A proposed change to the city's agreement with the Nashville Predators will reduce Metro's obligation to the team by more than $1.5 million.
Unveiled Friday, the changes cut the $7.8 million subsidy to $6.1 million in a deal that puts more value on performance incentives for Bridgestone Arena's manager.
"The city's goals were to lower the subsidy, establish a mechanism to finance capital improvements at the arena and preserve the franchise and incentivize improved arena operations," Metro Finance Director Rich Riebeling said. "We felt it was extremely important to lower the amount of money the taxpayers put into the building. Equally as important: this is the city's building … and we have an obligation to make sure this building is up to standards. We have not put a lot of capital into this building in the last several years."
The changes to the four-year-old agreement — inked shortly after the David Freeman-led ownership group bought the team — caps the net operating loss to the city at nearly $4.2 million (with annual adjustments of no more than 2.5 percent based on the consumer price index) and halves the management fee paid to the Preds to $1 million. However, the maximum incentive payment — equal to 50 percent of the increase in certain revenues from the base year of 2006 — increases from $2 million to $2.7 million. In addition, the Predators will be able to keep, as a performance bonus, any shortfall less than the $4.2 million loss cap.
Further, the non-school state portion of the sales taxes from non-hockey events — which previously went directly to the Predators — now goes to the Sports Authority under legislation that goes into effect July 1. The authority may transfer those funds to the team.
All told, under the new agreement, the Predators could receive as much as $8.4 million, of which the city's general fund obligation is $6.1 million.
The deal also adds a $2 fee — on top of the existing $2 seat user charge — to fund what will likely be a revolving line of credit for capital improvements at the 15-year-old facility. Those improvements will have to be approved by the Sports Authority.
The city will also issue a $6.4 million federal energy conservation bond for the arena, a move which Metro and team officials will reduce utility costs in the long term.
The changes also alter the terms by which the team can terminate the lease. In addition to a $10 million fee, the team would be obligated to pay 50 percent of any outstanding capital debt. The lease is also extended through 2021, a seven-year extension.
The obligation for the team's ownership to certify its net worth was eliminated, but was replaced by a new requirement that at least 50 percent of the team be owned by Middle Tennesseans.
The city and team also announced they will work together to build a new ice facility to "grow and support youth hockey and skating."
Effectively, the changes are to the agreement between the team and its arena management arm and the Sports Authority — which is set to meet June 28 — with no changes to any agreements with Metro government. Thus, no Council action is required. The issuance of the energy improvement bond and the capital improvement line of credit will have to have Council approval.