internally by the former City Attorney.
Q. Where did the $12 million in city funds in the original agreement come from? Did it include taxpayer funds?
A. One million came from previously approved Downtown Development General Obligation Bonds, $5.5 million came from the sale of Ernie Shore Field and $5.5 million was borrowed and is being financed over 20 years. This borrowing is being covered by the new tax increment generated by the stadium. Of this total amount, the $1 million in General Obligation Bonds is the only portion that is being taxpayer funded.
Q. What has the city already agreed to fund in the Phase II mixed use commercial development adjacent to the stadium?
A. The city’s additional financial assistance of up to $8,012,252 would be provided over a period of up to 25 years based on the annual taxes paid to the city in excess of the taxes paid on the $22.6 million base price of the stadium. In addition, with the construction of Phase II, the city would agree to purchase up to 1,000 parking deck spaces at a total cost not to exceed $16,340,858. The purchase of these spaces is contingent upon the costs being self-funded through the Phase II development.
Q. Why expand the scope of stadium in a tightening credit market?
A. The scope of the project changed before most vertical construction had ever begun.
Q. Why didn’t the developer come forward sooner to inform the city of the increases in cost?
A. Because the developer was trying to work out the details with the bank consortium and for reasons of confidentiality, the developer waited until most of the critical issues were resolved before going public.
Q. Why can’t the developer put more of his personal funds into the stadium?
A. The developer is unable to borrow any additional funds to put into the project.
Q. Is Flip going to receive any of the city funds?
Q. What are the specifics on the $1.3M loan from the Millennium Fund?
A. This loan is for 25 years at 0% interest with all payments deferred. When the stadium is transferred to the city's ownership in 25 years, the loan is completely forgiven.
Q. Is the city helping small businesses and/or homeowners that are facing foreclosure in this economy?
A. The city has a small business loan program to assist small businesses. Funds also will be available by the end of July to assist homeowners who are about to be evicted due to foreclosure.
Q. Can the city be more transparent and disclose all documents?
A. All documents that can be made public have been placed on the city’s web site.