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The county says the Ice Palace is worth $120-million; Lightning officials say $30-million.
By JEFF TESTERMAN
© St. Petersburg Times, published November 20, 2000
TAMPA -- Five years ago, as the finishing touches were being put on a $144-million deal to finance an arena for the NHL's Tampa Bay Lightning, a team official promised it would be "the finest facility anywhere in the eastern United States."
The chief of the Tampa Sports Authority predicted the waterfront arena, largely paid for by tourist taxes, sales taxes and ticket surcharges, would become a "jewel in the crown of downtown Tampa."
Today, the 18,758-seat Ice Palace is home to a division-improving hockey team and ranks sixth in North America in concert revenue among arenas its size. It raked in $11.2-million in the first eight months of this year.
But Lightning officials are balking at an unexpected tax bill on a $120-million assessment of the Ice Palace. They claim the arena is worth $30-million. The difference could mean an extra $2.25-million in tax revenue for the city of Tampa and a big blow to the Lightning's pocketbook.
The value the Lightning puts on the arena has some of the original architects of the arena deal shaking their heads.
"Well, I love the Lightning," said former Hillsborough County Commissioner Ed Turanchik. "But I can't see why the value is that low."
"That facility is not a Chevrolet; it's a Mercedes," said former county Commissioner Joe Chillura. "It's totally ludicrous to say it's worth $30-million. Give me a break."
The Lightning team was sold with rights to a 27-year lease of the Ice Palace in June 1999. Insurance magnate Art Williams sold the team and arena to NBA Pistons owner William Davidson for what team representatives said this week was $100-million.
The Lightning claims the value of the Ice Palace is essentially what Davidson paid for that package, minus the value of the NHL franchise.
"I know the higher taxes the Lightning pays, the less I have to pay," said Lee Pallardy, a private appraiser hired by the team to determine the value of the Ice Palace. "But it's not fair to assess it at $120-million when they just paid $100-million for the arena and the team."
When the Lightning first skated onto the ice at the Ice Palace in 1996, the arena was tax-exempt. Then, in 1998, the 2nd District Court of Appeal declared unconstitutional a law granting a tax exemption to the Sebring Raceway in Highlands County, which uses land leased from a public airport.
That ruling, now being reconsidered by the Florida Supreme Court, opened the door to taxing sports facilities on public lands.
The Ice Palace is titled in the name of the Tampa Sports Authority, a public entity that is landlord for the Lightning, Tampa Bay Buccaneers and New York Yankees. But the Lightning lease has a pass-through provision making the lessee responsible for any property taxes. Because of a special taxing district, those taxes would flow into Tampa's coffers.
In 1999, Hillsborough Property Appraiser Rob Turner put the assessment of the Ice Palace at $83-million. This year, armed with new construction cost data subpoenaed after the Lightning sued over the original valuation, Turner moved the value of the arena up 45 percent.
The Lightning is challenging the new assessment. Last week, an attorney for the team stated its case before a special master who is expected to make a recommendation to the county's Value Adjustment Board in the next few days.
The $90-million disparity between the two sides is the largest ever argued by Turner's office.
Because the building itself is unique, Turner relied mostly on a cost-to-reproduce approach to determine the Ice Palace's value.
Will Shepherd, Turner's general counsel, said weight was given to the income being produced by the arena, especially now that Davidson "is ramping up use of the facility."
Davidson's Palace Sports & Entertainment Co. expects to increase bookings at the Ice Palace from 120 events in 1999 to 160 this year.
The XO Club, a $4,000-a-seat, members-only restaurant and bar, opened in the Ice Palace last month. The Lightning is still shopping naming rights for the arena, which might bring in $2-million or more a year.
Although losses for the Lightning are projected at $12-million this year, operations at the Ice Palace are expected to make $2-million.
Pallardy, the private appraiser hired by the Lightning, says that in calculating the value of the arena, he relied on what a willing buyer would pay.
Though recent NHL expansion franchise fees for the Carolina Hurricanes and Nashville Predators were $80-million each, Pallardy put the worth of the Lightning at about $60-million. He deducted that from the $100-million overall price paid by Davidson, and took off another $10-million or so for the value of several developable acres next to the arena and the worth of personal property such as computers and the Zamboni.
That left the bottom line value of the arena at $30-million.
Pallardy and Turner agree on one point: A sports arena's value is skewed by a community's desire to support it with tax dollars.
"Society loves sports and has made a decision to subsidize sports facilities," Pallardy said. As a result, "you can't sell one of these facilities for what it costs."
It cost $114-million to build the Ice Palace, which opened in 1996. The property appraiser puts its value at $120-million; the team claims it it worth $30-million. Winning the fight over the appraisal would save the team $2.25-million in taxes.
The Lightning is worth about $60-million, according to Lee Pallardy, a private appraiser hired by the team. Losses for the Lightning are projected at $12-million this year, but operations at the Ice Palace are expected to make $2-million.
The arena, which has 18,758 seats, took in $11.2-million the first eight months of this year. The company that runs the facility expects to increase bookings from 120 events in 1999 to 160 this year. The XO Club, a $4,000-a-seat, members-only restaurant-bar opened last month. The Lightning is still shopping naming rights for the arena, which might bring in $2-million a year or more.