1. Public Finance
May 13, 2002
www.fitchratings.com
Tax Supported
New Issue
Memphis and Shelby County
Sports Authority, Tennessee
Ratings
New Issues
Senior Lien Revenue Bonds,
Series 2002A .................................. AA–
Subordinate Lien Revenue Bonds,
Series 2002B................................... NR
Outstanding Debt
City of Memphis, Outstanding
General Obligation Bonds .............. AA
Shelby County, Outstanding
General Obligation Bonds .............. AA
NR – Not rated.
Analysts
James Gilliland
1 212 908-0575
james.gilliland@fitchratings.com
Richard Larkin
1 212 908-0875
richard.larkin@fitchratings.com
Issuer Contact
Tiffany Brown
Managing Director
1 901 543-5338
New Issue Details
$113,370,000 Senior Lien Revenue Bonds,
Series 2002A (non-Alternative Minimum Tax
[AMT]), and $93,620,000 Senior Lien
Revenue Bonds, Series 2002B (non-AMT),
are scheduled for a negotiated sale the week of
May 13 via a syndicate led by Goldman
Sachs.
Purpose: Bond proceeds will be used to pay
for a portion of the arena construction costs,
pay the costs of acquiring land for the arena
project, pay architectural, engineering, and
legal costs, fund the debt service reserve fund,
and pay costs of issuance.
I Outlook
The Outlook for these hybrid project revenue tax-supported bonds is
Stable at ‘AA–’. The arena will be constructed for Memphis’ new
National Basketball Association (NBA) franchise, the Memphis
Grizzlies, and benefits from a non-ad valorem pledge from the deep
and diverse revenue base in the City of Memphis and Shelby County.
This investment-grade rating reflects the credit strength of Memphis
and the County of Shelby, both rated ‘AA’ by Fitch Ratings, and the
likelihood that each would appropriate non-ad valorem revenues
necessary to replenish the Memphis and Shelby County Sports
Authority’s (the authority) debt service reserve fund (DSRF), if
necessary, pursuant to the interlocal agreement.
I Rating Considerations
The ‘AA–’ rating reflects the credit strength of the general obligation
bonds and adequate liquidity levels of the City of Memphis and Shelby
County. Although the back-up pledge to replenish the DSRF is
unconditional, it does not constitute a full faith and credit of the city or
county. Liquidity is strong, with general fund reserve levels in fiscal
2001 of $61.5 million and $39.3 million, respectively. Both the city
and county practice prudent reserve requirements, and this rating
assumes a solid commitment by both in the event of revenue shortfalls.
Subordinate bondholders, representing roughly $24 million at issuance,
do not benefit from the city/county back-up but have rights to a range
of excess pledged revenue.
While pledged revenue cash flow is expected to be significant, the
current financial forecast calls for slim but adequate debt service
coverage averaging 1.12 times (x). Fitch believes there is an optimistic
and speculative element to the arena-based revenues that is likely to
require subsidies from the back-up pledge in future years. However,
Fitch does not believe that a worst case cash flow scenario would
significantly affect the city or county’s financial positions at their
current rating levels. If the Grizzlies leave Memphis before or after the
date of the early termination right, the Grizzlies’ corporate parent,
Hoops LP (Hoops), is required to pay a lump sum approximately equal
to the outstanding principal of the series 2002A bonds. If Hoops is
unable or unwilling to meet its early termination payment, both series
of bonds will continue to be supported on a pro rata basis by remaining
pledged revenue and the back-up pledge. Issuance of additional senior
or subordinate bonds for the arena or for another non-arena project, or
a change in the city or the county’s general obligation credit rating will
trigger a review of this credit.
The arena will be home to the Memphis Grizzlies of the National
Basketball League and is expected to host roughly 50 other non-NBA
events annually. The site is located in downtown Memphis’

2. Public Finance
Memphis and Shelby County Sports Authority, Tennessee
2
tourism development zone (TDZ), immediately
adjacent to the city’s historic Beale Street area.
I Strengths
• Non-ad valorem revenue back-up pledge of city
and of county.
• Deep diverse economy of city and county.
• Adequate reserve levels at city and county to
comfortably cover worst case cash flow scenario.
• Strong city council support for bonds.
I Risks
• 40% of projected cash flows are speculative
arena-based activity.
• Relatively new NBA franchise.
• Authority is not a single-purpose facility.
• Subordinate bondholders have rights over certain
excess pledged revenues.
I Security
The 2002 bonds are secured by the trust estate
consisting of: a senior lien on the pledged revenues;
all right of the authority in the interlocal agreement
among the authority, Shelby County, and the City of
Memphis; and the moneys and securities in the funds
and accounts (excluding the rebate fund subordinate
bonds) created under the indenture.
Pledged Revenues: Pledged revenue consists of six
separate revenue streams in addition to the
city/county back-up pledge. These six revenue
streams are the seat rental fees, the sales tax rebate,
countywide car rental taxes, citywide hotel/motel tax,
countywide hotel/motel tax, and an annual $2.5
million Memphis Light Gas & Water (MLGW) water
division payment in lieu of tax.
City/County Back-Up Pledge: If there is a pledged
revenue shortfall in any year and the DSRF is drawn
on, the city and county, via the interlocal agreement,
pledge to replenish, by appropriation, legally usable
non-ad valorem revenues.
Subordinate Lien Pledged Revenues: Subordinate
lien bondholders are secured only by the seat-use fee,
the sales tax rebate, and the car rental surcharge after
the senior bonds are made whole. In the event there is
a surplus in any year of these two revenue streams,
all surplus revenues will be used to redeem
outstanding subordinate lien bonds, to the extent that
there is not a deficiency in the reserve funds of senior
bonds.
Security Under Early Termination Right (ETR):
If Hoops executes its ETR under the use and
operating agreement (see page 3), the series 2002A
bondholders will cease to be secured by the sales tax
rebate revenue and will be redeemed by Hoops’ early
termination payment, which is structured to be
sufficient for full repayment of the series 2002A
bonds. The series 2002B bondholders will be secured
by the remaining pledged revenues. If Hoops is
unable or unwilling to meet its early termination
payment, both series of bonds will continue to be
supported on a pro rata basis by remaining pledged
revenue and the back-up pledge.
Flow of Funds: All revenue will flow through the
following funds: the revenue fund; bond fund; rebate
fund; DSRF; capitalized start-up costs reserve fund;
and surplus fund.
Within the revenue fund are two separate accounts.
These include the revenues available for senior
indebtedness account and the revenues available for
senior and subordinated indebtedness account. Senior
bonds must be made whole before subordinate bonds
are redeemed, but as long as there are senior or
subordinate bonds outstanding, any revenues (sales
tax rebate and car rental) in the surplus fund shall be
first directed to redeem subordinate bonds as
determined by the authority as necessary, and any
excess revenues shall be deposited back into the
surplus fund. Final maturity of subordinate bonds is
2037.
Once subordinate bond and reserve bond funds are
fulfilled, moneys in the surplus fund shall be directed
in the following priority: to reimburse the city and
county for any replenishment to the DSRF; for
deposit in the capital improvement reserve fund; to
redeem senior bonds; and any lawful purpose by the
authority.
DSRF: The DSRF will be funded at issuance with
the lesser of 10% of series 2002 par amount,
maximum annual debt service requirement, or 125%
of average annual debt service requirements.
Additional Bonds Test: Additional parity bonds
may be issued to accomplish any purpose of the
authority if: all funds and accounts in the indenture
have proper balances; the authority, city, and county
are all in compliance with the covenants of the
indenture; additional bonds are issued only for
construction costs of the project or an additional
project or that additional bonds will be issued for

3. Public Finance
Memphis and Shelby County Sports Authority, Tennessee
3
refunding purposes; or revenues available for senior
and subordinate debt service are not less than 1.10x
debt service coverage for the first five full years after
issuance. The first $20 million of additional bonds
issued to complete construction of the arena are
exempt from this test.
In the event that the authority issues a substantial
amount of additional bonds for any project other than
the arena project, Fitch will review this rating.
I Memphis and Shelby County
Sports Authority
The authority is a nonprofit corporation of the city
and county governments organized in 2000 pursuant
to Chapter 67, Title 7 of the Tennessee Code
Annotated. The purpose of the act is to promote
recreational opportunities via construction and
development of amateur and professional sports
facilities for the people of Tennessee.
The authority is governed by a board of directors
with seven members who are appointed by the city
and county mayors and are confirmed by the city
council and county commission. Under the act, the
authority has broad powers regarding the arena
project, including the issuance of the series 2002
bonds. The series 2002 bonds are limited obligations
of the authority, payable solely from pledged
revenues under the indenture.
I Arena Project
The arena is expected to have 18,500 seats, including
2,500 club seats and 64 luxury boxes with 14 seats
each. A parking garage with 1,800 spaces will be
constructed on arena grounds. Construction is
expected to begin in the summer of 2002 and be
complete in time for the 2004–2005 NBA season.
Construction will be administered by the Memphis
Public Building Authority (PBA), and the PBA will
own the arena on behalf of the city and county and
will lease it to the city/county. Hoops will be
responsible for operating the arena and assuming any
operating surpluses or losses.
The arena is expected to have roughly 95 events
annually, 45 of which are NBA games. The
University of Memphis (U of M) basketball program
will continue to play home games in its current arena,
the Memphis Pyramid, and no other sports tenant in
any major league is expected to play in the arena.
On April 11, 2002, the Memphis City Council voted
13-0 to approve the resolution authorizing the
pledged revenues to pay series 2002 bondholders. On
May 8, 2002, the Shelby County Commissioners
voted 11-2 to authorize the pledged revenues. There
was no referendum to the voters of Memphis and
Shelby County concerning the arena project, as there
is no property tax involved in the financing. The
arena project is being financed by a $20 million state
contribution, $12 million each from the city and
county, $202 million senior lien revenue bonds, and
roughly $21.1 million of privately placed subordinate
lien revenue bonds.
Memphis Arena Project Agreement: This
agreement (project agreement) between the city and
county and Hoops was executed on June 29, 2001
and governs the financing, development activities,
and construction of the arena. Pursuant to the
agreement, the city/county will pay for the
construction of the arena and will fund a $10 million
capital improvement reserve fund (CAPX fund). The
CAPX fund will remain at $10 million until Hoops
draws on it for future infrastructure improvements
that must be approved by the city and county, at
which time surplus revenues from pledged revenues,
if available, will replenish the fund to $10 million.
The CAPX fund balance will be used to pay the final
debt service requirements. Also pursuant to the
project agreement, Hoops will receive the $3.75
million balance in the capitalized start-up costs
reserve fund as reimbursement for start-up costs if
the new arena is not ready for the 2003–2004 season.
This $3.75 million will be funded at issuance.
Memphis Arena Use and Operating Agreement:
This agreement (operating agreement) between
Hoops and the city and county, executed on June 29,
2001, stipulates each party’s rights and operating
covenants relating to the operation of the arena.
Effective on the commencement date, the initial term
of the operating agreement is 25 years, during which
Hoops is obligated to maintain the arena as the
Grizzlies’ home arena. Hoops has the right to extend
the term of the operating agreement for five
consecutive five-year terms afterwards. Under the
operating agreement, all income and revenues of the
arena shall be the property of Hoops and Hoops shall
be responsible for all costs of operation, occupancy,
and management, including operating losses. Hoops’
payment for use of the arena is represented by the
$1.15 seat use fee to the city/county on all public paid
events at the arena. The city/county will maintain
insurance for the arena, and Hoops is responsible for

4. Public Finance
Memphis and Shelby County Sports Authority, Tennessee
4
routine maintenance and cleaning. The city and
county together will meet with Hoops to discuss
scheduling of future events at the arena and at the
Pyramid, and Hoops must consent to certain events to
be held at the Pyramid to limit competition to the
arena.
ETR: Under the operating agreement Hoops may
exercise an ETR to sell or relocate the Grizzlies to
another city after the 17th full NBA season if a
“shortfall season” occurs and specified shortfalls in
the sale of seats, club seats, and suites at the arena
continue into the immediate succeeding NBA season.
Assuming the arena is ready for the 2004–2005 NBA
season, the ETR may not be exercised before the end
of the 2020–2021 NBA season. The series 2002A
bonds mature in 2028, and the series 2002B bonds
mature in 2029.
A shortfall season is defined as one in which average
attendance at the arena for NBA games is less than
14,900, the 64 largest suites available for public sale
are not sold in full, or the number of club season
tickets sold is less than 2,500. If after the occurrence
of a shortfall season, shortfalls occur in any of the
aforementioned sales during the next season, the
“second shortfall season,” Hoops may give notice to
the city/county of the shortfall and second shortfall
season, at which time the city/county or members of
the community have 60 days to cure such shortfalls
for the second shortfall season by purchasing the
number of seats or suites necessary to cure the
shortfall. If no such shortfall is timely cured, Hoops
may relocate the team to another city after the second
shortfall season. If Hoops chooses to relocate the
Grizzlies to another city after this time, Hoops is
obligated to pay a termination fee that will be equal
to the outstanding principal of the series 2002A
bonds.
Interlocal Agreement: Under the interlocal
agreement, the city and county agree to make up any
shortfall in DSRF, by appropriation of non-ad
valorem revenues, split 50%/50%.
I Pledged Revenues
Sales Tax Rebate Revenue: Existing state
legislation provides for the capture by the local sports
authority of any state and local sales tax revenues
(state sales tax of 6% and local option sales tax of
2.25%) levied on ticket, concession, NBA novelty,
and parking revenue generated at the Pyramid and at
the new arena from NBA events but not U of M
events by the team in Shelby County, beginning
Oct. 9, 2001 and lasting for 30 years. This revenue
will be available only as long as the Grizzlies are the
home team at the arena. In the event the state rate for
the sales and use tax should change while the
authority is receiving these revenues, the Tennessee
Department of Revenue is required by statute to
adjust rates to provide substantially the same
economic benefit to the authority. The sales tax
rebate revenues are expected to account for 30% of
total base case cash flows.
Seat Rental Fees: The $1.15 per seat rental fee is
collected by Hoops for every sporting, entertainment,
exhibition, or performance at the new arena. All
events at the Pyramid excluding U of M games, until
the arena is opened, are subject to the $1.15 fee.
Under the operating agreement, Hoops remits this
$1.15 per ticket to the city and county, which remits
it to the trustee. The seat use fee revenues are
expected to account for 8.2% of total base case cash
flows.
MLGW Water Division Payment in Lieu of Taxes:
Pursuant to an agreement between the city and the
water division of MLGW, the city will receive $2.5
million annually after 2003. The MLGW PILOT is
expected to account for 11.7% of total base case cash
flows.
Car Rental Taxes: A 2% countywide surcharge on
rental cars rented for 31 days or less applies until the
bonds are fully paid. Exemptions include rental cars
under contract for customers whose vehicles are
being repaired and for rental car transactions in
which an entity whose principal business is the sale
or service of motor vehicles. Car rental taxes are
expected to account for 15.7% of total base case cash
flows.
Citywide Hotel/Motel Tax: The city currently
collects a 1.75% room occupancy tax. A portion of
the tax has been dedicated through 2016 to the
payment of Memphis’ downtown Cook Convention
Center (CCC). After 2016, all taxes are available for
the series 2002 bonds. The citywide hotel/motel tax is
expected to account for 14.3% of total base case cash
flows after 2016.
Countywide Hotel/Motel Tax — TDZ Sales Tax
Increment: Current countywide hotel/motel tax pays
debt service for Memphis’ outstanding CCC general
obligation bonds, although this revenue is not
specifically pledged to these bonds, and the city

5. Public Finance
Memphis and Shelby County Sports Authority, Tennessee
5
receives an annual rebate of the incremental state
sales tax within the downtown TDZ that will
substitute the hotel/motel tax revenue in to pay the
CCC bonds. The TDZ was established in 1999 and
includes the heart of Memphis’ downtown central
business district, including the entire Beale Street
area. The first TDZ rebate was in 2001, and the TDZ
payment will permit a county hotel/motel tax to apply
to series 2002 bondholders via assignment from the
interlocal agreement. The countywide hotel/motel tax
revenues are expected to account for 20.3% of total
base case cash flows.
I City/County Credit
Under the interlocal agreement between the City of
Memphis, Shelby County, and the authority, executed
on April 16, 2002, if pledged revenues are
insufficient to meet debt service requirements in any
year, the city and county shall each separately
replenish the DSRF at a 50%/50% split from legally
available non-ad valorem. The maximum amount of
the city and county’s obligation for the series 2002
bond is $115.0 million, and per the interlocal
agreement, both the city and county shall be
reimbursed from pledged revenues, if necessary.
In the event DSRF replenishment is necessary, the
trustee will notify both the city and the county of the
shortfall. Both the city and the county’s fiscal year-
end occurs on June 30, and the authority’s series
2002 bonds are payable on Nov. 1 annually. As such,
the city and county shall have four months to fill the
DSRF by the deadline of Oct. 31 of each year.
In fiscal 2001, the city appropriated roughly $180
million of local non-ad valorem revenues, and the
county appropriated roughly $59 million of non-ad
valorem revenues. Liquidity levels are strong at the
city and county level, with general fund reserve
levels in fiscal 2001 were $61.5 million and
$39.3 million, respectively, as well.
Fitch rates both the City of Memphis and Shelby
County’s general obligation property tax bonds ‘AA’.
For a detailed credit analysis, see Fitch Research on
“Memphis, Tennessee,” dated Oct. 21, 2001, and
“Shelby County, Tennessee,” dated Nov. 5, 2001,
available on Fitch’s web site at www.fitchratings.com.
I Projected Arena Cash Flows
Of these six revenue streams, two (sales tax rebate
and seat use fees) are tied to the profitability of the
arena, three are non-arena-related tax pledges, and
one is contractually obligated income (COI) from a
city agency. The arena’s principal cash flow risk lies
in the arena-based revenue forecasts, which are
largely dependent on the future performance of the
Grizzlies franchise and the fan support that the team
generates. Base case cash flows call for arena-based
revenues to account for an average of 34% of total
revenues available for debt service throughout the life
of the bonds.
While pledged revenue cash flow is expected to be
significant, the authority’s financial forecast calls for
slim but adequate debt service coverage averaging
1.12x. Fitch believes there is an optimistic and
speculative element to the arena-based revenues that
is likely to require subsidies from the back-up pledge
in future years. Assumptions for these are based on
fully leased luxury suites, fully leased club seats, and
roughly 80% of sell-outs for regular seating through
the life of the bonds. If the Grizzlies leave Memphis
before or after the date of the ETR, the Grizzlies’
corporate parent, Hoops, is required to pay a lump
sum approximately equal to the outstanding principal
of the series 2002A bonds. If Hoops is unable or
unwilling to meet its early termination payment, both
series of bonds will continue to be supported on a pro
rata basis by remaining pledged revenue and the
back-up pledge.
Under a stress case scenario under which Fitch
assumed arena-based revenues to be roughly 80% of
forecast at 2003, decline to 50% of forecast by 2010,
and see the Grizzlies execute their early termination
right in 2022, as well as stressing the tax-backed
revenues to 80% of their forecast through the term of
the bonds, Fitch estimates the city and county would
each have to appropriate roughly $200,000 in 2004
and increase slowly and steadily increase this to $1.5
million each by 2022 and $3.5 million afterwards,
assuming no termination payment from Hoops. While
Fitch believes the city and county’s respective non-ad
valorem budgets would be able to sustain these
increases at their rating levels, a major risk despite
the interlocal agreement, is future appropriation risk
for non-essential assets. However, Fitch does not
believe that a worst case cash flow scenario would
significantly affect the city or county’s financial
positions at their current rating levels, and this rating
assumes that the city/county would be willing to
appropriate amounts necessary to replenish the
DSRF.

6. Public Finance
Memphis and Shelby County Sports Authority, Tennessee
6
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