City unveils financing plan for arena

Lincoln Journal Star
January 31, 2010

In broad strokes and fine detail, officials have revealed how they will pay $340 million for "the biggest project in Lincoln's history" -- turning a windswept railyard into a home for a new downtown arena.

Among the broad strokes:

• For the first time, the city disclosed the price to move three railroads from the edge of the Haymarket -- $51 million.
• The deal with the railroad also includes paying for a new Amtrak station and closing a pair of crossings on J Street.
• Partnership possibilities that were floated as possible components of the arena plan could change somewhat. The city would still partner with the University of Nebraska-Lincoln, which would agree to play men's and women's basketball games at the arena for at least 30 years.

But the city has opened the door to creating a sports marketing partnership with a company other than International Stadia Group, which had been mentioned repeatedly as the vision of a new arena evolved.

And among the smaller details:

• The city calculated it will pay $207,000 to plant grass and $265,500 to restore railyard canopies.

In what Mayor Chris Beutler called "a very solid financial plan," officials detailed what the arena will cost, and how the city will pay for it.

"I think we've gotten there," he said during a press briefing Thursday. At the city's request, the information was held for release until today by area news outlets, including the Journal Star.

A new arena has topped Beutler's agenda and that of many civic and business leaders for some time. Pershing Auditorium is viewed by many residents as no longer adequate to the needs of a growing city. A new arena and surrounding improvements would fuel economic development and provide jobs, proponents say.

Among the highlights:

Partnering with UNL

The city and UNL plan to form a joint public agency, which would issue general obligation bonds to finance the arena and supporting infrastructure.

The city would own the 16,000-seat arena. Husker basketball teams would play in it.

The city would repay about half the debt through higher hotel, bar, restaurant and car rental taxes. Arena revenue would pay another quarter of the debt.

Backing the bonds with the city's taxing authority will allow Lincoln to pay significantly lower interest rates, estimated at 4 percent, given the city's good credit rating.

That would save hundreds of millions of dollars in interest over the life of the 30-year bonds, said Scott Keene of Ameritas Investment Corp.

The city could raise property taxes if projected revenue falls short. But officials are confident that won't be necessary; they say their projections are conservative.

"Two or three of the revenue streams could come in lower than expected and there would still be sufficient revenues to cover the debt service," Keene said.

A private partner

The city's figures didn't include financial help from International Stadia Group, a subsidiary of the London-based marketing giant IMG College.

In November, the city's arena coordinator, Dan Marvin, said ISG had verbally committed to financing $75 million of arena debt for the right to manage the sales and marketing of arena seating, advertising and naming rights.

But because others have expressed interest in taking on that role, the city will request proposals from all interested companies.

The city is still in talks with ISG - which is "very interested in doing business with Lincoln," Marvin said.

And Steve Moore, president of North and South America for ISG, said in an e-mail: "We are 100 percent committed to the Haymarket Arena project and are currently in development on agreements with the city and university to clarify our relative positions."

Because the city's arena financing plan does not count on a private company taking on any of the debt, the financing plan projects the city will keep more arena revenue.

But that could change, depending on what companies offer the city.

$51 million to move railroads

The city also disclosed the cost to move railroad tracks out of the way.

• The city would pay Burlington Northern Santa Fe Railway $45 million to move -- $1 million for the land and the rest for relocation costs. The city would also swap 18 acres of its land for 41 acres of BNSF property.
• The city has tentatively agreed to pay Union Pacific $2.8 million to move out of 14 acres. Also, the city would pay to rehab UP's bridge over Salt Creek to accommodate trains traveling at 40 mph.

The agreement requires the city to close rail crossings south of the Haymarket district - on J Street, at Second and Third -- and release BNSF from legal liability for any environmental damage.

• The city would pay $1.7 million to move and rebuild the Amtrak station.

Show us the money

And where will the money come from?

Most of it -- $194 million over 30 years -- would come from increased taxes on hotel rooms, bar and restaurant tabs and car rentals.

Another $95 million is projected in arena revenue -- ranging from naming rights to premium seating.

The rest of the money to pay off bonds over 30 years would come from:

• $33 million in private donations, including $20 million from 2015 Vision -- a group of business leaders -- and $13 million in mostly private money for the Breslow Ice Center.
• $24 million in state turnback taxes (70 percent of the sales tax revenue collected from the arena and nearby hotels is "turned back" to the city).
• $19 million in revenue from two new parking garages and surface parking.
• $17 million from the sale of land to developers for offices, shops and stores and tax increment financing.
• $16.4 million in interest income from the bond proceeds.
• Federal funds to assist with environmental remediation, $800,000.

The revenue sources total $398 million to account for a reserve the city must have for the debt.

Arena coordinator Marvin offered reporters on Thursday a foot-high stack of studies and reports on everything from environmental issues to how to get vehicles in and out of the area.

The mayor promised to be transparent about what he called "the biggest project in Lincoln's history."

"It's show time," he said.

Reach Deena Winter at 473-2642 or dwinter@journalstar.com.

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