The local investors group seeking to purchase the Nashville Predators has outlined the lease changes it is seeking from Metro in a letter that it sent to the city on Saturday and obtained by The City Paper.
One would allow the team to retain most of the sales tax revenues generated within the arena. Another would allow the team to leave Nashville if average annual paid attendance in any year is less than the minimum necessary to qualify for NHL revenue sharing and if the new ownership group loses a cumulative $20 million in addition to the $193 million paid for the team. Metro would have the option to purchase tickets to make up a gap if there is one but would not be required.
The group has also furnished Metro with an economic impact study that says Metro would lose approximately $2.7 million in sales tax revenues “net of substitution spending,” about $4.1 million in “total direct fiscal impacts associated with the Predators, including Arena operating profit, sales taxes and seat use fees” and that local businesses around the arena could lose $1.5 million-$3 million annually in sales revenues.
“First, the Predators absolutely cannot survive in Nashville without some additional sources of revenue. This does not mean that life will not continue without the Predators, but simply that retaining the Predators is not financially viable without additional revenue,” David Freeman, the businessman leading the investors group, wrote local attorney Larry Thrailkill in the Sept. 29 letter. Thrailkill represents Metro in the matter.
“Second, mere survival will ultimately be a poor economic development decision, a poor quality of life decision, and a national TV embarrassment to the city. Searching for the ‘bare minimum’ is counterproductive to the greater good. The team should have a reasonable opportunity to thrive and succeed on the ice. The team needs a chance to win,” Freeman continued.
“Third, any additional revenues dedicated to the Predators should come only from those people that use the arena and not from the general population. The city should not be asked or expected to use any additional taxpayer money to assist the Predators unless those taxes come directly and specifically from the arena users,” Freeman wrote.
The proposed lease changes, which the Metro Council would have to approve this month if Mayor Karl Dean agrees to them, are as follows.
• Metro would cap its annual subsidy compensating for operational losses at the Sommet Center at roughly $3.8 million plus an annual Consumer Price Index adjustment. The investors group says this would limit Metro’s financial risk.
• Metro would continue to pay for arena expenses such as insurance, capital expenses and bond debt service.
• Metro would tax the team only on its profits, not on gross sales.
• The Predators would keep most of the state and local sales taxes and seat-use fees paid by visitors to the arena. The amount in 2006 was approximately $4.2 million. The team would not retain approximately $400,000 in annual arena sales tax revenue it says is currently “set aside for education.”
“The majority of this revenue would evaporate immediately without the Predators,” Freeman wrote. “… We believe this concept is much preferable to our earlier proposal with a ticket purchase guarantee plus a $3 million direct subsidy from the taxpayers. …. Our strategy is to use this incentive to maximize the utilization of the arena.”
• The team could leave Nashville if average annual paid attendance in any year is less than the minimum necessary to qualify for NHL revenue sharing and if the new ownership group loses a cumulative $20 million in addition to the $193 million paid for the team. The city could purchase tickets to make up the amount but would not be forced to.
• Metro would “make necessary and reasonable capital expenditures to keep the arena up-to-date.” In addition to capital expenditures already approved, but not funded, by the Metro Sports Authority, the group suggests Metro complete the building’s rehearsal hall, build “three additional Fun Zones similar to the one already constructed” and “improve the HVAC to eliminate excessive utility costs.”
• Metro would pay $289,000 in back performance fees that the Predators claim the city owes from 2004 and 2005 and would pay the 2006 and 2007 performance fees.
• The Predators would be allowed to use any parking facility built as part of the proposed new downtown convention center. The group suggests the team be allowed control of the garage two hours before any arena event although not from 5 a.m.-5 p.m., Mon.-Fri.