CHICAGO -- Stadium fever is spreading in the Midwest, with projects planned in Detroit, Milwaukee, Cleveland, and Chicago.
And state and local governments are scrambling to find ways to help finance the sports facilities due to the fact the Tax Reform Act of 1986 essentially eliminated the use of tax-exempt bonds for these kinds of projects.
In Wayne County, Mich., officials are exploring possible ways tax-exempt bonds could still be used to build a new home for the Detroit Tigers baseball team. While officials have said they would not release their plan until Aug. 1, industry sources and newspaper reports have stated the county was trying to figure out a way to issue $120 million of bonds and also have the Tigers organization pay debt service on about $40 million of the bonds through lease payments on the facility.
The country would use proceeds from a proposed 25-year, 5% tax on hotel rooms in the county to pay debt service on $80 million of the bonds, according to The Detroit News. Last month, the Hotel Association of Greater Detroit voiced its opposition to the tax, and state Sen. John Kelly, D-Grosse Pointe, who is against replacing 79-year-old Tiger Stadium, said last week that county officials were beginning to back away from the hotel tax and look at other revenue sources for the project.
County and team officials did not return phone calls.
Meanwhile, Mr. Kelly's bill to ban local governments from financing professionals sports stadiums of more than 25,000 seats and place a $75 million cap on public financing for the renovation of an existing sports stadium, was waiting to be called for a vote by the Senate.
Renovation of Tiger Stadium has been ruled out by the team, the county, and Detroit officials, who are also examining the possibility of building a new stadium for the team, whose lease with the city for the present stadium runs until 2008. The team want a new stadium by the opening of the 1995 baseball season.
If Wayne County decides to issue tax-exempt bonds for the stadium, one public finance industry source has suggested the process could entail getting Congress to revive the transition rules that were granted to certain sports facilities under the tax reform act and that expired Dec. 31.
While Wayne County is staying quiet on its exact plans for bond issuance, state officials in Wisconsin have ruled out the use of tax-exempt bonds for a new baseball stadium in Milwaukee County.
Last week the Legislature approved a $70 million state package proposed by Gov. Tommy Thompson to assist the Milwaukee Brewers in building a replacement for County Stadium.
The package contains a $35 million loan to the team, to help build a $140 million stadium, and $35 million of infrastructure improvements, according to Nick Hurtgen, a deputy secretary in the Department of Administration.
The loan to the Brewers would be made by the Wisconsin Housing and Economic Development Authority. Funds for the loan would come from a taxable bond issue by the agency.
"We looked at every angle we could for a tax-exempt issue, but we couldn't get around the federal ban," on issuing tax-exempt bonds to build stadiums, Mr. Hurtgen said.
The bonds would be backed by revenues derived from the sale of luxury seating at the stadium and a state moral obligation pledge, Mr. Hurgen explained.
As part of the overall funding package, Milwaukee County and the city of Milwaukee would fund another $35 million in infrastructure improvements.
Neither government body has yet approved funds for the plan, but David Schulz, the Milwaukee County executive, and Mayor John Norquist of Milwaukee have both been supportive of some government assistance in building a new stadium.
Mr. Schulz is "very happy that the Legislature took action to keep the Brewers in Milwaukee," said Pat Mueller, an aide to the county executive. "He just wants to look at the package over the weekend before he has any other comment."
No dates for the issue or beginning construction have been set, but team executives have said they want a new stadium ready for the 1994 season.
In Cleveland, developers of a baseball stadium beat the Dec. 31 bond issuance deadline for sports projects grandfathered under the tax act. However, the sale of $146.7 million of tax-exempt bonds on Dec. 19 has not ended financing problems for the Gateway Economic Development Corp., a private, nonprofit organization set up by the city and Cuyahoga County to develop and finance the project.
While the entire project, which is estimated to cost $349 million, includes both a 45,000-seat ballpark and a 20,000-seat arena, the bonds were issued only for the stadium because the transition rules contained in the act called for a single facility. Gateway officials have said the rest of the money will come from from other sources, including excess revenues from a countywide excise tax on cigarettes and liquor that is also being used to back about $115 million of the bonds.
Earlier this year, while lease discussions were continuing with the Cleveland Indians baseball team and the Cavaliers basketball team, Gateway announced a $40 million shortfall in the project's financing, although the Plain Dealer in Cleveland has pegged the shortfall at closer to $89 million.
Lora Thompson, a Gateway spokesman, said the shortfall was mainly caused by lower-than-expected interest earnings in bond proceeds, as well as a lack of advertising revenue. As for the interest earnings, David Goodman, a partner at Calfee, Halter & Griswold, Gateway's bond counsel, said that project planners had not taken into account arbitrage restrictions in their earnings estimates for the bond proceeds. He said once bond counsel was involved in the process that misconception was corrected.
Last week, Gateway officials said they were successful in convincing both teams that the money would be available to build the entire project and that the Indians had signed a 20-year lease for the ballpark. Ms. Thompson said Gateway's letter of intent with the Cavaliers has been extended to Sept. 30 to give the two sides time to negotiate a long-term lease for the arena.
Ms. Thompson outlined a plan where Gateway would close the $40 million gap with the proposed use of $24 million to Ohio's capital building budget slated for Cleveland, as well as with money from local business groups and foundations. While Gov. George Voinovich has said he would support Gateway's request in the two-year capital budget he will introduce later this year, he has ruled out any general fund support for the project, which won credit enhancement guarantees for the bond issue from Cleveland and Cuyahoga County.
In Chicago, the Chicago Bears football team is searching for a new home after plans for a domed stadium were scrapped by the Metropolitan Pier and Exposition Authority earlier this year. The authority, which was set up by Illinois, eliminated the stadium from its plans in order to improve the chances of getting a $987 million financing package for an expansion of the McCormick Place convention center passed by the General Assembly.
Bears officials, who want a new stadium after the team's lease with the Chicago Park District for Soldier Field expires in 1999, are talking to a dozen suburbs about a public-private financing deal for a open-air, 75,000-seat stadium, according to Bears spokesman Bryan Harlan.
Officials reached in some of those suburbs said that talks with the team were in the preliminary stages and that they were not ready to discuss any financing proposals.
Mr. Harlan said building a stadium for the Bears in Chicago "appears to be a dead issue." However, authority officials have said they may try to resurrect a stadium plan in the future. The authority lost $100 million of tax-exempt bonding power granted under the city's transition rule when the General Assembly last fall failed to act on a proposal to build a domed stadium, along with the convention center expansion.
Even though the stadium was touted as a multiuse facility, a source close to the project said that without the transition rules the authority would have to issue taxable debt for the stadium due to the $8 million annual payment the Bears had agreed to in a memorandum of understanding that has since expired.