VIRGINIA BEACH-- Virginia Beach City Council heard the latest Tuesday afternoon on a proposal to build an arena and bring a professional sports team to town.
Comcast-Spectacor President and COO Peter Luukko says negotiations behind closed doors to secure a pro-team are going well.
"We’re there, we’re negotiating," says Luukko on landing a team, " But, we’re not there yet."
The cost for the City of Virginia Beach to build the sports and entertainment venue at the Oceanfront has gone up $46 million now that officials have factored in the cost of borrowing the money.
Last week, Mayor Will Sessoms estimated the cost at $195 million but noted that did not include borrowing costs.
Virginia Beach officials are considering increasing the city's hotel tax by 1 percent to 14 percent to help pay for a proposed arena.
Details of the proposal presented to the City Council Tuesday show that financing costs would bring the city's total to just under $241 million.
City financial experts working on the arena gave a breakdown of how the city will pay for their nearly $241 million portion of the arena cost:
$18.5 million annually from a sports team
$1.7 million from $2 per ticket debt service fee
$5.2 million admission tax from arena
$2.8 million hotel tax increase of 1%
$.9 million rebate from sales tax collected within the arena
The grand total is an estimated $29 million in annual revenue to pay debt and other costs.
The total estimated cost of the arena is nearly $346 million when interest is factored in; an additional $80 million is needed to relocate an unnamed professional sports team, for an estimated grand total of about $426 million.
"The underlying numbers are unrealistic, and I've said that at every single meeting from the first time I looked at the spreadsheet," said Councilman Bill DeSteph who believes projected costs, as well as revenue the arena is supposed to bring, are off.
Luukko says that Comcast will chip in $35 million toward the $346 million cost to build the arena and will assume all of the operating cost for 25 years.
Here is how the total cost breaks down:
$195 million from the City of Virginia Beach
$150 million from State of Virginia, including sports team relocation fee and initial construction
$46 million interest and reserve fees
$35 million from Comcast-Spectacor
The grand total is an estimated $426 million.
"I've always said from the beginning, I would like to see Comcast have a much bigger equity position in the deal," Councilman John Moss told 13News.
Moss, who said he is undecided as to whether the project should be okayed, is concerned the Commonwealth will not sign off on the funding Virginia Beach requested.
"When you look at the competing needs that the State has for roads and for schools, and we're even asking more money for roads and schools, it's gonna be difficult for members in Roanoke and people in Staunton and people other places to say, 'Yeah, we want to send $150 million here,'" Moss said.
In a statement sent to 13News Tuesday, Governor Bob McDonnell's press secretary, Jeff Caldwell, wrote: "The Governor has long supported efforts to bring a professional sports franchise to Hampton Roads. However, any state involvement in a specific deal or agreement would need to make financial sense for the Commonwealth’s taxpayers and be economically justifiable. We will be reviewing this proposal in the weeks ahead."
Virginia Beach officials anticipate a new arena could be ready in 2015, but a team that relocates would need to play in a smaller venue for the next 2 seasons.
Rumors put the Sacramento Kings as the team likely to relocate.
Virginia Beach Economic Development Director Warren Harris told council members Tuesday that Richmond could offer a possible interim venue.
The Richmond Coliseum seats about 12,000 people for basketball. Arenas closer to Virginia Beach in Norfolk and Hampton seat between 8,600 and 10,600 people.
Mayor Will Sessoms was emphatic Tuesday, saying, "I stand by what I said originally. We are not gonna ask the citizens of Virginia Beach to pay for this arena."
The next step:
December 11: City Council action to endorse direction of deal structure (subject to funding participation by State of Virginia and Comcast-Spectacor, and lease agreement between Comcast-Spectacor and major professional sports franchise) and direct staff to complete term sheet and development agreement.