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Public tab for Philips rehab could be $150M

Atlanta Mayor Kasim Reed says a renovation of Philips Arena, key to keeping the Atlanta Hawks in downtown, could be a $200 million to $300 million project, and the public’s tab could be as high as $150 million.

Reed's comments in an interview Monday with The Atlanta Journal-Constitution were the first indication of how much public funding might be involved in the rehab plan, which came to light last fall.

The mayor said he expects a deal to renovate the downtown arena by the end of March. The total cost and the taxpayer portion of the overhaul hasn’t been set, he said, but the city has determined it could afford to finance $100 million to $150 million.

“We have not settled on the number, but what we have looked at is our own capacity of what we can comfortably finance,” he said in a meeting with AJC reporters and the newspaper’s editorial board.

His comments were part of a preview of his State of the City address later this week. They came as the city’s financial fortunes have rebounded from the depths of the Great Recession.

The Atlanta Fulton County Recreation Authority owns Philips Arena and can issue bonds, but the city would need to help “back stop” bond financing, Reed said.

Reed said funding sources haven’t been determined, but rental car taxes — which fund part of the existing bond debts on the arena — are likely to be part. He did not rule out funding from the Westside Tax Allocation District.

He said the deal will not involve a tax increase.

Hawks spokesman Garin Narain said it was premature for the team to comment on the matter.

An agreement involving public funds would be the fourth since 2013 between a metro Atlanta government and a major league franchise involving public subsidies for a sports facility.

The Falcons and Atlanta struck a deal for $200 million in bond financing for the $1.4 billion Mercedes-Benz Stadium. That deal also will involve hundreds of millions more in public money for financing costs, operations and upkeep over 30 years. Cobb County lured the Braves away from Turner Field with an offer of $368 million in public funds for the future SunTrust Park. The Atlanta United FC franchise will receive public support for a headquarters and soccer training facility in Marietta.

Bryan Long, executive director of left-leaning watchdog group Better Georgia, is opposed to such a hefty use of taxpayer money, but he said local leaders can be at the mercy of professional sports franchises.

He said Reed is likely concerned about losing another pro sports team given the Braves’ planned move to Cobb County and and the Thrashers’ departure to Winnipeg in 2011.

“I can imagine he doesn’t want to see the Atlanta Hawks leave on his watch, which puts the city in a very difficult negotiating position and the Hawks know it,” Long said.

Reed acknowledged stadium deals with public money aren’t popular. His administration plans to conduct a poll on the Philips Arena renovation, he said.

“I’m inclined to believe that so long as we are not raising the public’s taxes, which we are not, to afford to pay for it, it is my sense there will be support to do it because people want to keep the Hawks downtown,” he said.

Reed said Philips, which opened in 1999, hasn’t kept up with other arenas and its configuration, including a wall of suites on one side, is not in fashion with newer NBA venues.

The Hawks’ future at Philips has been in question since June when an ownership group led by billionaire Antony Ressler acquired the team and did not rule out moving it out of downtown.

Philips and surrounding infrastructure upgrades originally cost $213 million. That included about $150 million in bonds backed by stadium revenue (with any potential shortfalls backstopped by city of Atlanta and Fulton County taxpayers). Rental car taxes paid for infrastructure improvements.

Operating revenue pays annual debt service of about $11.9 million, according to bond documents obtained by the AJC. The recreation authority which owns Philips, refinanced the $124.5 million in bond debt in 2010. The bond debt is scheduled to be paid off in 2028.

Councilwoman Keisha Lance Bottoms, also executive director of the recreation authority, said Reed’s office is handling the bulk of discussions about funding, as the authority works to close the Turner Field deal later this year.

In October, the AJC first reported talks about a Philips rehab for the Hawks. Reed then gave a range of $150 million to $250 million for the project cost. At the time he said public backing would be involved but did not discuss an amount.

Reed said Monday the renovation would involve doing away with the wall of luxury boxes on one side of the arena and also better connect disjointed corridors for better flow of fans.

Atlanta Council President Ceasar Mitchell said he wants to learn more from Reed about the proposal.

“You never want to operate and negotiate from the specter of ‘all or nothing,’” Mitchell said, when asked about the risk of a sports team leaving. But if the joint project can “become an investment that will invigorate downtown and strengthen (tourism), then it’s worth the conversation.”