And I think you have something that you're not telling us as the 56 11/29/2000 WHOLE - STADIUM BILLS purpose of these bills.
If in fact this isn't necessary because there are stadium transactions concluding, it is within the purview of City Council simply not to pass this legislation. That's the answer. You know, we are putting -- we are trying to put in place a facility that will enable us to finance stadium repairs, if in fact there are no new stadiums funded. If those deals are going to pass, City Council can simply not approve these transactions or not approve them, you know, in the -- you know, not approve the transactions.
Well, I am very fearful that these two bills could be interpreted to permit the City Administration, without further contact with City Council, to declare the current leases terminated and to be authorized to renegotiate a new three-year lease. And it is my strong view that the purpose of such a renegotiation would be mainly to relieve the teams of that obligation with respect to those payments beginning in February. I can see nothing else that makes any sense whatever in having these 57 11/29/2000 WHOLE - STADIUM BILLS bills presented to City Council at this time. Thank you, Madam President.
Thank you. I didn't hear all of Councilman Cohen's questioning. Before I left the room, I did hear some of it. Isn't it so that the Administration does not have the authority to waive the flip without coming back to City Council?
I think that's right, Council President, yeah. I mean, what I did say was that, in all due respect, and I have great respect for Councilman Cohen, but the bills in front of us today do nothing but address how we fund the repairs. They don't give us, the City Administration, authorization to change the Vet lease. We have to bring you in a lease amendment, and that amendment would include, if anybody would want to touch the sky box revenue provision. I mean, the lease has to come back here. There will have to be an amendment, and Council will have to vote on it, consider it and vote on it and act on it.
I don't want to be belabor an issue, but I'd just like some 58 11/29/2000 WHOLE - STADIUM BILLS clarification on the turf replacement issue. And I hate getting back to that, but what is the life expectancy for a new turf?
I believe at this point in time, we're told that the life expectancy is about six years.
Six years. And how old is the turf that we presently have?
It's just about six years. We may have a year on the warranty of the original turf product, but I don't even think it's a full year left on the warranty.
The original turf that's down right now, when it was installed, I believe we were given a seven-year warranty on it. At this point, it is now six years or a little over six years old, so it's at the end of the warranty period, or useful life period. I would equate this to -- it may sound a little silly, but when you get a 60,000-mile warranty on a pair of tires and if you drive it and at the end of 50,000 miles, your tread's gone, 59 11/29/2000 WHOLE - STADIUM BILLS and you go to trade it in, you still have a 60,000-mile warranty but your tread's gone anyway. Maybe it will give you 50 cents, you know, towards the purchase of a new tire, as the balance of the warranty. And that's sort of what I equate this to as well.
And didn't it have a fire on the field at one time, if my memory serves me, as a result of -- what was it, a parashooter that came down and he had flares, and didn't it burn the -- pardon me? Didn't they burn part of the turf?
I just checked with Greg Grillone, who is the Stadium Manager, and tells me yes, it did happen. There was a section of the field that was scorched, but that had been repaired.
Okay, can we put the issue of the turf to bed? 60 11/29/2000 WHOLE - STADIUM BILLS One more question about the turf, and then we're going to conclude the issue on the turf.
Thank you, Madam Chair. Can I get the mic. on? Thank you. I'm not clear on how we left this issue. Could you please, Chief of Staff, are we putting this project -- I understand the deal's been awarded, but are we putting this project on hold? Or what exactly are you doing here as a result of this conversation today?
We are not moving forward with any of the construction, you know, any of the item we're proposing right now until we reach some kind of resolution with respect -- with City Council with respect to the items of work. We will also be providing you with technical data supporting the turf replacement, further technical data supporting the turf replacement. We -- you know, I mean, we have construction, it needs to happen as soon as the season is over, but we will not, you know move forward and, you know --
Again, just briefly 61 11/29/2000 WHOLE - STADIUM BILLS so I understand when we close this conversation, this letter of intent award of a contract to a vendor, how do you put that on hold?
We will call the -- I can find out technically. We will call the vendor.
So you're going to put that on hold? As far as the vendor is concerned, he's going to be notified that we are not going to move forward on this project?
Yeah, we will do that. We -- you know, let me repeat, though, that we have timing constraints on all of this.
And, you know, in making the commitment to Council that we will put these items on hold until there's some kind of agreement, you know, we have to also agree that there are timing constraints. We're going to need some kind of signoff. We have a requirement to do repair work and maintenance work at the Vet, one way or the other.
We have a stadium that 62 11/29/2000 WHOLE - STADIUM BILLS has structural problems with it, we have stands that need repair. There's going to have to be work done to maintain this facility.
And so we can put the -- you know, we can we can put the items on hold, we can, you know, shorten the -- you know, try to further shorten the construction schedule, but these are not items that --
Well, I'm not suggesting that everything on the list be put on hold; I'm suggesting that the playing surface issue be put on hold until the technical data that supports the decision is provided. So I asked the decision so you would be able to make it clear to me and the members of Council on exactly how you plan to move forward on this particular issue. Thank you Madam, Chair.
I would like to ask that we be allowed to work out a protocol with the Office of the Council President so that, you know, that as items surface, you know, we provide the technical information that, you know, that Council has asked for, that, you know, if we can develop a 63 11/29/2000 WHOLE - STADIUM BILLS process that would enable to us move quickly in response to the timing constraint, that we do have it. Short of having full hearings, it would be helpful.
You're welcome. The Chair recognizes Councilwoman Blackwell.
Thank you, Madam President. I just want to follow up on some of the things that we are talking about in terms of this interim period. So until the stadiums are built in 2003, will both teams still pay their annual rent under the current lease agreement or the percentage of ticket sales? Or what happens during this interim period? And what about this -- any maintenance issues during the interim period?
Well, again, you have 64 11/29/2000 WHOLE - STADIUM BILLS leases in place between the City and the teams. The legislation before you now does not change that, it does not amend, it does not alter those leases. Even though we've used the technique of having PAID become, you know, the landlord of the building for PAID to have a right to issue debt, et cetera, the City leases the building back to PAID -- excuse me. PAID leases the building back to the City, the City remains the landlord to the two teams, and the current two team leases remain in effect, as they stand today. If the City wishes to change those leases to terminate them, to alter them, they will bring amendments back that would authorize that; they will come before this chamber, and Council will have to, you know, review, comment, and then agree or disagree on doing that. So that all of the current lease relationships -- them paying rent, us having to maintain, those all stay in effect. This legislation doesn't affect that.
One more question. How much will it cost, or would it 65 11/29/2000 WHOLE - STADIUM BILLS cost, to demolish the Vet in 2004? And if the new stadiums are built, will some of the proceeds from this bond be used for the demolition costs, or would a new bond be considered? What about demolition costs?
Let me try to answer those, I'm doing this off the top of my head 'cause I didn't bring that file. I think the estimated cost to demolish the Vet is approximately $12 million -- I think that's about right. But there's additional costs on top of the 12 because, actually, if you finish demolishing the Vet and you then look at what you have, you have a hole in the ground, because the field sunk, so there's also a cost to fill the hole and create, you know, the normal condition which, I think, is 4 or 6 million. I can get you precise numbers. I'm doing this -- I don't have those files with me. The intent, if we build new stadiums, is to pay for that cost as part of the overall cost that are being proposed in the ordinances that you'll be considering tomorrow for new stadiums. It's not out of this money; it would be 66 11/29/2000 WHOLE - STADIUM BILLS out of the new money.
Okay, okay. Thank you, Madam President. I'm done.
Mr. Hankowsky, I'd like to go back to the start of today's hearing and try to get a somewhat better understanding of your response to the Council President's question, which, I believe, revolved around the provisions of Bill 82, which, to some extent, I think, are what caused us to be here today, at least conceptionally, although it does not appear that we're necessarily following some of the other provisions of Bill 82.
I'm sorry, Councilman. I just missed the end of that. I apologize.
That's okay. I wanted to ask you about your response to the Council President's question at the beginning of the hearing with regard to some of the specific provisions --
-- of Bill 82, 67 11/29/2000 WHOLE - STADIUM BILLS which, I think, conceptually at least, are a part of the reason that we're here today, although there are some other components of the provisions of Bill 82, which I'm trying to understand, as to whether or not we're following those provisions as well.
So for instance, I think the Council President read earlier that part of Bill 82 talks about up to $80 million in capital repairs, restorations, and replacements to be made to Veterans Stadium shall be decided by agreement among the City, acting through the City Commissioner of Public Property, the Eagles, and the Phillies. And the list of the said capital repairs, restorations, and replacements shall be attached as an exhibit to the agreements with the Eagles and Phillies, which shall be subject to approval by resolution of City Council prior to its execution and delivery. Now, are we following that particular provision through this process today?
If I could, Councilman, only because I sort of feel I'm beginning to tread 68 11/29/2000 WHOLE - STADIUM BILLS into the question of how you interpret the ordinance and the legality of the ordinances. And I'm often happy to respond in many areas, but I think on how this is, I would ask if Paul McCarthy, of the Law Department, could actually sort of review what legally we think we're doing with ordinance, if that would be helpful, in response to that bill.
What I'm struggling with is, we -- I think we think we have attached a list to this bill. And so I -- but I want to -- I'm not sure -- I can't do it, to be honest with you, chapter and verse of Bill 82. And so perhaps Paul could help me explain what provisions of that bill we think we're actually implementing with that legislation, which I think is the question.
Right. Well, let me make sure that I understand what I thought I understood back on March 1st, and then you can tell me where you think that I'm in error. It was my recollection back at the time, and there have been subsequent discussions, 69 11/29/2000 WHOLE - STADIUM BILLS that the Bill 82 process was envisioned to entail that the City and the two teams would mutually agree upon a list of capital repairs or improvements, which would be attached as an exhibit to the agreements amending the leases with each of the teams. Subsequently, those agreements would be included, as with the exhibits, would be a list of the capital improvements, which would be submitted to us for approval by resolution. Council would then adopt the resolution and these amendments, and then the City and the teams would execute the agreements. Now, I mean, is that a correct characterization of what the provisions of Bill 82 were, that we approved back in March?
This is Paul McCarthy, good afternoon. I am a Divisional Deputy City Solicitor for the Law Department. Councilman, that's a correct description of the process set forth in Bill 82.
Okay. Can you tell me, based on what we have in front of us, how we are either in compliance with those provisions; or 70 11/29/2000 WHOLE - STADIUM BILLS to the extent that we're doing something different, tell me what the difference is.
We are, at this juncture, Councilman, doing something different. The reason that we are doing something different is that Bill 82 anticipated a process with the teams and negotiations with the teams about the scope of repairs. We invited the teams to participate in that process; they declined to do so. Consequently, having no agreement with the teams, there is no amendment to the leases that we might offer to you at this time. Nonetheless --
Well, hold your thought right there. I thought I heard earlier in the testimony that the list in front of us -- there's a list in black and white, and then there's the list of those items with the yellow and gray boxes that lays out a schedule. I thought I heard earlier testimony that indicated that that list was an agreed-upon list between the City and the teams; is that correct?
Forgive me, that's accurate. There are, of course, two scenarios 71 11/29/2000 WHOLE - STADIUM BILLS here. There's the 3-year scenario at $19.7 million; there is the 10-year scenario at up to $80 million.
Now, the language of the bill, though, didn't anticipate any particular timeframe scenario; it just laid out the scenario. Is that correct?
Okay. So what is the difference and why is it different and why are we -- I mean, I thought I heard you say earlier you asked the teams to participate and they didn't participate; therefore, you don't have amendments to the lease.
But now we have an 72 11/29/2000 WHOLE - STADIUM BILLS agreed-upon list based on the early testimony not upwards of $80, but $19.7 million. So, I mean, we either have an agreed-upon list or we don't have an agreed-upon list, and the difference is the price tag, correct?
Right. Let's stay with the two lists. The teams have verbally agreed that the 19.7 list is the list that would get the Vet through the next three years of useful life. The teams have not agreed or reserved their rights on any list that deals with ten years.
I think for what are fairly obvious reasons. On the three-year list, in terms of an amendment to the Vet lease, that list obviously is a list that assumes you're building new stadiums. 73 11/29/2000 WHOLE - STADIUM BILLS
So there actually has to be an amendment to the Vet lease that is more extensive than simply saying, Here is list of repairs, 19.5, 'cause it's actually going to be what I call "the unwind lease amendment."
It's says when they leave the current buildings, it says what happens in a (unintelligible) event, it says what happens in a delay. So the parties are now going to need to sit down and do that amendment.
I think all that we are seeking Council's support for today are: One, the putting in place of the PAID mechanism to finance it, so we're outside the Capital Budget; and, 74 11/29/2000 WHOLE - STADIUM BILLS secondly, that the list of 19.7 is a list that would allow the Capital Budget Office and Recreation to proceed with these repairs, part of this being the timing problem of just getting them done between seasons. It's a mechanical issue.
We understand that at the end of this process -- and I understand some of the frustration, because you really are, in effect, running in parallel here with two scenarios about what you're doing with the Vet that are based on another set of bills about, are you staying at the Vet or not. And, unfortunately, just given the timing of all of this and the Council's schedule --
-- you kind of have to do them in parallel. You could do them, if you had enough time (unintelligible), and then you'd actually know the answer and you wouldn't be dealing with two scenarios; you'd be dealing with 75 11/29/2000 WHOLE - STADIUM BILLS the one scenario.
Right. I'd like to go to the financing part of the deal, and I'd like to come back to where we are now for a moment. So now I need to ask the Treasurer a question.
Madam Treasurer, you were here at some time not too long ago, when we were having one of our many discussions about Veterans Stadium, and we had talked about the prospect of, I guess, this transaction. It may have been at the time of the approval of the question to go on the ballot.
And I think I asked you about the timetable for the bond issue, putting the issue together, getting it out to market, and then when you would actually have funds in hand. Can you take us back through that, 76 11/29/2000 WHOLE - STADIUM BILLS given that you're potentially on the verge of having a transaction ready to go.
The bond issue with respect to this financing, or with respect to the general obligation financing?
All right. We contemplate that if we have successful passage of this legislation, to be on the market as early as December 17th.
It's a few days after the legislation is passed and hopefully signed by the Mayor.
Gotcha, okay. And so you're in the market around about that time, and when do you actually have the money?
Okay. This transaction actually is being structured as a commercial paper 77 11/29/2000 WHOLE - STADIUM BILLS program, which is basically comparable to -- the best way to describe is, it's like a line of credit, it's debt. And the way it works is, you create a debt instrument in which you draw down the amounts of money you need to fund whatever capital program you wish, you need to fund. So in effect, we're not issuing an entire --
It's a debt instrument. It's not a bond; it's like a note. And what you do is, you actually --
Is that from a bank or from a private placement? Or, I mean, who's providing --
You're probably targeting similar investors who would buy bonds, except the duration is shorter. So while a bond could be anywhere from a year to 30 years, based on the structure of the transaction, commercial papers can be as short as a week to 270 days. So you're actually remarketing the note.
Tell me about the -- what's our debt service on that? 78 11/29/2000 WHOLE - STADIUM BILLS
It's hard to say at this moment because this is going to be a taxable available-rate debt, so whatever the prevailing market rates are in December, it's going to be what it is. We will go out into the market.
Because of the use. There's a -- and actually, bond counsel is not here, but there's actually a use with regards to the -- there's a private use issue.
That is correct, but there's an issue with regard who is benefitting from the use of the proceeds, who is benefitting from the expenditures that we're putting into the building.
Well, whoever benefitted from the expenditures, the $64 million of expenditures that made in the Veterans Stadium in the past 7 years, who benefitted from that? And they were all capital dollars, weren't they?
Councilman, not really. It was bad enough I tried to be a lawyer; 79 11/29/2000 WHOLE - STADIUM BILLS now I'm trying to be a bond lawyer.
This is what is generally characterized as the private payment problem, which is to say, when you've got -- if you try to do tax-exempt debt that way, you can't get payments coming back this way to the issuer from the private beneficiary of the tax-exempt debt. And there have been a series of rulings, including letter rulings, from the IRS that have really crunched down the definition of what this is coming back.
You got to tell me -- I mean, I don't know if I can do it as well as you do but, I mean, the --
The rent from the teams back, a piece of the concessions. I mean, in 80 11/29/2000 WHOLE - STADIUM BILLS other words, the current --
All right. But -- but the bond counsel's opinion in looking at this transaction at this point in time, based on the IRS rules, is that the materials of the Vet lease create private payment issues. And so what you need to do to finance this -- if this would have been the case had we done itself this through the Capital Budget. This is not a question of technique between PAID or the City.
Has this issue ever come up -- I mean, we've done capital expenditures to Veterans stadium forever.
It's because the IRS has changed its legislation over time. So in 1972, where it may have been permissible to use taxes-exempt debt, in today's environment, with the various legislation that has been passed by the IRS, we are not able to do that on a tax-exempt basis. So the laws have changed over time, and that's why we're doing it in tax-exempt -- in taxable note, because the laws, as they are 81 11/29/2000 WHOLE - STADIUM BILLS written today, do not permit us to use the tax-exempt -- our tax-exempt status to issue the debt.
So what would you have done if we had not gone through PAID and had just done the 40 million in repairs through the Capital Budget?
If we had done it through the Capital Budget, it would have still been taxable.
The GO would have been structured where you have a tax-exempt piece and a taxable piece, but it would be one transaction.
Mr. Hankowsky, you 82 11/29/2000 WHOLE - STADIUM BILLS had mentioned on a couple of occasions that the list represents an agreed-upon list between the City and the teams. Can you tell me what document is before us today that represents or articulates that agreement?
-- in an environment where you asked them to participate in one part, they said no, but now we're coming back and saying, but we like the 3-year part for 19.7, but we don't have a document that indicates that.
So what is that based on? 83 11/29/2000 WHOLE - STADIUM BILLS
Yeah, it's based on -- a series of meetings were held between the teams that, I guess -- I mean, I have to be candid, that basically I initiated. And Mr. Tustin then proceeded with, along with the consultant. This was during a time when there were also parallel discussions about new stadiums, that at certain points were --
It's fine. It's -- there's an issue over on the other side of the room. They're just -- it's a -- you know, it's a other-side-of-the-room issue.
All right. I'll try not to. So we were trying to have Mr. Tustin have cooperative conversations with the teams about what would it mean if we fixed the Vet in a three-year sub period, while at the same time, we were having some very hard discussion with the teams about the negotiations for new stadiums. So it was an environment where people 84 11/29/2000 WHOLE - STADIUM BILLS sort of had to switch hats back and forth. That resulted in the working group -- meaning the representatives of the two teams -- and Mr. Tustin and Ewing Cole saying, Yep, this sounds like what we can do. And then I say to the principals of both teams, Okay, you agree this is the list? Yep, okay. And we're off, also trying to finish off that new stadium transaction. So -- I'm sorry.
We -- it kind of goes back to we need to do full Vet lease amendments. If it would be helpful, I think I could probably represent here that I could get the teams to put in writing that, in fact, this list is the three-year list. That sounds like something we should do, huh? We could do that.
That incorporate the $19.7 million in repairs, although that is, from all your meetings and discussions, an agreed-upon list, and you think that you can even get a letter from either, or the teams jointly, saying, This is the list, it's a three-year deal, these are the items that we're interested in, and everything else we'll deal with later on, if in the event that we don't have new stadiums. Is that accurate?
Right. I mean, there will probably -- the letter would probably have appropriate lawyer language --
-- that would say in the event new stadiums don't proceed, we reserve our rights, whatever lawyers put in letters like that.
Right. Now, what happens if the bill -- Bill 705 is the one with the authorization to finance and refinance the cost of rehabilitation to Veterans Stadium in an aggregate principal amount not to exceed $80 million; is that correct?
Okay. We have a list in front of us, though, that is, for all intent and purposes, $20 million. What happens to the other 60?
I think you have to kind of walk through the scenarios. If we build new stadiums, then we never plan to use the 60 on debt repairs, we're not doing 60 on Vet repairs.
And -- and the City's obligations to pay would get capped at repaying the 20. If we don't do new stadiums -- I doubt, by the way, whether we will get team concurrence on a list, you know, just to clear on that.
Correct. I think that's probably extremely accurate. So in that world, there may or may not be a lease amendment that the teams have agreed to, but we would then come back and say to Council, in addition to this 19, we probably 87 11/29/2000 WHOLE - STADIUM BILLS should now look at the other 60, because we don't want to be out of compliance with the lease.
I guess we could -- I guess we could actually set this legislation up to be either/or. We could actually use the 80 list that was already done. We don't actually. . .
I think what we would propose is to amend this to provide an either/or scenario. If there are two new stadiums, then we would do this list of repairs for $19 million. If not, then, you know, we are authorized to do the second list of repairs at $80 million. City Council has been provided with both renovation scenarios, and I think the most efficient mechanism is probably to structure this with the either/or.
Yeah. I mean, it just -- I mean, it leads me to just asking the question that if in the most positive scenario, if we believe that we're going to do new stadiums, 88 11/29/2000 WHOLE - STADIUM BILLS why wouldn't you just do a deal for $20 million and let that be the end of it? Because you know that if we don't do new stadiums, even if we did the 80, that may not accomplish what you want to accomplish, you're certainly not going to have an agreed-upon list, and you have to come back anyway. So why don't you have this bill just say 20? Because you know that's what you need and what you want to spend and what you have an agreement on.
Because I think -- I'm not sure -- I think there's -- I think there's various responses to this, I mean, some of which are practical. If you --
Hold on for one second. I want to ask the treasurer a question.
With this transaction 80, 20, whatever the amount is, what is the issuance cost if any?
It's hard to tell until we 89 11/29/2000 WHOLE - STADIUM BILLS actually size the transaction. We haven't gotten to that point yet. We're still putting together the structure of the transactions. Sizing's usually done right before the transaction.
Well, in the instance of a bond, you determine -- you make certain assumptions of what the market rate is going to be, insurance costs for the bond. You start putting together the cost for professionals. That sort of encompasses your cost of issuance. We haven't gotten there yet.
Well, for the terminology of the day, I mean, give me a ballpark figure on what you think we're talking about.
No. It's not part of the PAID aggregate amount, it's separate.
No, I'm saying, based on an $80 million transaction, it's 90 11/29/2000 WHOLE - STADIUM BILLS $700,000? But it doesn't matter the size of the --
It would be the same, it doesn't matter the size of the transaction.
It's part of the costs that's assumed in the debt service, so the PAID -- City.
No. The way the ordinance 17 is drafted, the $80 million is the (unintelligible), the aggregate amount for the project.