DALLAS Texas A&M University System is preparing to issue $353 million of taxable and tax-exempt revenue bonds for the most costly college stadium renovation in the nation.
The bond deal is scheduled to price through negotiation Sept. 4, with Wells Fargo Securities as senior manager. Wells Fargo director Pamela Clayton is the lead banker. Co-managers are RBC Capital Markets, Raymond James, Citigroup, and Siebert Brandford Shank & Co. Texas A&M System Treasurer Maria Robinson is coordinating the issue on behalf of the regents.
Mary Williams, senior vice president at TAMUS financial adviser First Southwest Co., has worked with Texas A&M and other universities on previous deals. Andrews Kurth serves as bond counsel.
At a total cost of about $450 million the Kyle Field expansion is the largest of 30 announced or recently completed college stadium projects across the nation valued at more than $3.3 billion. The University of Nevada at Las Vegas would have had the most expensive at $900 million, but the Nevada Legislature balked at the deal. UNLV is considering less grandiose options. The University of Notre Dame has not yet put a price tag on a proposal to remodel its legendary stadium in South Bend, Ind.
The unprecedented spending on stadium projects has been likened to an “arms race” for supremacy in college sports as most universities are tightening their belts.
The stadium building binge is a “trickle-down effect from the pro ranks,” said Donald Muret, who covers college sports for Street & Smith’s Sports Business Journal. “Now, it seems more schools are taking the plunge to build new stadiums, compared with costly renovations that are almost as expensive as new construction, depending on the project.”
Deceased former NCAA president Myles Brand had expressed concern that intercollegiate athletics spending grew two to three times faster than the rest of higher education over the last decade, a rate that he called “unsustainable.”
The “more intractable point for the future health of higher education,” Brand wrote in his 2005 report, “is that institutions hold mortgages on burgeoning facility expansions that represent on average 20% of intercollegiate athletics spending. This factor puts institutions at risk over decades of time if the popularity of college sports wanes.”
The TAMUS bonds come to market two months after a Texas legislative session in which lawmakers and Gov. Rick Perry a Texas A&M alumnus — refused to consider $2 billion of tuition revenue bonds for classroom construction at the state’s rapidly growing colleges and universities.
Despite the rejection of the tuition revenue bonds, Texas A&M has been on a major growth path in recent years with the addition of a medical school in Round Rock and this month’s acquisition of a law school from Texas Wesleyan University in Fort Worth.
When completed in 2015, the new Kyle Field will claim the top spot in the Southeast Conference with a planned capacity of 102,500, just 45 seats more than the University of Tennessee’s Neyland Stadium in Knoxville. The University of Michigan in Ann Arbor still has the nation’s largest college stadium with an official capacity of 109,901, even though home-game attendance in 2012 averaged 112,252.
The redevelopment of the A&M stadium will occur in stages over two years, allowing the Aggies to continue playing home games there.
The project includes the addition of 20,000 seats, new training areas, three new scoreboards, new landscaping and walkways, along with stadium suites and lounges.
With a broad pledge from all revenues, the TAMUS bonds carry ratings of triple-A from Moody’s Investors Service and AA-plus from Standard & Poor’s and Fitch Ratings. Outlooks are stable.
System revenues for 2012 were $3.9 billion, including $2 billion in operating revenues. The bonds, styled as Series 2013C taxable and Series D tax-exempt, will mature serially through 2043.
Maximum annual debt service on bonds issued under the revenue finance system, including this deal, is about $193 million in 2016. Fitch considers the new debt to have a negligible effect on coverage ratios.
“Management has approached these $352 million stadium bonds conservatively, approving a student fee to supplement student ticket revenues, seat licensing revenues, and gifts,” wrote Fitch analyst Susan Carlson. “As a result, associated debt service costs are expected to be self-supporting.”
Part of the finance cost will come from an anticipated $125 million in donations, most from A&M’s fervent alumni.
Under a deal concluded last week, representatives from the cities of College Station and Bryan, Brazos County and the Convention & Visitors Bureau agreed to chip in $36 million over 30 years for preferred access to the new stadium.
The convention and visitors bureau will serve as a booking agent for events that are not under the auspices of Texas A&M. Attendees would also get 30% parking discounts.
The local governments have also agreed to add 0.75% to the county hotel occupancy tax to support the new stadium. The agreement raises the county-wide HOT tax to 15.75% from the current 15%.
Local officials expect to host a large number of religious and civic events at the stadium and adjoining facilities.
Keeping the Aggies playing at home in College Station during stadium construction was a critical issue for local businesses.
A study by Oxford Economics indicated that if Aggie home games were played outside of Brazos County, more than $63 million in direct business activity would be lost in a single year, representing 53% of the economic impacts of home games.
“Local businesses confirmed these statistical findings,” according to a statement from the convention and visitors bureau. “In the event that home games left Brazos County for a year, 66% or two-thirds of respondents stated that the impact would be significant or catastrophic to their businesses. If home games were played outside of the area for two years, this share rises to 74%, with nearly one-third of respondents saying the impact would be catastrophic and their business would not survive.”
Construction of Kyle Field’s new northeast tower and east-side press box will begin on Sept. 30. Demolition of sections of the existing stadium will take place on Nov. 11 and the demolition of the playing field two weeks later. The east side of the stadium and the south end zone complex are expected to be complete in time for the start of the 2014 football season.
For the TAMU athletic department, the challenge will be filling the seats by winning games. With the return of Heisman Trophy winner Johnny Manziel as quarterback, A&M ticket prices for 2013 are the highest in the SEC at an average of $204.11, according to ticket information aggregator TiqIQ.
A&M bumped national champion Alabama from the No. 5 spot in college ticket prices, as the Crimson Tide’s average fell to $178, the lowest in three years. Notre Dame ticket prices soared 43% to $293.90, the highest in the nation, despite their loss in the championship game against Alabama.
This season, the Aggies’ home games feature lackluster competition from the likes of Sam Houston State’s Bearcats and the University of Texas at El Paso Miners but will include another showdown with Alabama.
The 2013 season follows a decline in attendance at college games, according to NCAA statistics. However, the SEC became the first conference to reach nearly 7.5 million in attendance with the addition of Texas A&M and Missouri. The SEC averaged 75,538 per game to lead all conferences.
The value of remodeled stadiums was reinforced in 2012 with rising attendance at the home games of the University of California at Berkeley, Texas Christian University, the University of Minnesota and Louisville.
A few miles upstream from College Station on the Brazos River, Baylor University expects to complete its $250 million stadium in time for the 2014 season. And 90 miles to the south, the University of Houston is building a $105 million stadium expected to open the same year.