As Metro Council members consider the new Sommet Center lease agreement between the Nashville Predators and Mayor Karl Dean, the notion of unintended consequences has been raised more than once.
Metro Council likely will vote on a resolution to approve the lease amendments at its April 15 meeting.
In advance of that vote, one possible unintended consequence of the deal has already been discovered — the use of Metro’s Hotel Motel Tax (HMT) to fund the Sommet Center subsidy.
Already, Dean has offered an increase in the Sommet Center subsidy drawn from the HMT to $7.4 million. It comes in a year when a handful of other groups drawing on the HMT — including the Adventure Science Center, the Arts Commission, the Nashville Sports Council and the Country Music Hall of Fame — have seen reduction in their funds.
And it comes in advance of a proposed new $635 million Convention Center that will use the HMT as a critical funding tool. For this fiscal year, the Convention Center subsidy is just $800,000 because the bonds for the current facility are already paid in full.
If and when a new Convention Center is approved by Council, city officials say a decision will have to be made as to how to fund both the Sommet Center and the Convention Center.
“It’s not an either/or,” Metro Director of Finance Richard Riebeling said. “We will continue to fund tourist-related activities like the Sommet Center and the Convention Center from tourist-related taxes.”
Riebeling was asked by Councilman Rip Ryman at a special meeting to discuss the amendments about whether the current tourism taxes in place will be able to fund both the Sommet Center subsidy at its new increased level and the new Convention Center.
Besides the HMT, the proposed new Convention Center will take advantage of new tourist accommodation taxes approved by Council last year.
“Obviously we don’t have the plan of financing for the Convention Center done yet,” Riebeling said. “We also have new taxes proposed last year that we’re starting to collect now to fund the Convention Center budget.
“So I can honestly tell you when we come up with a plan to fund the Convention Center, we’re going to have to answer that question and show you exactly how it’s going to be laid out.”
Riebeling did not say the HMT would be able to continue funding the other groups at their current level. Council members have conceded the other groups currently taking advantage of the HMT will likely see their funding trimmed down once the Convention Center is on the table.
“There is going to be a pressure on the Hotel Motel Tax when we embark on the Convention Center project that’s going to be the largest capital project we’ve ever taken,” Councilman Jason Holleman said. “In a perfect world is this the ideal way to go about securing professional sports? I’m not sure that it is.
“But I think this mayor and this Council have to deal with the facts in front of us. Where we find ourselves today, it’s a lesser evil to work out a deal to retain the Predators than to let them go and have a multi-million dollar arena to fill,” he said.
Besides dealing with the HMT in the future, there’s the issue of the cap for the new Predators’ ownership group’s operating losses. The new ownership group said it needed more favorable lease terms and an operating loss cap in order to help make the team viable in Nashville.
The new agreement has an operating loss cap of $3.8 million. The Predators’ operating loss for this season is on pace to be about $1.8 million, but the team would still be able to come up with ways to draw the difference under the new agreement, according to attorney Larry Thrailkill, who represented Metro in the new agreement.
Because the team already has a lease agreement in place through 2028, some Council members are pondering issues like the operating loss cap as they consider whether to approve the resolution.
“I am still worried about unintended consequences,” Councilwoman Megan Barry said.
What: A resolution to approve the new Sommet Center lease terms for the Nashville Predators at the Metro Council meeting
When: Tuesday, April 15 at 6:30 p.m.
Where: Council chambers at the Historic Downtown Metro Courthouse