Wednesday, July 08, 2009
Fire all of them: managers and incumbent commissioners who supported the Marlins deal ... by gimleteye
I can just imagine Nero, the Roman emperor, and the upper class of Roman nobility, the sycophants and hangers-on cheering the construction of a new colosseum for the people, while watching the city state's wealth drain away. It doesn't take much imagination. Only a passing interest in history. We have our own example: the newly planned and approved Marlin's baseball stadium in Miami.
Back then, the idea was to distract "the people" with entertainments. It is not much different, a few thousand years later. Just more monstrous. Instead of payoffs for stone slabs (My quarry, not yours), we have cement and preforms and cranes and dericks and a whole supply chain more complicated than iron gate fitters for lion cages. I suppose, back in Nero's day, there were also scribes and contract drafters, wearing togas and sandals instead of bespoke suits and Bruno Magli shoes. But it worked the same way: the insiders knew the treasury was being drained and figured we better stick our straws in deeper today because who knows what happens tomorrow. Tomorrow, their thinking went, even we might be thrown to the lions.
The 37,000 seat stadium will cost taxpayers, all told, $65,000 per seat. (Before cost overruns. County Commissioner Katy Sorenson, the lone voice of logic on the county commission, might have asked County Manager Burgess, how much of that per seat cost will be returned to taxpayers by Marlin owners once the team is sold.)
The Marlin's financing shows both local governments -- the city and the county-- lunging at exactly the same exotic financing scheme that characterized mortgage fraud in residential housing: teaser loans with low upfront costs and massive balloon payments at the back end. The underlying logic, that financing conditions will improve, is bankrupt because the deal never made sense in this economic climate in the first place. But that is also how millions of individual homeowners made their own bad decisions to take on more mortgage than they could reasonably afford.
''It was always presupposed the payments would be backloaded,'' County Manager George Burgess, the chief deal architect, told the Miami Herald this morning, every bit Nero's consigliere. ''This is the sort of financing you do when you cannot afford it,'' said Leo Guzman, president of securities firm Guzman & Co. in Coral Gables, who is not involved in the deal."
But we are all involved in the deal. Soon enough, we will be paying taxes to these baseball entertainments that were sold to us as what we wanted and needed for general morale in tough economic times. We needed "the jobs", most of all, never mind that the king's ransom we are paying goes to the financiers, the lobbyists, and to fund the lifestyles of the rich and famous. Oh, and the commissioners get individual box seats and parking spaces.
The Marlin's deal is a disgrace. We said so, all along. The managers should be removed. The Cool-Aid drinking majorities of the city and county commissions should be voted out. Of course, that assumes Miami's voters have more life than hanging chads.
Posted on Tue, Jul. 07, 2009
Final cost of Florida Marlins' Little Havana stadium down the road may shock some
BY MATTHEW HAGGMAN
As Miami-Dade County commissioners worked late into the night to finalize financing for the Florida Marlins stadium last week, Commissioner Katy Sorenson posed a simple question: What's the total cost of financing going to be?
''I don't know off the top of my head,'' County Manager George Burgess replied.
With bonds issued last week in New York, the total cost is finally in black and white: $2.4 billion, spread over 40 years, to repay $409 million in bonds that will primarily, though not exclusively, cover stadium construction.
The total exceeds earlier estimates, which pegged final costs at $1.8 billion to $2 billion, according to papers released by the Wall Street firms underwriting the bonds. The new figures show that one $91 million bond offering alone will cost, with interest, more than $1 billion to repay. The bonds are backed by tourist-tax dollars, but if those numbers don't meet projections, the county can dip into the general fund.
The prime reasons for the rising figure: The county is paying higher interest rates than anticipated -- and is putting off huge pieces of the repayment until decades down the road. That means interest will compound year after year, raising the total.
Stadium critics say the figure shows the team should have put up more money, which could have significantly lowered the ultimate public payout.
''It is very expensive money,'' said Sorenson, who voted against the deal. "Who knows what we could have gotten out of them if we had tougher negotiators.''
The team is contributing $120 million toward construction, plus the repayment of a $35 million county loan. But the team doesn't have to pay until the final phases of construction.
Burgess, the county's chief stadium negotiator, said it was vital to keep debt obligations low at the start so as not to risk having to use anything other than tourist taxes. He said financial obligations down the road were not as great as they appear because future dollars are worth less.
''It was always presupposed the payments would be backloaded,'' said Burgess, who said a report detailing the bond sale will be issued Wednesday.
Experts offered mixed views on the financing plan, with some saying the county was fortunate to secure the ballpark bonds in a fragile economic climate, but others saying the back-ended financing could ultimately bring havoc.
''This is the sort of financing you do when you cannot afford it,'' said Leo Guzman, president of securities firm Guzman & Co. in Coral Gables, who is not involved in the deal.
Stadium proponents downplay the significance of the total cost, saying homeowners who buy a $300,000 house ultimately pay much more than that with interest.
Also, there's the chance the deal can be reworked when credit markets improve -- shaving untold millions from the payout figure.
''Miami had the unfortunate luck of trying to deal with a market where it is difficult to finance anything,'' said Mark Rosentraub, a sports management professor at the University of Michigan.
''The hope is it can be refinanced, and that has been done many times before'' at other stadiums, said Rosentraub, a critic of the Marlins deal who contends the public is paying too much.
LONG ROAD AHEAD
The 37,000-seat Little Havana ballpark is slated to be ready Opening Day 2012. Workers started clearing the site for construction last week, and an official groundbreaking is set for July 18.
But stadium financing was not officially inked until a week ago, when a county commission meeting that stretched into Wednesday morning resulted in the Marlins agreeing to pick up $6 million in costs -- after Miami-Dade County's bond sale fell short of expectations and county leaders agreed to a higher bond interest rate.
The commission approval cleared the way for the county to sign contracts to sell $409 million in bonds backed by the promise of repayment from tourist taxes.
Roughly $100 million will refinance existing bond debt and another $9 million goes into a debt service reserve fund. The result: $300 million for stadium construction, financed in two ways.
One portion, underwritten by Merrill Lunch totaling $220 million, has an interest rate of 6.4 percent and requires immediate repayment. In October 2010 the county must pay $9.6 million, though there are questions over whether tourist taxes will meet that. This year, for instance, they're on track to generate $7.2 million.
Annual payments run through 2049 and climb as high as $71 million per year.
The second portion, underwritten by JP Morgan, is for $91 million -- $80 million for construction. That carries an 8.17 rate, but repayment doesn't begin until 2025.
Yet that grace period comes with a big price: $83 million a year for three years starting in 2038. Then, starting in 2041, six years of payments totaling $118 million annually. Total cost to retire the debt: $1.2 billion.
Miami Herald staff writer Douglas Hanks contributed to this report.
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