The legions of Atlanta Braves fans in Mississippi must be wondering how their team has fallen so rapidly, to the point where it’s won only a quarter of its games this season.
Perhaps the reason is because management’s attention isn’t focused on the field. A story in the May 2 edition of Bloomberg Businessweek uses the city of Pearl’s experience in asking the frank question, “Is building a stadium for the Braves good for anyone but the Braves?”
Bloomberg details how the Braves convinced Pearl officials to borrow a total of $78 million in 2004, with $28 million of it going to build Trustmark Park. As part of the package, Pearl recruited a huge Bass Pro Shop store next to the stadium.
The city’s bond attorney and financial adviser both told Mayor Jimmy Foster that the plan would not produce enough money to repay the loans. But Pearl went ahead anyway, betting that it could repay the loan through ticket surcharges, Bass sales taxes and a new sales tax.
Pearl’s financial problems began when the revenue fell short of what the city needed to make the payments. In the agreement to bring the Braves’ Double-A team from South Carolina to Mississippi, Pearl promised to pay as much as $950,000 more per year if the stadium and Bass money was less than expected.
That’s exactly what happened in 2013 and 2014. Both years, the city had to put up more than $900,000, which is more than 5 percent of its annual general fund spending.
For Pearl, the worst may be yet to come. Last December, Moody’s Investors Service reduced the city’s debt rating to junk status. That means if Pearl wants to borrow money for anything else — to repave streets, fix sewers or do things that cities typically do — property owners will pay a sharply higher interest rate for the privilege of getting a loan.
Just as interesting, the city ignored Moody’s when the company asked for details of its stadium deal with the Braves. The current mayor, Brad Rogers, said the debt rating downgrade was unwarranted and that “Nobody but us needs to understand how this ballpark works.”
Well, duh, it’s pretty easy to see how it works: The Braves got a nice new Double-A stadium, while Pearl has had to raise property taxes to help repay that $78 million it borrowed.
The Braves used the same strategy with its Single-A and Triple-A teams, relocating both a few years ago when it convinced other towns to put up more money. The team did it in Atlanta as well. It is building a new $722 million stadium outside the city, with taxpayers putting up more than half the cost.
There’s a lesson in this story for all local governments: Don’t overborrow. There may not be a sports franchise involved, but there is sure to be an industrial recruit who promises the moon.
In difficult times, it’s hard to resist this temptation. But as Pearl’s experience shows, the penalty is severe: higher property taxes and 5 percent of the annual budget to repay a loan.
