NLR, Travelers strike debt deal

Aim to pay off cost overrun

Arkansas Travelers Baseball Club Inc. will pay all debt resulting from the construction cost overrun for Dickey-Stephens Park, relieving North Little Rock of that future burden, according to a proposed agreement between the city and the baseball club.

North Little Rock Mayor Joe Smith and Travelers President Russ Meeks negotiated the new agreement that requires a simultaneous reworking of a city-owed loan and a modification to the ballpark’s lease. The proposal will need the approval from the Travelers’ board of directors and the North Little Rock City Council, Smith and Meeks said last week.

North Little Rock built the $40.4 million ballpark using about $28 million of the revenue from a voter-approved, 1 percent city sales tax that lasted two years, expiring in September 2007. The ballpark’s cost included private contributions and the value of the land donated for it. The ballpark opened in April 2007.

Construction costs exceeded the tax revenue used by about $6 million. The 20-year stadium lease has required the baseball club to pay to the city by April 1 a “basic rent” plus an “additional rent” from the ballpark’s net revenue from each preceding season. The city, in turn, has used the full rent payment toward the loan debt.

The rent amounts were set up to pay down the cost overrun, but were separate from the interest and finance charges accrued through any loan that the city acquired to cover the overage. The current five-year note was taken out in 2011 in a refinancing of an earlier loan and would have a balloon payment due in 2016.

“The old contract, the way it was written, actually shows that this year will be the final year that the Travelers will pay additional rent, that rent being all of the initial overage on the construction,” Smith said. “That’s because the contract didn’t allow for the Travelers to pay interest. We’ll do an addendum to the lease so they continue to make payments until the note is paid off.”

Under the new terms, the previous rent calculation, which Meeks called “confusing even to the accountants,” no longer applies.

“The construction cost overage amount and the note are two different things,” Meeks said. “They are tied together, but up until recently the team wasn’t concerned about the note because what we were concerned with was the construction cost overage.

“We’re in a position now to try to figure out a way to get the city of North Little Rock’s citizens to have zero payments remaining,” he added.

The Travelers paid the city $699,562 with a cashier’s check Friday - past its due date of Tuesday because of the renegotiation - toward reducing the remaining $2.64 million balance on the five-year note, Meeks said. Another $92,961 held in escrow also is being applied toward the loan to reach $1.85 million, the amount to be refinanced under the new agreement, he added.

The restructured agreement will involve a new, 10-year loan note to cover the remaining $1.85 million debt, Meeks said. The refinancing will set a fixed payment, starting next year, for the Travelers Baseball Club to pay an estimated $230,000 by April 15 annually to the city, which the city will then use to pay off the 10-year note, Meeks said. The city’s subsequent loan payment will be due every May 1.

Legislation is expected to go to the City Council as soon as any final details are concluded, Smith said. Approval by all parties is anticipated, Meeks said.

“All we end up changing are the lease payments, the amounts and the computation of this payment, through the last year of the primary term [of the lease] of May 1, 2026,” Meeks said.

“The intent is to get the note balance paid so the Travelers and the city know that all of the construction expense to the city of North Little Rock taxpayers that exceeded the revenue from the 1-cent sales tax, and all additional amounts, will have been paid by the Travelers,” he said.

The exact amount of the Travelers’ annual payments will depend on the interest rate the city achieves in a bid process handled by the city’s Public Building Authority, but shouldn’t vary much from the estimated $230,000, Meeks said. For the final two years of the 20-year lease, Meeks said, the Travelers will pay the city $115,000 each year as rent to complete its obligation.

The Public Building Authority - an independent board that has the ability to secure long-term financing for the city’s capital projects - owns Dickey-Stephens Park. The Travelers manage the ballpark and have a contract to pay rent to the city. The city contracts with the Public Building Authority to carry the loan.

With Friday’s payment, the Travelers have paid $5,770,946 over seven years toward the construction overrun debt, Meeks said. The Travelers are into the eighth year of the lease.

Smith called the change in the lease agreement “good for everybody.”

“I thought it would be better for the city to not be responsible for any payments,” Smith said. “The Travelers will know for the next 10 years what their payment will be so they can budget around it.

“It maybe will give the Travelers the opportunity to do some more improvements on the ball field and we don’t want Dickey-Stephens Park to get into bad shape,” he said. “We always want to have money to keep it updated and keep it clean. What I want is, 10 years from now, for that ballpark to look as good as it does today.”

A year ago, the Travelers’ annual payment was $800,350, based on net proceeds from the 2012 season, down from $981,572 paid in 2012 and $837,662 in 2011. The Travelers kept $120,000 for “operation reserves” last year, an option allowed in the 2007 lease with the city, but never before exercised.

Meeks said last year that the money was set aside for repairs and upgrades. That work included enclosing and air-conditioning the ballpark’s batting cage, he said last week.

The ballpark’s restaurant also was closed permanently at last season’s end, which allowed space for an additional staff bathroom and the expansion of administrative offices and the team souvenir store, Meeks said. There was an unexpected major expense to repair an air-conditioning system that serves the locker rooms, home and visitor clubhouses, the umpires’ room and offices for team coaches and managers, he added.

Front Section, Pages 1 on 04/07/2014

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