Memphis Grizzlies' FedExForum fund could take hit due to NBA lockout
A fund used to pay off bonds that paid for the $250 million FedExForum could be pushed into the red by 2022 if the NBA lockout lasts the entire year, a situation that would force the city of Memphis and Shelby County to pay the shortfall.
The Commercial Appeal reports that the lockout was a subject of discussion at Wednesday's meeting of the Memphis and Shelby County Sports Authority.
FedEx Forum, home of the Memphis Grizzlies, opened in 2004 (AP Photo)
The bonds, authorized in 2002 by the sports authority, are paid with six different revenue streams related to the NBA, including tickets and concessions to Grizzlies games, and seat rental fees.
With the loss of revenue associated with a lockout, projections show the current surplus fund of $10.8 million would be gone in time for the senior bonds' Nov. 1, 2022, payment.
The shortfall could reach $10.6 million by 2029, or about $600,000 annually for each government, the newspaper reported.
At the meeting, projections were also made based on two models of a weak economy but with no lockout. The scenarios were presented by Lisa Daniel, managing director at Public Financial Management, the group that advises the sports authority.
Daniel said that, assuming 2 percent growth in the NBA sales tax rebate and car rental taxes, the bonds would be paid off without shortfall and with a $2.7 million surplus.
Assuming 1.5 percent growth in those revenue streams, a shortfall would begin in 2025, Daniel said.
Still, although there is the potential for problems in the future, authority members were told that there are no signs of imminent stress for the bonds. Improvement in the economy, or increases in NBA-related revenues once play resumes, could keep the surplus fund from wasting.
"Even with the lockout, the senior bonds are safe for the next several years," Daniel said.
Subordinate bonds purchased by a group of unidentified businesspeople as part of the project are in greater risk than the senior bonds.
The lockout and non-lockout scenarios show that the subordinate bond fund goes into a shortfall in 2015.
Subordinate bondholders are paid only after payments are made on senior bonds. They are not guaranteed by the city and county, however.
