I had an epiphany. Don’t worry, it’s not contagious. My revelation: folks don’t understand that a leaseback project, the UAA Seawolves Sports Center, is a freebie. The cost to the State of Alaska and the University is nothing, nada, zero.

A leaseback is built for a specific user (UAA) and leased by the owner/developer to the user for a long term. Wal-Mart and the big box stores do it all the time. What’s unique here is that the Seawolves Center is projected to generate more income than required for debt service and expenses. Constructed in a federal tax credit zone, it qualifies for a $20 million tax credit.

For Doubting Thomas’, here’s a tutorial in leasebacks. First, we estimate development costs. We did this two years ago for UAA. Second, we identify the source and use of money. This Center has three: private capital either borrowed or contributed; public contributions (currently zero); and increased program receipts.

The 2008 Hickel/Crawford team’s proposal provided UAA management with spreadsheets in excruciating detail for construction costs, time phasing and source and use of funds.

Our plan includes community fundraising at $17.7 million. We raise corporate and labor donations and sell box seats at the complexes, as is done by other sports facilities. We don’t ask UAA personnel to raise the money.

Third, we calculate the income and compare it to our carrying costs. We updated our budget last November including the tax credit through Alaska Growth Capital of $20 million. We’re excited that UA could receive this $20 million gift, filtered through our leaseback.

The balance to design-construct the Center comes from interest earnings, construction borrowings and program receipts at no cost to the State or University. Program receipts are sales driven. Think of it this way. The Wells Fargo Sports Complex sells tickets at $13.25 for general admission and may sell 1,000 of them. The increase in stadium receipts for a hockey game with seating of 7,500 at a first class facility with a ticket price of $16 (80% full) is $80,000+ more for each game compared to the existing seating. With 20 home games, that’s $1,655,000 increase just from hockey!

That increase is not the result of work of UA but is generated by marketing the Seawolves Sports Center and appropriately using part of the increase for lease payments. The lease designates a portion of the increased receipts to cover debt payments and operating costs. It should also provide an increase to the Sports Departments’ income to help our athletes qualify as D1 schools.

In 2008, the State Legislature gave UA $15 million to design a Seawolves Sports Center on the UAA campus. Half the money was spent on design. The UA Board of Regents then vetoed that project. The on-campus Sports Complex is dead.

Noting the strong potential of failure with only appropriated State funds, our investors provided an alternative for the now failed on-campus Center with a new UAA Seawolves Center as a leaseback. We still need to replace the outdated, cramped and overused Wells Fargo Center. UA Regents should not take offense at being handed a $94.5 million brand new sports facility with no State or University investment.

My epiphany was in finally understanding that most folks do not know how leasebacks work. I hope this tutorial sheds the proper light. All it takes to complete the Seawolves Sports Center is a lease from UAA, which is approved by the UA Regents, Legislature and Governor. The lease will state that the Seawolves teams will use the Center as if it were their own for training and their games. Then with a lot of hard work and cooperation, we can accomplish this gift for our University students.

The lease back process worked when I ran the State Leased Building program at ASHA. We did hundreds of leaseback projects, on time and within budget.

It will work now if those who could receive this gift will only accept it. In fact, any revenue-generating project can apply. For numbers addicted folks like me, here’s the detail:

Alaska Collegiate Sports Facilities LLC 2010-2012, Source and Use of Funds
Where’s da money from? 2010 2011 2012 Total

Donations $15,900,000 $1,440,000 $360,000 $17,700,000
Construction draws $15,634,000 $30,644,000 $7,558,000 $53,836,500
Interest earnings $ 113,860 $ 244,525 $ 139,292 $ 497,677
Sale of tax credits $ 6,700,000 $ 6,700,000 $6,700,000 $20,100,000
Lease payments $ $ $2,443,000 $ 2,443,000
Total funds provide$38,347,860 $39,028,525$17,200,792 $94,577,177

Where’s da money go?
Fundraising costs $ 623,600 $ 88,800 $ 22,200 $ 734,600
Overhead, operatin $ 1,017,354 $ 966,250 $ 746,800 $ 2,730,404
Interest costs $ 94,798 $ 1,333,211 $ 2,737,791 $ 4,165,800
Increase const $31,243,203 $37,580,864$14,932,046 $ 3,756,113
Increase (dec) res $ 5,368,905 ($940,600) $(1,238,045)$ 3,190,260
Total use of funds $38,347,860 $39,028,525 $17,200,792 $94,577,377