Just over a week before the Aug. 9th meeting of the Austin City Council, during which Precourt Sports Ventures’ McKalla Place Major League Soccer stadium proposal will be discussed among other proposals for the land’s use and purchase, the City of Austin announced an Aug. 1, 2018 meeting for discussion and public comment on a term sheet that has been negotiated between PSV and the City of Austin. On July 27, 2018, the offer sheet that was negotiated between the Austin City Manager and PSV was released to the public. Here is a link to the full term sheet.
In June, the City of Austin passed two resolutions regarding the land at McKalla Place. Resolution 130 from that meeting directed the Austin City Manager to work with PSV to draft a term sheet for a stadium at McKalla Place and Resolution 60 directed the City Manager to receive proposals for the purchase and/or use of the McKalla Place land by all interested parties. All proposals that met the City of Austin’s criteria were to be discussed and potentially voted on during the Aug. 9 meeting along with any agreement that PSV and the Austin City Manager were able to reach.
With the term sheet agreed to and ready for review before the Aug. 9 date, the City of Austin will discuss that term sheet and allow public comment at the Aug. 1 special meeting. It should be noted that the Aug. 9 meeting will still be utilized to vote on PSV’s proposal and to hear and vote on any proposals from other parties. Those parties have until Aug. 3, 2018 to submit their proposals, so they will likely be able to make changes to sweeten their deals before the Aug. 3 deadline.
Many aspects of PSV’s original proposal to Austin remain unchanged. Precourt still proposes to rent the land rather than purchase the land and will still cover the cost of building the stadium that is immediately donated to the City of Austin while it is operated by PSV.
PSV still asks that the land be exempted from property taxes. This issue could be a major sticking point for the Austin City Council (or for PSV if the City Council mandates that property taxes must be paid) and will be worth paying attention to during the Aug. 1 and Aug. 9 meetings.
Some notable changes have sweetened the deal for Austin.
The biggest change in this new deal are in the terms of PSV’s lease of the McKalla Place land. The original proposal suggested a 20-year initial lease with the option to renew the lease for three other 20-year terms (for a total of 80 years). This lease would be for $1 per year for a total of $80 should the lease be extended for it’s full life.
The new term sheet is a dramatic departure from the original proposal. The initial lease term is still 20 years, but the three renewal periods are now only 10 years each (for a total of 50 years). Rather than a $1 per year lease, the new term sheet requires a lease payment of $550,000 per year beginning in the sixth year of the initial lease and extending for every year that remains, including the 10 year renewals. So, if the lease runs its full term of 50 years, PSV will pay a little more than $24 million in rent (44 years at $550,000 per year).
This rental agreement is a dramatic increase in pay for PSV but is still significantly lower than the rental terms proposed by John Chen and Marcus Whitfield, who offered to purchase the land outright for $22 million or to lease the land for 80 years at a total payment of $300 million.
Unlike the previous agreement, PSV would be required to fully pay for the cost of the preparation of McKalla Place for stadium construction.
PSV’s previous proposal requested a discount in utilities while the current proposal states that PSV will pay the full cost for utilities.
The City of Austin will also now have a much larger say in the design and construction of a new stadium.
Unsurprisingly, the City of Austin will require PSV to enter into a non-relocation agreement that lasts throughout the time of the lease and any renewals.
The biggest unresolved issue, aside from PSV’s steadfast determination to pay nothing in property taxes, is transportation.
This new agreement does not mandate that PSV pay for a new rail station or increase the amount of parking on the site (though the City may be able to increase the number of parking spaces with the rights of approval in this term sheet). Instead, it punts the issue to the future and requests that PSV and the City work together to identify a third party situation or another financing issue.
PSV and the Austin City Manager coming to an agreement on terms this far ahead of the Aug. 9 meeting is certainly disheartening for the Save The Crew movement, but this agreement is neither final nor was created by the Austin City Council itself. While this agreement does overcome some of the initial issues of PSV’s proposal, it still presents multiple potential sticking points including transportation, property taxes and the multiple third party offers that will likely propose to build many units of affordable housing and purchase or rent the McKalla Plan for much more than PSV has offered.
The Aug. 1, 2018 meeting will provide a good gauge of the Austin community and the City Council’s opinion on term sheet but will not be dispositive of the success or failure of this offer. Any third party offers that will be submitted by Aug. 3 will have the ability to review this term sheet and the meeting to sweeten their own offer.
Stay tuned for analysis on those two meetings.