Gwinnett Braves Gwinnett County Commissioner

Gwinnett Braves

Gwinnett County Commissioner Bert Nasuti decided in 2006 that Gwinnett County should pursue a minor league baseball franchise. By mid-2007 the feasibility study was completed. The original intent was to bring an independent league team to the county. They would occupy a new stadium that the county financed. However, the Atlanta Braves, who had an option to end the lease of their existing AAA team in Richmond, VA, at the end of the 2008 season, initiated discussions with the Gwinnett County Board of Commissioners (Gwinnett County, 2008). The Braves had been negotiating with Richmond on a new lease deal but the negotiations had not progressed far. For the team, the move towards minor league baseball in Gwinnett was a "lucky coincidence" (Tucker, 2008).

In January, 2008, the County Board of Commissioners for Gwinnett County, outside Atlanta, voted unanimously to approval a deal that will see the construction of a new minor league baseball stadium. As part of the deal, the Atlanta Braves agreed to move their AAA minor league affiliate from Richmond, VA to Gwinnett County to play in the new stadium (Ibid.).

Pursuant to the deal, construction on the new stadium began in April. The estimated cost of the construction is $45 million. At the vote of the County Board of Commissioners, the funding package for the stadium was approved. Some of the funds, $12 million, will come from county tax revenue that had been earmarked for recreation. The remainder of the funds will come from bonds issued by the county with a face value of $33 million. The bonds were given a 'AAA' rating by Fitch Ratings (Reuters, 2008). This rating indicates that the bonds are backed by the county, rather than the revenue streams from the stadium.

This runs counter to the county's claims, which state that the interest on the bonds will be covered by revenues from the stadium. There are several revenue streams that will contribute to this. The county will receive $250,000 per year from the Braves in rent. They will receive $1 for every ticket sold to a Gwinnett Braves game. This contribution has been budgeted at $400,000, the minimum level guaranteed by the Braves. The county will receive 50% of the parking revenues, an estimated $200,000. The county will also receive the fees from the naming rights to the stadium, less $350,000 that they will pay to the Braves (Tucker & Redmon, 2008).

The county will also impost a rental car tax and a contribution from the Gwinnett County Convention and Visitors Bureau to top up the direct revenue streams from the stadium. The bonds bear interest of $2.59 million annually, which equates to a rate of 7.84%. The estimated revenues from the streams listed above will total between $1.95 million and $2.59 million.

If a shortfall does emerge, the County will be held responsible for the interest payments. The shortfall would come out of the county's general budget. If necessary, the County will need to raise property taxes. This was a promise made to the lenders by the County's leadership.

Since the deal was made, the stadium costs have increased significantly. The construction budget of the stadium increased approximately 50% by the fall of 2008. The County was forced to pay for this shortfall by accessing reserve funds of $19 million, a move that received unanimous approval in September (Young, 2008). The weakening economy has hampered some of the projected revenues as well. For example, the stadium has yet to be named, and the market for naming rates has worsened considerably since the deal was announced. This will lead to a shortfall in revenues, not just for this upcoming year but for several years to come (Pearson, 2008). If the County is unable to sell the naming rights, the Braves will be able to do so, but they will keep more of the money. This represents a steep reduction in the value of the naming rights. Therefore, it appears as though the County is going to pay some of the interest on the bonds out of its general budget, which was not part of the original plan.

It is apparent today that these projections, both for the revenue streams and for the stadium costs, were optimistic. The County had used these optimistic figures as the basis for their argument to build the stadium. Moreover, County economist Alfie Meek outlined other benefits to the County. He calculated $15 million annually in new economic activity and 200 new jobs that would pay $6.5million in new personal income (Gwinnett County, 2008). These figures were based partly on impacts seen from the Gwinnett Arena, home of a minor league hockey team.

Despite the cost overruns and high likelihood of future revenue shortages, bringing the team to Gwinnett is likely to have a positive impact. The County was eager to build a stadium, but they made their decision based on relatively optimistic numbers. The high end estimate for attendance revenue, for example, was $468,000; the county used $400,000, very close to that high end estimate. The county increased the cost of the stadium under the assumption that a AAA team would draw a larger attendance than an independent team. However, they approved substantial improvements to the stadium after construction had begun, which resulted in the $19 million supplemental funding. The County is unlikely to recoup its investment in the stadium as a result of these year-over-year shortfalls and the additional $19 million outlay. Tax revenues on the $15 million of increased economic activity are unlikely to cover the shortfall. However, the project's contribution to the overall growth of the Gwinnett economy, especially during this period of economic difficulty, will be a positive for the community. The baseball team will be a draw for businesses and residents, and the contribution to the GDP of the area will offset the direct cost to the county. The citizens of Gwinnett County are, in effect, subsidizing the project in order to facilitate economic growth and an increase in social prestige for the region.