Oklahoma City seeks arena financing proposals amid Southwest sports stampede

Adobe Stock

Oklahoma City will review proposals due this week on ways to finance a downtown arena to replace Paycom Center, the home of the National Basketball Association's Thunder, at a cost of at least $900 million.

Working with PFM Financial Advisors, the city sent out a request for proposals for financing plans secured mainly by a 1% voter-approved sales tax collected between April 1, 2028, and March 31, 2034.

"We're going to select really good bankers to come in and help us with this, help us to develop our plan, and I'm going to let them tell me what they think will get us the best bang for our buck," Oklahoma City Chief Financial Officer M. Brent Bryant told The Bond Buyer. 

The goal is to have a financing team in place by mid-March, he added. 

The city projects the tax will raise nearly $976.3 million during the six-year period based on annual growth of 1.79%, according to the RFP. 

In December 2023,  Oklahoma City voters overwhelmingly approved the six-year extension of a Metropolitan Area Projects (MAPS 4) one-cent sales tax beyond its April 1, 2028, expiration date. 

The city will also contribute $78 million in MAPS 4 funds that had been earmarked for the 22-year-old city-owned Paycom Center, which has been the Thunder's home since 2008. The team is putting in $50 million.

Bryant initially considered the use of privately placed tax anticipation notes, structured like a line of credit, to bridge the gap until the sales tax collections earmarked for the new arena begin in 2028. Given the current interest rate environment, he said it might be more advantageous to lock in an interest rate for a nine-year period and invest the proceeds. 

The RFP also addresses 2022's Oklahoma Energy Discrimination Act, which prohibits state and local government contracts worth $100,000 or more with companies that "discriminate" against the fossil fuel industry. The law resulted in bans for several financial firms, including municipal bond underwriters Barclays, Bank of America, JP Morgan, and Wells Fargo.  

A lawsuit challenging the law's constitutionality led to a permanent injunction in July blocking its enforcement — a ruling that is being appealed before the Oklahoma Supreme Court.

"We're in a wait-and-see mode on that," Bryant said. 

The Oklahoma City Council approved a development agreement for the arena in May.  

Government officials in other Southwest states are also considering public financing for new or improved professional sports facilities, which critics say fail to produce a promised economic boost. 

"The real-world evidence in city after city across the country is that they're zero-sum games that only rearrange where local entertainment budgets are spent instead of creating any meaningful new economic activity," John Mozena, president of the Center for Economic Accountability, said in an email.

A plan by Charlotte, North Carolina, to provide $650 million in bond financing to renovate Bank of America stadium owned by Tepper Sports and Entertainment, which also owns the NFL's Carolina Panthers, was deemed the worst economic development deal of 2024 by the center.    

Sports facilities are a net drain on general funds, according to Geoffrey Propheter, associate professor at the University of Colorado Denver School of Public Affairs.

"How much of a net drain depends on the size of the subsidies," he said in an email. "More subsidies means a bigger general fund hit and greater costs to future taxpayers in the form of higher rates/reduced services."

The state of Utah last year armed Salt Lake City with big bonding authority to build a Major League Baseball ballpark should the city land a franchise by 2032 and to remodel an existing basketball arena to accommodate a National Hockey League team. 

Adobe Stock

The city snagged an NHL team in April with the sale of the Arizona Coyotes to Smith Entertainment Group, the owner of the NBA's Utah Jazz, which plays in the Delta Center.  

In October, the Salt Lake City Council approved an agreement with Smith's organization allocating up to $525 million of bond proceeds for Delta Center renovations and up to $375 million for a sports, entertainment, culture, and convention district. The council also approved a 0.5%, 30-year hike in the city's 7.75% sales tax to pay off the debt.

The sales tax rate increase is projected to generate about $1.2 billion with a maximum of $900 million dedicated to Delta Center renovations and the revitalization of the surrounding entertainment district, according to a city council press release. 

City spokespersons did not respond to emailed questions on when the bonds might be issued.

Delta Center, which was acquired by Smith when he bought the Jazz in 2020, opened in 1991 and has a seating capacity of 18,206 for basketball games. There are fewer seats for Utah Hockey Club games and many of the views are obstructed. 

In December, the city council approved zoning for the Jordan River Fairpark District, a proposed mixed-use development that could include a MLB ballpark financed in part with up to $900 million of bonds.

A new arena for the NBA's San Antonio Spurs would be part of a sports and entertainment district being considered by the Texas city.  Funding options for the project, which would also expand the convention center and renovate the Alamodome football stadium, could include an existing project finance zone, Bexar County's venue tax, hotel occupancy taxes, tax increment financing, and general obligation bonds for infrastructure, according to a Nov. 21 presentation to the San Antonio City Council.

On Jan. 7, the Bexar County Commissioners Court met in closed session to discuss a potential memorandum of understanding with San Antonio and the Spurs and a resolution to use the county's venue tax, subject to voter approval, to help finance an arena to replace 22-year-old Frost Bank Arena. No action on the matters was taken by commissioners in open session. 

Denver media has been buzzing about the potential for a new stadium for the National Football League's Broncos, whose lease with the Metropolitan Football Stadium District for the 23-year-old Empower Field at Mile High expires at the end of 2030. 

The team did not respond to a request for comment. 

The Denver Post Editorial Board on Jan. 8 threw its support behind financial incentives for a new stadium in the city and suggested a metropolitan district-like taxing structure could be used as long as there is proper oversight. 

The football stadium district was empowered by the state of Colorado to collect a 0.1% sales tax in the seven-county Denver area from Jan. 1, 2001, until Jan. 1, 2012, to finance the current stadium, which opened in August 2001. 

The district sold $245.7 million of sales tax revenue bonds in 1999 and $15 million of taxable subordinate lien bonds in 2002 with the debt carrying final maturity dates in 2012, according to issuance data on the Municipal Securities Rulemaking Board's EMMA disclosure website. 

The clock is ticking for the NFL's Kansas City Chiefs and the MLB's Kansas City Royals to take advantage of a 2024 Kansas law authorizing the use of sales and tax revenue bonds to cover 70% of the cost of new professional sports stadiums.

The law expires June 30 — a deadline that could be extended a year by the Legislative Coordinating Council, which is empowered to approve or reject sports team projects. 

The Missouri-based teams became the subject of a tug-of-war between the two states after Jackson County, Missouri, voters in April rejected the extension of a 0.38% sales tax to fund a new ballpark for the Royals and renovate Arrowhead Stadium for the Chiefs. 

MLB's Arizona Diamondbacks are reportedly seeking sales tax revenue to fund improvements to 27-year-old Chase Field, which is owned by the Maricopa County Stadium District. The team's lease for the venue expires in 2027 and the county has proposed an up-to 50-year agreement.    

The Harris County-Houston Sports Authority, which owns professional sports facilities and other venues, is reportedly eyeing a debt sale in 2026 or 2027 to fund stadium renovations after issuing $371 million of senior lien revenue refunding bonds in October.