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Dear Larry,
Let me begin by thanking Mayor Dean and Chairman Lavender for their
encouragement and support over the past several weeks as we have worked
together to find a solution to the threat of the Predators being moved out of
the city. Please convey my appreciation to Chairman Lavender for fitting us
into his schedule yesterday afternoon and to Mayor Dean for giving up so
many hours of his evening last night to help us dig through the details.
3. We propose that the city tax the team only on profits and not on gross
sales. The team currently pays the city approximately $128,000 in such
taxes despite overwhelming losses. This revenue to the city would not
exist without the team.
4. We propose that the city allow the team to keep (via a management
fee or whatever mechanism the lawyers advise) almost all of the state
and local sales taxes and the seat use fees paid by those that use the
arena (hockey and non-hockey events). We have heard the demands to
“make those that use the arena pay for it if they want to keep the
Predators.” We think that demand has merit and we think that this
concept is perfect. All additional revenue (approximately $4.2 million
based on 2006 in-arena sales) for the Predators would come
exclusively from arena users rather than the general public. The
majority of this revenue would evaporate immediately without the
Predators. The city will continue to benefit financially from the
presence of the Predators because the city will continue to retain all
sales taxes generated outside the arena on event nights. We believe
this concept is much preferable to our earlier proposal of a ticket
purchase guarantee plus a $3 million direct subsidy from the
taxpayers.
We suggest “almost” all of the sales tax revenues because we now
understand that part of the sales tax money collected (approximately
$400,000 annually) is set aside for education. We prefer that
percentage remain set aside for education. We cannot accept that
money in good conscience. If we are successful in growing the revenue
streams inside the arena, the city’s public school system will benefit
from increased funding. Other than this education set-aside, we believe
that any reduction in this incentive will only delay the inevitable loss of
the Predators.
It is our great hope that we are able to take advantage of the incentive
provided by this structure. Our strategy is to use this incentive to
maximize the utilization of the arena. We will focus a lot of energy on
non-hockey events. We will now have an incentive to take greater risks
on more events. We will now have an incentive to accept events that
otherwise would not be profitable. The outside-arena sales tax
collections will rise as our in-arena sales tax collections rise. The city’s
financial boat will rise with ours. We promise to work closely with the
Sports Council and be extremely aggressive in recruiting SEC, NCAA,
and Olympic-sport events. These special events will create an even
greater economic benefit for the city due to the influx of out-of-state
visitors.
5. The owners need the right to avoid financial disaster if the team does
not succeed financially. Thus, the team should have the right, but not
the obligation, to leave if (i) average annual paid attendance in any
year is less than the NHL minimum to qualify for revenue sharing, and
(ii) the new ownership group has lost at least a cumulative total of $20
million (in addition to the $193 million already invested). The city will
have the explicit right (but not the obligation) to purchase (or arrange
for the purchase of) enough tickets to satisfy the revenue sharing
threshold. The existing exit penalty provision will remain in effect in the
event the team is both sold and relocated.
8. The city has not paid the team its 2004 and 2005 Performance Fees
due to a dispute with the prior owner. We suggest that the city pay
only the $289,000 that the city believes it owes and that the new
ownership group accept that amount as payment in full. The city will
need to calculate and pay the 2006 and 2007 Performance Fees and
then the Performance Fees will be eliminated going forward.
Please know that our ownership group does not intend to take any
salaries, distributions, dividends, or other payments from the team. We
intend to use any excess funds to pay down debt and re-invest in the
Predators. We are asking for help for the team, not for ourselves.
For what it’s worth, my opinion is that the Predators and the Sounds
directly affect the allure of downtown living and downtown entertainment.
My opinion is that the Titans and the Predators are a factor in the
recruitment of the Nissans, the Dells, and the LPs. My opinion is that the
Gulch, the Signature Tower, and all the other new downtown residential
development projects benefit from the glamour and proximity of
professional sports. My opinion is that Second Avenue and Lower
Broadway are infinitely better today than a decade ago. Unfortunately, I
cannot prove these opinions or provide a credible economic impact study
that incorporates these effects. However, I was here a decade ago and I
remember downtown Nashville. As a very wise man once said, it’s all
connected.
Sincerely,
David S. Freeman