Stadium Financing Close To Wrapping Amid Gripes Over Lack Of Cost Disclosure
Written by Risa Polansky on July 16, 2009
By Risa Polansky
With two bond sales wrapped up, Miami-Dade County is to hit the market again next month to sell $50 million in general obligation bonds to complete financing for a Marlins stadium.
The county Tuesday closed on the first two bond issuances, which over the next 40 years are to cost taxpayers about $2.4 billion in debt service.
Paying down the $50 million in general obligation bonds would come on top of that cost.
The county went to market to price the first two stadium bond issuances late last month and couldn’t sell all of the bonds within the commission-set 7.5% interest rate cap.
About $91.2 million in convention development tax-backed bonds sold at nearly 8.2%.
Debt service on those bonds is to cost almost $1.2 billion by 2047.
About $319.3 million in professional sports tax bonds sold below the interest ceiling at about 6.39% and are to cost about $1.3 billion to pay down by 2049.
As part of that issuance, the county sold $100 million as variable rate, meaning interest rates change weekly.
Monday, the county learned the initial rate: .3%
The general obligation bond financing is considered more traditional, County Manager George Burgess said.
"It would be fixed-rate, conventional, current-interest debt. A much more conventional, typical — in a perfect world, preferred — way to do things," he said, adding that tourist tax-backed bonds can’t be sold that way.
Commissioner Carlos Gimenez, a vocal stadium critic, also said he anticipates much lower debt service costs on the general obligation bonds compared to the earlier stadium issuances — about $200 million, by his estimation.
Mr. Gimenez was one of the first to learn actual costs of the first two bond sales.
He requested to see amortization schedules from underwriters immediately after the pricing.
Some other commissioners did not find out about total costs until County Manager George Burgess released a memo last Thursday — more than a week after commissioners OK’d the bond sales during a late-night vote with only interest rates in hand.
During the marathon meeting, which ran into the early morning, a handful of commissioners repeatedly asked what the bonds would cost the county over time.
Mr. Burgess never answered, telling commissioners costs were about the same as estimated in the past.
But commissioners never received estimates, Mr. Burgess acknowledged in his memo.
"Up front, let me state that staff mistakenly advised me that an assumed amortization schedule was attached to the CDT bond resolution when presented to the board on April 7, 2009," he wrote. "There was no such schedule, and that answer was incorrect."
In an interview Tuesday, he elaborated.
A bond seller can’t know true costs ahead of interest rates, so there was no way for the administration to give commissioners an exact figure, he said.
"But typically we have some kind of a schedule that is almost an anticipation or draft or an idea of what we think it could look like with some rate assumption" — but this time, the county didn’t have it.
"I found out afterward it didn’t," Mr. Burgess said, "And obviously it’s upsetting."
He owned up to the mistake in the memo because "if we make a mistake, we should say so," though he doesn’t consider the omission a major blunder.
"It wasn’t material to the outlook or the dialogue, in my judgment," he said.
To some commissioners, it was.
Dennis Moss, a stadium supporter and commission chairman, did not return a request on deadline to comment on Mr. Burgess’s admitted mistake.
Vice Chair José "Pepe" Diaz, another stadium fan, did not respond to calls last or this week regarding ballpark financing.
But some stadium opponents — who in the past repeatedly pressed for cost estimates — criticized the manager for never having shared estimated debt service numbers.
"How forthright of him to blame it on staff. …If this was readily available, if this existed, it would have been through his knowledge, his office," Commissioner Sally Heyman said. "It starts and stops with the manager, who was the lead negotiator on this deal and selectively provided information."
The manager signed the April bonding legislation, Mr. Gimenez noted.
"I found it interesting that he didn’t know he hadn’t given us the numbers," he said.
Though the manager calls it a miscommunication with staff, Mr. Gimenez said, "that has his signature on it, so maybe he doesn’t read what he signs."
Mr. Burgess said it’s simply a case of an honest mistake.
"Human beings are going to make mistakes, so I’m not going to tell you folks are never going to err. It’s relatively minor," he said.
And that’s not the key, he added — the important part was structuring the debt so tourist taxes could cover it.
He emphasized the point in the interview and his memo.
"However, the bottom line is that the transaction was structured within the constrained tourist tax revenue streams in a way that will significantly minimize any exposure to the secondary pledge of the bonds," Mr. Burgess wrote.
Non ad valorem revenues, part of the county’s general fund, are the secondary pledge.
Mr. Burgess said he thinks tourist tax revenues will cover the costs, as the debt is structured so the bulk is paid off in later years.
Others point to this year’s dip in tourist tax collections — a symptom of the ailing economy — as evidence that may not be true.
Ms. Heyman frequently airs worries about putting the general funds on the line.
Of the final debt service costs, she said, "a bad deal got uglier.
"And for administration and the manager with his financial background to not give us an understanding of the enormity of the debt — we’re talking billions of dollars that are going to encumber this county in the future — speaks for itself."
Stadium supporter Commissioner Barbara Jordan, interviewed before receiving the Burgess memo, said she’s not thrilled with the $2.4 billion debt service price tag but is still a fan of the ballpark project.
"I’m somewhat disappointed at the escalated costs," she said, though she pointed out that it’s understandable in this economy to have had some trouble with interest rates.
"I understand why the cost is what it is."
Still, she said she hopes the county can refinance once the economy bounces back so "all is not lost in the process."
Regardless, Ms. Jordan said, because of the amount of jobs stadium construction is to create, "I still feel very strongly we made the right decision."
The Marlins kicked off construction on the 37,000-capacity ballpark this month.
It’s meant to be complete for Opening Day 2012.