Gwinnett County's plan to build a new stadium for the Atlanta Braves' top minor-league team has received top credit ratings — mainly because of the county's commitment to pay off the construction bonds with taxpayer money if other avenues fail.

The three major bond-rating agencies have assigned AAA grades to the $33 million in taxable revenue bonds that will fund the stadium. None of the three agencies attribute their rating to projected stadium revenue. All attribute the rating to the county's fallback position.

"The ... AAA rating reflects the security provided by a pledge of Gwinnett County's full faith and credit and taxing power," Fitch said in a report on the bonds.

In an interview, Moody's public finance analyst Baye Larsen said: "The bottom line is they are pledging their full taxing authority, not just one revenue stream."

Gwinnett officials say they expect the annual debt payments to come primarily from stadium revenue — $250,000 per year in rent plus $1 per ticket sold from the Braves, 50 percent of parking fees and a portion of the anticipated sale of naming rights. County officials say they expect the rest to be covered by a new tax on rental cars and up to $400,000 per year in funds from the Gwinnett Convention and Visitors Bureau, whose operations are partially funded by the county's hotel/motel tax.

Recreation funding

Gwinnett officials say no property tax increases are planned to help pay for the stadium, but documents obtained under the Georgia Open Records Act show officials discussed increasing the millage rate for recreation in the context of the stadium financing plan. Aside from the $33 million in debt, the county will spend $12 million from the recreation fund on the stadium.

The bond rating agencies did not take a position on whether stadium revenue sources will add up to enough to cover the annual debt payments of about $2.4 million. They focused on the county's financial condition and its unconditional commitment to pay off the 30-year bonds, one way or another.

The AAA rating "has nothing to do with the revenues generated from the stadium covering debt service," Fitch analyst Christopher Hessenthaler said in an interview. "It has everything to do with the county's willingness and ability to pay debt service."

Because of that commitment, he said the bonds, while legally revenue bonds, are as strong as general obligation bonds.

"Not the same as, but as strong as," Hessenthaler said.

General obligation bonds are backed by the full faith, credit and taxing power of a municipality. And so, ultimately, are the Gwinnett stadium bonds, which Standard and Poor's described as a "general obligation equivalent security."

Moody's Larsen said the stadium revenue bonds don't differ from general obligation bonds "from our perspective in terms of rating." Although the stadium revenue projections did not drive the rating, she said Gwinnett will get "financial and budgetary benefit" from bringing in new revenue to offset new debt.

Gwinnett County Commissioner Bert Nasuti, the driving force behind bringing minor-league baseball to the county, said he is comfortable the stadium will prove a good deal for Gwinnett.

"We analyzed the business model, analyzed the projections involved," he said. "At the end of the process, [County Administrator] Jock Connell and [Gwinnett Arena General Manager] Preston Williams walked in and said, 'There was more risk with the arena [which is profitable] than with this.'"

The bond-rating agencies' reports cited Gwinnett's strong credit, manageable debt, stable outlook and solid financial performance.

The county will pay a higher interest rate than it had hoped because the municipal bond market recently saw a sharp rise in yields.

Taxable bonds necessary

A feasibility study last year assumed a Gwinnett stadium bond rate of 5.5 percent, and county documents prepared in January projected a rate of 5.95 percent. However, the $33 million in taxable bonds were priced at 6.25 percent in a competitive bid process on Feb. 28.

Documents show that the county also looked at the option of financing the stadium with tax-exempt bonds, which would carry a lower interest rate and save millions of dollars in borrowing costs over 30 years. Gwinnett forecast tax-exempt rates for the stadium project to be about 1.5 percentage points less than taxable bonds, documents show.

Many sports facilities, including the Georgia Dome, have been built with tax-exempt bonds. But the practice has become rarer because of changes in tax law, and the Gwinnett project did not meet the current requirements for tax-exempt financing, experts said.

Regulations change

A stadium that gets more than 10 percent of its use from a private business and more than 10 percent of the funds used for debt service from a private business cannot be financed with tax-exempt bonds, according to Atlanta attorney Earle Taylor, who focuses his practice on public finance.

The Gwinnett deal fails to qualify on both counts.

"Basically, in order to do the stadium tax-exempt, you have to give the stadium to the team for free," said Taylor, a partner at law firm Kilpatrick Stockton. He is not involved in the Gwinnett deal.

In a notable recent case, New York found a way around the restrictions on tax-exempt stadium financing. New stadiums for the Yankees and Mets are being built largely with tax-exempt bonds.

After a lengthy process, the Internal Revenue Service signed off on a creative and complex approach in which New York removed the stadium sites from the property tax rolls and allowed the teams to make payments in lieu of taxes — PILOTs — and to pay no rent. The IRS held that the PILOTs would not count toward the 10 percent cap on private-business payments. The IRS has since issued further regulations on the matter.

The Gwinnett County administrator, Connell, said the county "absolutely" would have preferred tax-exempt financing, but that it was not doable in the context of this deal.

"We can only do what the IRS is going to allow us to do," Connell said.