| The Deal – Who Pays for What and How? The Amway Center is part of the Orlando Downtown Master Plan 3: a plan that also involves improvements to the Citrus Bowl and a new performing arts center. On September 29, 2006, after years of negotiations, Orlando Mayor Buddy Dyer, Orange County Mayor Richard Crotty, and the Orlando Magic announced an agreement on a new arena in downtown Orlando. The arena itself cost around $380 million, with an additional $100 million for land and infrastructure, for a total cost of $480 million. It was part of a $1.05-billion plan to redo the Orlando Centroplex with a new arena, a new $375-million performing arts center, and a $175-million expansion of the Citrus Bowl, which due to current economic conditions is delay until at least 2020). The Orlando Downtown Master Plan 3 has been described as the "Triple Crown for Downtown". The agreement between the Orlando Magic and the City of Orlando was made public in December 2006. In that agreement, the Orlando Magic was to contribute at least $50 million in cash up-front, pick up any cost overruns, and pay rent of $1 million per year for 30 years. The City of Orlando was to pay for the land and infrastructure and the remaining money coming from bonds which would be paid off by part of the Orange County Tourist Development Tax. The Orlando Magic guaranteed $100 million of these bonds. According to the Orlando Sentinel, “The deal keeps ownership of a new events center in the city's hands and locks in the team's promise to cover any cost overruns. But team officials will be allowed to pick the architect and construction team, as long as the Magic bid out the projects in the same public way that a local government would be required to do. The team also negotiated the city into giving up its concession revenues from basketball games, which it currently shares. In return, the Magic will fork over a greater share of advertising, naming-rights and luxury-suite sales to the city in the form of guaranteed annual payments.” Although all reports currently show the Amway Center came in on budget, there is a major financial hurdle that arose in April of this year. The Fitch Rating Agency downgraded the bonds used to finance the arena to "junk" status. They also warned the arena's debt holders that in as soon as 30 months the new Amway Center could be faced with a default unless finances are corrected. The City of Orlando was quick to assure that in no way would Fitch's downgrade delay construction and that all necessary funds were there to complete the center. However, because of the Fitch downgrade, the interest rate on the debt would increase the "payoff" cost of the Amway Center over time. This downgrade to "junk" of the Amway Center's debt--although reversible--signals that unless local government either expands tax revenue or drastically reduces both Amway Center and non-center expenses, creditors could in just a short few years seek bankruptcy relief in the form of repossession or auctioning off the new center.
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