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
mhaggman@MiamiHerald.com
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.
DIFFERING VIEWS
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.
© 2009 Miami Herald Media Company. All Rights Reserved.
http://www.miamiherald.com
19 comments:
I think the city and county just perpetrated a giant scam on the bond buyers. Every indication is there will not be enough money to pay the money back.
I went to a community meeting awhile back and Marc Sarnoff bluntly said that city of Miami costs are going up (in large part because of pension obligations) and revenues are going down. He estimated, six months ago, that the city would have to declare bankruptcy in 18-24 months. He said that would solve the problems since the labor agreements would all have to be renegotiated.
That is the city of Miami but you know it is the same or worse for the county.
There is no way, in the future when the payments sharply increase, that the money will be there. Not in tourist taxes or in the general fund.
Buying stadium bonds two weeks ago was like buying bonds in General Motors a year ago. Money down the drain.
So, who in their right mind bought them? Banks. With _other peoples_ money. What the heck do the bankers care?
If I saw that my bond fund had these stadium bonds, that would be the sign to sell, because the fund operators are obviously just gambling or idiots or too lazy to do their homework.
7.5% return, gimme some.
#1 is right. These bonds are going to go into default. Perhaps greed makes people stupid.
Incidentally the thrust of the post is spot-on. I'm reading Decline and Fall of the Roman Empire, and while we know of Nero the decline was much worse later. And yes, much money was wasted locally, though then, as now, the bulk of the Empire's wealth was destroyed through continual military adventures. Sound familiar?
The speculators are still in charge. They are still ginning fees and commissions from transactions that are within and between insolvent entities. That is what the Marlin's deal represents. The promise of refinancing is just another opportunity for the banks and brokers to earn more fees, and for the lawyers to bill more hours.
I can't believe the asinine comment about how it seems like a lot of money, but it's really like buying a $300k house with a mortgage. Mind-boggling.
The Lawyers seem to be living in a dream world. Who would buy a $300 K house and over the mortgage period pay back $2,2 million? Even the worst mortgages are not on par with that much interest.
Only two of the five City of Miami Commissioners voted against this very bad Marlin Stadium deal. They where Tomas Regalado and Marc Sarnoff. You may also recall that only Tomas Regalado voted against the no-bid builders contract. More proof that Regalado's NO VOTE was the RIGHT VOTE and the only candidate for Mayor that really looks out for the interest of the City of Miami and its citizens. Harry Emilio Gottlieb
Another proof of the irrationality of capitalism. The system is incapable of turning away from short term gain even when catastrophe and collapse lay just ahead.
The Florida Marlins will never play in this proposed coliseum. But it will be a significant monument to the people of South Florida about to suffer deprivation and loss unlike anything they have ever known. They will look at it in some state of incompleteness and ask, "Who did this to us?"
Those people will be very, very angry and I would not like to have my name associated with its building or governmental approval.
This is not directly related to the stadium issue but it is such a huge blow to "Store Mannequin Politicians for US Senate" that it had to be shared. Seems Marco Rubio could only raise $340,000 in the second quarter and will now conduct a "guerrilla campaign" against Gov. Empty Suit w/Rich Tan.
Does that means Rubio will adopt the tactics Fidel used against Batista?
http://www2.tbo.com/content/2009/jul/08/na-rubio-sees-donation-disparity/news-politics/
Speaking of which, who remembers the other Dade baseball stadium built to save the local economy from tough economic times. It's down in Homestead Florida and was supposed to draw lots of tourists to baseball events, a spring season for major baseball or minor league team? Oh well... at least Shiver is in NC.
I'm still not over trying to explain to family who don't live here why there were two Arena's within blocks of each other downtown or the two Airport towers when they visited a few years ago. They have not been back since!
The Miami Herald reporting, at least most of it, was another dose of their IQ being forced to drop thinking it was a real paper.
As to the bond issue, if the economy doesn't turn around, they will probably default. So, a short term gain right now at a higher yield might work but I'd be worried about getting my principal back down the road.
As to Mr. Burgess, he goofed by a few million? Come on. He's not stupid. I don't believe a word he said about this then or now.
I think there are so many false hopes with contracts for staduim vendors, just watching all those people who really need jobs, knowing it's a smoke screen. Only 15% need to be local.
What a crappy deal for us, who are going to pay for this deal because they are going to have to dip into an already depleting general fund.
Thanks BCC, Mayor Alvarez, and a special award to back door dealings for George Burgess.
High interest bonds would seem to indicate higher risk of repayment.
$2.4 mil in interest. The taxpayers and residents of Miami and Miami-Dade County got screwed by Carlos Alvarez, Manny Diaz, George Burgess, Joe Sanchez, Larry Spring, Dennis Moss and that other idiot Bruno Barrerio.
Don't get me started on that munchkin David Samson. What a snakeoil salesman.
Bond buyers got a great deal. 7.5% and 8.1% taxfree returns. Backed by the Miami-Dade County General Fund. That means when the tourist tax revenues are too low George Burgess will raid the General Fund. Taxpayers will be forced to pay more taxes so the bondholders get paid. Miami-Dade County services will be reduced so the interest on the Marlins bailout bonds get paid.
The Marlins are master media manipulators - staging the long line of unemployed construction workers. It's shameful they way they used these poor people to get their photo-op and prop up their "deal." They should have handed out free groceries to compensate those people for performing in their "commercial."
Katy is the lone voice of logic??? I think you are missing the one Commissioner that really did fight the Stadium, on and off the dais.
Carlos Gimenez and Sally Heymann also opposed the Marlins stadium scam. Bruno Barrerio would not let Katy, Carlos or Sally make any changes to the deal that might have protected the taxpayers. Impeachment would be too kind for the scum who voted yes to the bailout.
Heyman.
George Burgess should be ashamed of himself.
Our Honorable Mayor Carlos Alvares and the Distinguished County Manager George M. Burgess do not care about the welfare of the Miami-Dade County employees or it's constituents, beginning with the Honorable Mayor who receives two salaries, one for his pension and another as a Mayor, also known as a double dipping, followed by the distinguished County Manager, who after destroying the finances of our County intends to recover it by sacrificing the county employees, asking the taxpayers to elect between the unpopular increase of taxes on their properties or the popular measure to cut benefits to all county employees. The answer is obvious; eliminate the benefits to the employees.
What taxpayers ignore is that county employees are also residents of the county, and that they pay taxes, and they are victims of the bad administration, waste of money, and corruption. As a result when an employee tries to bring this misuse of funds to light, the administration at all levels ignores the complaint, and the employee ends up reprimanded, segregated, or punished for the honest complaint, demoralizing the rest of employees. The current administration eliminated every possibility to denounce any case of corruption or waste of money, and instead reacted with surprise and believed it is unthinkable from a Mayor who was a county employee and former Director of the Miami-Dade Police. The whole intention is to sell to all taxpayers the idea of the perfect county, free of inefficiencies, negligence and corruption, with the purpose of building a new stadium for a private baseball team. In the Board of County Commissioners Meeting, last June 30, the distinguished County Manager during the meeting with the Commissioners never mentioned any deficit in the budget, instead he presented an ideal scenario for the contribution of $400 million for the construction of the stadium, coincidentally the same figure of the famous deficit, and conveniently the debate was carried out late at night to avoid a lot of exposure.
The media and taxpayers need to stop blaming the county employees, whom the vast majority are taxpayers themselves and have families just like the taxpayers, and should investigate more deeply and objectively the County administration, their inefficiency and the corruption within the administration. The media only needs to visit the County Store to see how the administration from many departments send computers and furniture that in some case were never used and were very costly. The media needs to visit any office of any department of Miami-Dade County to see how many violations of the construction codes exist, endanger the health and the security of the county employees, the same code that the county applies to home residences and private business for what taxpayers are penalizes for with high fines if they violate one of them, the media has to review recent purchases of all departments to discover how many of unnecessary equipments and furniture were bought and the price that the county is paying for them.
And to do an objective investigation the media does not need to invest lot of money and time, they only need to speak with a county employee. The Honorable Mayor and the distinguished County Manager never meet with any County employees to seek solutions, to hear suggestions, to seek alternatives; the Honorable Mayor and the distinguished County Manager only meet with administrators and Department Directors, all responsible for the economic disaster of the Miami-Dade County.
The Honorable Mayor and Distinguished County Manager belong to an elite group that is concerned with lining their own pockets and do not care who they hurt in the process.
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