Watershed in Marlins giveaway: How high will bill soar?
By Michael Lewis
At a watershed for the taxpayer bailout of Florida Marlins owners, the county will learn Tuesday how much interest we'd pay to bond a $645 million stadium and decide whether to move ahead. A high rate would push the bill far past $2 billion.
Setting the stage to potentially exceed the 7.5% interest ceiling that commissioners have set or find other financing, Mayor Carlos Alvarez asked them Friday to be flexible.
That's fine for him — he won't be in office when 40-year bonds are paid off. The fattest balloon payment comes the final year: $75 million in principal alone, more than 18% of the total bond issue.
It's like paying a $500,000 home mortgage at ever-increasing levels, leading up to a final bulge of $90,000 plus interest that could wipe out a homeowner who hadn't saved enough cash. No intelligent buyer would sign that deal.
On Tuesday, commissioners are to be told the lowest interest bond buyers will take, then reject it and kill the one-sided stadium deal outright — which they should — or accept the rate and, if need be, find more money to pay it.
That could mean digging deep into funds for services, though the county had vowed at the outset not to touch general revenues.
But that vow has already been broken. To get decent bond ratings, the county pledged general revenues to pay off bonds if tourist taxes fall short, as they have in our tourism dive. After several flat years, the stadium plan unrealistically projects continual tourist tax jumps from pre-recession levels.
But even if future tourist tax receipts can meet bond payments, the county is required to set aside general funds each year to do so too, just in case. That forces cutting services or raising taxes to cover the set-aside.
Affordable interest is harder to get now than when the Marlins bailout was crafted. The recession has handcuffed municipal bonding. Fearful of inflation due to federal spending to slow the nosedive, bond buyers may reject even 7.5% tax-free for 40 years if they anticipate future double-digit interest.
Bond buyers may also be wary of the courts.
On Friday, two taxpayers turned to the 3rd District Court of Appeals after a judge rejected their call for an emergency injunction to bar a bond sale. A suit by auto dealer Norman Braman is also on appeal. Bond bidders must factor into interest rates how the suits could impact their investments.
Also affecting interest rates, the county last week agreed to move Wachovia Bank's payments to join bond buyers at the head of the line for its letter of credit on the stadium's variable-rate bonds. Bond buyers, who no longer will stand alone for priority payment, may therefore seek higher interest.
Variable-rate bonds may slip under the commission's 7.5% ceiling today but have us paying incalculably more when rates rise with inflation.
If the commission Tuesday obligates future generations for billions, tying up tourist taxes instead of using them to help our visitor industry, the Marlins plan to break ground July 18 on public land with public money to build a stadium that gives them all the revenues for 40 years.
That would come after actual bond closings July 13 and 14. The commission still gets to escape through July 17 if something happens to upset those closings. Unfortunately, if we agree to pay high enough interest, someone is going to buy all the bonds and profit from our needless financial pain.
It's not, after all, like we're bailing out General Motors or Chrysler to save tens of thousands of workers' jobs. We're about to spend billions to bail out team owners and pay 25 players whose minimum by league rules is $400,000 and whose total pay tops $36.8 million.
Ostensibly, we're building a covered stadium so that rain doesn't keep fans away, attendance rises and the team can pay players far more to be competitive — yes, $36.8 million is baseball's lowest player payroll, believe it or not, with the top-paying New York Yankees surpassing $201 million.
But even though we're funding a ballpark so that we can pay closer to $200 million, expect the Marlins to slash today's payroll through trades and pocket the cash right after the county finally locks in a stadium deal. The real payday is for the owners.
Oh, that rain issue. The Marlins, whose paid fans this year average 17,451 — 48% of capacity — played last Wednesday in Boston, where the Red Sox sold out their 500th consecutive game. The next day, in chilling rain that finally halted play with the Marlins, the Red Sox still had 37,577 paid customers.
Did we mention that Boston's Fenway Park is 97 years old and has no roof?
The Marlins' attendance problem isn't lack of roof. It's lack of fan interest. No amount of bailout money will grow that. Like General Motors and Chrysler, the Marlins face skimpy demand. Handing them money won't add fans.
A potential Miami investor asked this Friday about the stadium issue: "Is this what Miami has become: scam after scam, deal after deal?"
As county unemployment nears 10%, property assessments plunge almost 10%, a 5% county budget shortfall looms and the mayor looks at raising tax rates in the depths of the worst recession most living persons have ever faced, this county is trying to hand hundreds of millions to a baseball team and encumber taxpayers more than $2 billion for 40 years to do it.
That's what commissioners should be looking at Tuesday.
If none of that fazes them — and it hasn't thus far — they can look at the fixed interest rates, plus variable interest rates at untold levels, and determine how much stomach they have to mortgage our future for private owners' benefit in a sport that has never caught hold in Miami.
If they have intellectual honesty they'll discuss the stadium and a tax hike in the same breath, because the general fund would have to grow to back up tourist taxes for bonding, yet that fund won't even cover next year's expenses.
Mayor Carlos Alvarez doesn't favor spending cuts. The only other option is to hike tax rates, and then hike them even more for baseball.
Why are elected officials who know these facts so set on a stadium?
Knowing that letting stadium bonding proceed Tuesday means a tax hike and billions in debt that will deplete the general fund for 40 years leading up to painful balloon payments, no commissioner should accept this deal. The recession should alter our course.
But commissioners are spending in a vacuum.
Miami-Dade has no master plan for what it wants to become, so no alternatives are weighed for use of tourist tax receipts that, once committed to baseball, will be out of play for 40 years as a tool for our vital visitor industry. That makes it easier to waste tourist funds on baseball, which doesn't lure many overnight visitors.
In fact, lack of planning to allocate finite resources toward agreed-upon objectives is a far worse sin than the baseball giveaway. And once the county squanders tourist taxes it will be too late to plan for their best use.
That's the best reason to halt the stadium debacle Tuesday: before we give away money, we ought to determine what we're trying to achieve.
It ought to be something far better than raising a paycheck for 25 men from $36 million to $200 million.