Sorry Folks With Countys Aid I Lowballed Stadiums Cost
Written by Michael Lewis on July 9, 2009
By Michael Lewis
I apologize to readers: I’ve had a key fact wrong in opposing public funding for a baseball stadium from which the Florida Marlins alone will profit.
My error was major: for many months I’ve written that a stadium giveaway would total $2 billion in public funds.
But I was way off base: Miami-Dade commissioners last week voted for more than $2.4 billion for stadium bonds, and more yet to be issued will balloon the total.
Add City of Miami bonds for the parking, and true public cost will pass $3 billion. That doesn’t include the Orange Bowl site given free, or county and city payments to maintain a ballpark from which the Marlins will extract almost all revenues.
So I vastly low-balled costs all along. Again, I apologize.
My sole defense is incomplete information. No matter how many questions reporters asked county officials, we never envisioned that large a giveaway.
But then, most commissioners themselves didn’t know — and only three asked — when they voted at 1:10 a.m. last Wednesday to approve bonding and allow the stadium to go ahead.
In discussion, the word "billion" never surfaced. Was that by agreement, or out of ignorance, or didn’t they consider it important?
Oh, the three opponents of the giveaway did pepper County Manager George Burgess with questions over a six-hour period trying to learn the cost of repaying just the bonds on the table. They got the runaround.
Mr. Burgess told them variously that the number was the same as it always had been, that it was in bond schedules they had seen before, that they had already known it for a long time, that he would get the number for them before a vote. But he never did come up with the number, nor did anyone else.
In fact, hours after the vote that locked them in, commissioners got figures showing total county payments for the first groups of stadium bonds at $2.4 billion plus. They had signed a blank check, and the manager wouldn’t even estimate costs for them.
If you’re in business, you’d be very concerned if your top manager had personally directed a major deal over several years and when final yes-or-no day arrived didn’t know the cost — or wouldn’t tell.
Yet, that executive put his bosses on the spot to vote immediately when they didn’t know the cost to taxpayers.
Mr. Burgess began more than six hours before the vote by saying "It’s been a long day." He then said the interest rate ceiling he’d confidently told commissioners wouldn’t be surpassed was way too low on one bond issue, so the county had to raise the ceiling or the stadium deal was dead.
He gave them no leeway. "We need that action tonight."
Not to worry, he told them: "…the amortization schedule that we put in would stay the same, so the payments out wouldn’t change…" And he reiterated, "The principal and interest payments we have shown we would be making don’t change…. The cash out the door doesn’t change."
The county would be responsible, he added later, "for the same debt service payments we’ve laid out all along…"
And again, "My understanding is that the total amortization, or the principal and interest payments, stays the same… The total outlays from what I’ve been advised stays the same…"
Over and over, Mr. Burgess told commissioners the final cost was the same.
Okay, Commissioner Katy Sorenson asked logically, "What’s the number, Mr. Manager?"
"I don’t know off the top of my head," Mr., Burgess replied. "It’s the same number we showed you before, commissioner."
Ms. Sorenson replied, "I would like someone to get that number. I’m sure someone has that in their documents somewhere."
"We’ll get that for you," Mr. Burgess replied. "But it’s the same number we’ve discussed before."
"Then it’s in documents somewhere and we know what it is," Ms. Sorenson responded.
Five hours and 23 minutes later the commission voted, still without a hint of that number that Mr. Burgess promised. It has yet to be put on the record as a bottom-line total for the commission.
Later that night, Sally Heyman tried again to get figures out of Mr. Burgess.
"I keep hearing "the payments are the same.’… One of my colleagues already asked "What are our payments?’… "Do we know what our payments are at this date that we’re voting on? Do we know what the payments are going to be?"
Carlos Gimenez well after midnight was still asking for total county principal and interest payments for the stadium: "What is the total cost of this financing over 40 years?"
He also got no figures.
And Commissioner Heyman again, concerned that the contract for bonding on which the commission was voting would be based on an assumed interest rate, continued, exasperated:
"It’s an assumption. It’s when we get the figures. We don’t have a rate sheet. We don’t have anything except hoping, assuming. This is the type of words we didn’t want to rely on when we were putting these to contracts last time. Fortunately, the City of Miami stepped up [at the last stadium vote] and made demands so it became more concrete and we just fell into suit…."
"I can’t wait to see what it’s going to cost the taxpayers of Miami-Dade County," Commissioner Heyman continued, "but then, we’ll all see it because we’re pledging the general fund."
At 12:55 a.m., 15 minutes before the vote, Commissioner Sorenson gave a last try at prying out of Mr. Burgess a bottom-line cost for this $2.4 billion portion of stadium bonds — though, to reiterate, the word billion never crossed the lips of Mr. Burgess throughout the evening.
"We don’t have an amortization schedule," Ms. Sorenson said. "So what’s the total cost? What’s the final amount we’ll pay? What’s the number?
"I don’t think we have to wait to tomorrow to find out what the total cost is because what the manager has been telling us is that the total cost is the one number that hasn’t changed, the number that’s been driving the whole process. And what he said is that the same amount of money will be going out the door. So, what is that amount? … To have an educated vote we ought to know what that amount is. I’d like to ask the manager or someone who has that information to share that at this time."
"It’s the amortization schedule that we’ve been using, that the finance adviser has been using," Mr. Burgess replied. "I don’t have that number."
He then fumbled around, called an aide’s name and added weakly, "It’s… where is it?"
Then, without anyone helping him out, he continued.
"The financial advisers, the director of finance are in New York now [for the bond sales]. The amortization schedule they’ve been working with is, um, I don’t know the number off the top. I don’t have it."
"This seems very odd that the manager says it’s the same number the whole time, so it’s X, and we don’t know what X is, even though we’re voting on a very expensive project," Ms. Sorenson said.
"We presented a number of different scenarios, hypothetical scenarios, when we presented the baseball stadium deal," Mr. Burgess responded. But interest rates have changed. "They have gone to New York to work that amortization schedule, which is within the stream of revenue… that would leverage the money we need." That, he said, has gone through a number of iterations.
"The actual final amortization schedule that is in New York now I just don’t have in front of me… Everything I have heard from New York is that the schedule that fell $6 million short is no different than the schedule we went up into New York with. I just don’t have that schedule in front of me. That’s all."
So the single figure, a bottom line for two key bond issues that the county has been planning for months with Mr. Burgess directly at the helm, was still a mystery. And apparently no phone or e-mail contact could be established with the county’s executives and advisers in New York over a six-hour period to learn the bottom line.
"Thank you, Mr. Manager, you’re not answering my question," a frustrated Commissioner Sorenson said finally.
But nine other commissioners, who all voted for the bond deal, didn’t care to put the cost on the record.
"Yes, we could go into a hundred other minute questions," said Jose "Pepe" Diaz, "but the bulk of the issue has been addressed." So he seconded a motion to approve the bond issues and learn later — or not at all — just how much money he was committing taxpayers to.
In fact, in one bond issue that raises just over $80 million for the stadium, taxpayers will be committed to nine consecutive years of repayments of more than $80 million each year, with payments for six of those years topping $118 million each. The total cost for that bond issue alone is nearly $1.2 billion — to raise $80 million. That’s a repayment of 15 times the amount borrowed.
But why would commissioners want to get into a hundred minute questions that go into the billions? After all, they want to help the Marlins stay financially sound.
So again, apologies for failing to tell you the true cost of a Marlins stadium. Most of the commissioners didn’t care, but taxpayers might want to know where their billions are going.
Miami-Dade is, after all, in a recession in which county program and staff cuts along with tax increases are on the table, unemployment is deepening and assessed value declines just got 3.2% worse than last month’s projection.
Maybe the county’s game plan is to build the Marlins a stadium and then follow the California roadmap: pay the county’s bills with IOUs.
We’ll never know that, because most of the commissioners follow a popular rule: don’t ask, don’t tell. And the manager is more than happy to oblige.