City makes $15.5 Million dollar offer for Dynamo Stadium land.

Carolyn Feibel lays out the details of the City's offer to purchase five blocks of land that's the cornerstone of the "non-taxpyer funded" Dynamo soccer stadium....

Houston has offered more than $15.5 million to buy five downtown blocks that could be a future site of a Dynamo soccer stadium.

The city council could vote on the deal this Wednesday. The purchase price assumes the land is worth $49 per square foot, almost quadruple the assessed value of $12.50 per square foot, according to Harris County Appraisal District records.

The five blocks are owned by various corporate entities controlled by former Councilman Louis Macey. To acquire a sixth block, owned by a different company, the city has offered to swap a block nearby that it already owns.

The six-block tract is between Texas and Walker streets on the north and south, and Bastrop and St. Emanuel streets, just east of 59 in the so-called "warehouse district." The area has recently undergone some loft-style residential development.

The city hired an outside assessor for the deal, who said the land is worth $50-55 per square foot.

The land would only be used for a Dynamo stadium if the city can reach a good agreement with the team owners, said Andy Icken, deputy director for Public Works and Engineering. Mayor Bill White has said that he does not want taxpayer money to be used in the stadium construction.

"They identified this tract of land as one in which they would be interested," Icken. Negotiations are still ongoing.

The official line is that the city is acquiring the land for a number of possible future uses, including multifamily residential development

Regardless of your opinion regarding the necessity of a Soccer stadium you have to admit that the deal requires anyone to suspend an awful lot of disbelief to accept it as its currently structured....


1. Mayor White: "No taxpayer funds will be used to build the stadium itself."

This is only true if you ignore the fact that you HAVE to have land upon which to build a stadium. Last I checked $15.5 Million is a lot of real money and is only going to be the beginning of what the City is going to have to pay out to make the stadium work. Not only is there going to be road improvement and flood abatement work to handle all of the run-off a stadium and surround parking generates, but there's also going to have to be massive infrastructure upgrades to the surrounding sewage and water systems. My assumption is that the City will assume the cost of the infrastructure upgrades to the point that the foundation is laid, then the Dynamo will cover the remaining plumbing/sewage costs in the stadium itself. This will allow for Mayor White to "keep" his promise. Ignoring, of course, that ample infrastructure under a stadium is a very important part OF a stadium.

So, just ignore that fact will you?


2. The "tax" question.

Owned by the City the stadium land will come off of the tax rolls. And not just the raw land either. Any calculation of sales tax will have to include the value of the improvements to the land to fully understand how much the City is potentially losing. If the land is valued at $15.5-$20 Million and the Stadium improvements are expected to cost in the neighborhood of $75-$80 Million dollars then you are potentially looking at lost property tax revenue, to the City, of a $100 Million dollar piece of property. At 2.25% that's $2.25 Million dollars in lost tax revenue annually.

What this means is that the City's lease to the Dynamo has to be at LEAST $2.25 Million per year in order for the City to "break even" versus what should be coming in from property tax collection. And I haven't even taken into consideration how to amatorize the $15.5 Million dollar purchase price yet. That would be determined based on the structure of the lease. In theory, based on several factors, "break even" for a lease number could be around $2.75-$3 Million per year.

Anyone want to make a bet the annual lease isn't NEAR that amount?


3. The whole Louis Macey angle...

(from Lynn Cook of Houston BizJournals June 18, 1999)

Former City Council member Louis Macey has been quietly blocking up downtown land east of U.S. Highway 59, with Enron Corp. snapping up the option to purchase part of the property.

Macey has assembled eight-and-a-half blocks in the shadow of Enron Field, with some of the parcels coming into his sights within recent weeks. Deals for another two-and-a-half blocks are underway and, apparently, Macey has an appetite for even more.

Beyond confirming the blocks he's gathered Macey would not reveal who he represents or what possibilities for development are.

Rumors are swirling within the local real estate community that the land is intended for such varied uses as a retail venture with The Mills Corp. or a basketball arena for the Houston Rockets.

Mark Palmer, Enron's vice president of public relations, confirms the energy giant has optioned to buy from Macey eight blocks that total 14 acres.

Enron's option on the Macey land accounts for half of the 16 blocks bounded by Highway 59, Texas, Dowling and McKinney. Six of those tracts are in three-block-long contiguous strips.

For nine years Macey has been trying to get a stadium (or something) built on his blocks of land. Now it appears that he's found an administration that's willing to pay him four times the appraised value for his land allowing them to do so.