How $1.2M in Covenant Health Park tax revenue compares to projections

Knoxville’s new Covenant Health Park generated more sales tax revenue than projected in its first year.
Sales tax from tickets, food, drinks, and merchandise at the stadium is used to pay off public debt.
The city and county’s debt payments could decrease over time if the stadium continues to exceed revenue projections.
Covenant Health Park brought in more money from ticket, food, drink and merchandise sales than what was projected for the downtown Knoxville stadium’s first year.
This has resulted in higher than projected sales tax revenues, which are used to pay back the city’s and county’s portions of the $114 million stadium. The extra money will help offset lower than projected revenue from the attached apartment and condo buildings, which each faced their own delays with units becoming available.
Through September, Covenant Health Park generated more than $1.12 million in sales tax revenue since it opened for the first Knoxville Smokies game April 15, Knox County Finance Director Chris Caldwell told Knox News. That’s roughly $170,000 more than the projected $950,000.
Once sales tax revenues are processed by the state, the money goes directly to the Sports Authority Board to pay off $65 million in bonds used to cover the public (and largest) portion of the stadium’s cost.
The Sports Authority, on behalf of the city and county, is scheduled to pay off $4.6 million in stadium debt every year for the next 30 years. Here’s how:
$1.8 million from the city and county, split evenly at $900,000 apiece
$1 million in lease payments from the Knoxville Smokies
$950,000 in sales tax revenue from any expenditures made at the stadium
$850,000 generated by a special tax district and tax programs approved for properties surrounding the stadium
The first payment is scheduled for Dec. 1 and will cover around $2.7 million, Caldwell said. The next payment is scheduled for June 1 and would cover the difference of the $4.6 million.
As connected commercial and residential spaces at the stadium get filled, the city’s and county’s direct debt payments could get lower over time if the stadium continues to generate higher than projected sales tax revenues.
Tax revenue that’s still be finalized for October is estimated to be around $110,000, Caldwell said. The numbers from November and December, he said, will give an extra boost thanks to the upcoming Smokies Winter Wonderland Lightshow beginning Dec. 5 and the USL League One championship game Nov. 16, which One Knox SC won to capture the club’s first postseason title.
Any sales made inside the stadium walls – with the exception of liquor – contribute to sales tax revenue figures, Caldwell said, whether it’s a beer or a hot dog or a Smokies shirt. So does buying tickets to any event held at the stadium.
Caldwell attributed part of the growth to the increase in attendance at Smokies games, despite an unusually rainy season. If the weather stayed clear, he said, it’s reasonable to think Covenant Health Park would’ve seen even more sales tax revenue generated.
A handful of restaurants are expected to be open along the exterior of the stadium and the Delaney Building next season, including Jackie’s Dream and a dual concept from Kern’s Food Hall vendors Disco Chicken and T. Ralph’s Burgers & Fries. Whether these new additions will count toward sales tax revenue figures to pay off the stadium debt is still to be determined, Caldwell said.
In addition to the $65 million in bonds, the $114 million stadium is being paid for using:
State of Tennessee grant: $13.5 million
Investment earnings on bonds and state grant: $2.5 million
Payment from Knoxville Smokies owner Randy Boyd: $13 million
Loan from Smokies owner Randy Boyd: Up to $20 million to KCDC, transferred to Sports Authority for construction
Local government has made it clear Boyd will not be repaid for his $20 million loan until the tax increment financing district, commonly called a TIF district, pays for the needed infrastructure improvements around the stadium.
TIF districts bank on an anticipated increase in property tax revenues that would come only from new development within a designated area.
There’s an opportunity cost for city and county residents if the TIF is in place because the property taxes collected cannot be spent on projects outside the tiny TIF district. On the other hand, city and county taxpayers both gain new housing and amenities in developments that likely will generate tax revenue far beyond the life of the TIF.
In addition to Smokies and One Knox games, the stadium has hosted a handful of other public events in its first year, including the inaugural Knoxville Music Festival Xul Beer Company’s Kill the Lights beer festival. Increasing the number of events at the stadium, Caldwell said, would also help in paying off stadium debt.
Knox News reporters Tyler Whetstone and Joanna Hayes contributed to this report.
Keenan Thomas is the higher education reporter for Knox News. Email: keenan.thomas@knoxnews.com.