Final bill for Marlins stadium up in the air as financing steps remain
By Risa Polansky
Though Miami-Dade scored big in the stadium bonding game last week, the county isn't yet in the final inning of the financing.
Miami-Dade is set to pay about $2.5 billion in debt service over the next four decades on about $410.5 million in tourist-tax-backed bonds, priced last week.
But of that total, $100 million is to be paid down at variable interest rates, and officials are to learn next week the initial rate, which could alter costs.
Final closings on the bonds are set for July 14.
The county must still also sell about $50 million in general obligation bonds to fund the project, adding to the total the county must repay.
Meanwhile, the City of Miami — in charge of parking at the site — has yet to do its financing.
The bidding process for parking contractors just kicked off.
The Marlins began ballpark construction July 1, hours after the county commission agreed to financing tweaks during a late-night meeting.
Technically, the team, county and city have until July 17 to pull out of the stadium deal penalty free should something go wrong during the upcoming bond closings.
Unlikely, said Matt Lalla, a bond analyst in the county's Finance Department.
"The most often cited example is an outbreak of war," he said when asked to name common causes of failed bond closings.
The closings serve simply to officially finalize a sale, he said.
"We would fully expect that both the underwriters and the county would be able to provide all the documents and contracts and executed versions of the contracts that are required," Mr. Lalla said. "It's a lot of dotting of I's and crossing of T's."
Already the county has in hand what's called a "good-faith deposit," he added — that's 2% of the amount to be lent to show good faith that the underwriter "will provide the balance of the funding for the transaction."
The deposit represents the county's liquidated damages if the sale doesn't close, Mr. Lalla said.
The county must wait until the day before the closing, July 13, to get the actual initial interest rate on the variable-rate bonds, said Frank Hinton, also a county bond analyst.
In fleshing out the cost of the bond issuance, Merrill Lynch plugged in an interest rate of about 4.6% for the variable-rate portion, documents show.
But interest on variable rate bonds changes weekly — hence the "variable" — so the county couldn't price those bonds at the same time as the others last week, Mr. Hinton said.
"Otherwise, that rate would not be good for a closing that closes later. It wouldn't be good for a whole week," he said.
The county has another variable rate issuance with the same basic structure, and those bonds are trading at about 0.25% interest, he added.
County Manager George Burgess said the same just before last week's commission vote.
The county chose to issue some of the bonds at variable rates because "variable rate bonds allow the county to take advantage of optimal debt structures which utilize a combination of bonds to reduce the cost to the county. Variable rate bonds currently have a lower interest rate than fixed rate bonds," County Finance Director Carter Hammer said via e-mail last month.
But stadium financing critic Commissioner Carlos Gimenez said variable rates are predicted to rise.
And should the county ever choose to convert to fixed-rate bonds instead, that rate would probably be above the variable rate, he said. "That's completely volatile."
Mr. Gimenez also takes issue with another element of the bond sale.
In issuing new stadium bonds, the county also refinanced existing professional sports tax-backed bonds.
"We lost $36 million because of that financing," he said, calling the loss "outrageous."
And the money goes toward "no new projects," Mr. Gimenez said. "We're just refinancing projects we had basically completed in the '90s. We increase the principal every time we refinance."
A report from underwriter Merrill Lynch confirms the value loss. In a refunding results summary, a column labeled "Net PV [present value] Savings" shows negative $36.1 million.
Mr. Gimenez has also long opposed what some call "ballooning" bond payments — paying off most outstanding debt toward the end of the life of the loan.
He's likened it to "mortgaging" the county's future.
Some baseball bonds are set up that way.
The county isn't to pay a penny on $91.2 million in convention development tax bonds until 2025, according to documents from underwriter J.P. Morgan. A $260,000 payment is scheduled that year.
But from 2041 to 2046, annual payments on the $91.2 million the county receives sit at $118.6 million.
The county is to begin paying down $319.3 million in professional sports tax bonds right away, with an $874,065 payment scheduled this year, Merrill Lynch numbers show.
Payments on those bonds increase gradually, with no pronounced spike.
The highest is to come in 2048: about $71 million.