These articles from out of town sources paint a different picture of our ballpark situation than we get to see locally.
Not a pretty picture
This section from Bloomberg talks about the financial situation:
El Paso, Texas, which is cutting police overtime and holding some jobs vacant, will have to spend an extra $17 million on bonds to finance a minor-league baseball stadium after an initial attempt to sell the debt failed.
Goldman Sachs Group Inc. (GS) took over marketing of the debt this month after the mayor said Morgan Stanley (MS) couldn’t find buyers when interest rates were lower in June and July. The delay, during a period when local-debt yields reached the highest since 2011, means higher interest costs for the municipality of about 673,000 across the Rio Grandefrom Mexico, William Studer Jr., deputy city manager, said in an interview.
El Paso plans to use a higher hotel tax and general funds to help pay the debt. It joins localities from North Carolina to Oregon building sports venues to spur their economies. The ventures don’t always pan out, leading buyers to penalize the issuers. The city-formed development agency last week sold 25-year tax-exempt bonds to yield 5.95 percent, compared with about 5.05 percent on 30-year revenue debt with a similar rating, data compiled by Bloomberg show.
“It’s a lot of money they are having to pay out due to the risk involved,” said Lin Elliott, who oversees about $1 billion as investment manager at Texas Farm Bureau Mutual Insurance Co. in Waco. The bureau prefers holding bonds to maturity and wouldn’t buy debt for a minor-league franchise that may not last 30 years, he said.
Crap shooting with our money
An article in Governing talks about the gamble the city took with our money — and lost.
As it intends to do with most of the bond projects, the city broke ground on the new stadium in April by fronting its own money with plans to issue the bonds for the project soon after… El Paso offered its $63 million in revenue-backed stadium bonds the first week in July.
It was not good timing.
“It was sort of if anything could go wrong it did,” Wilson said. “Standard & Poor’s rated our [nontaxable bonds] double-A minus, which is pretty good. But when Detroit defaults on $18 billion subject-to-appropriation debt, all of a sudden everybody looks at the muni market a little differently.”
Faced with no takers, El Paso was forced to find another underwriter for the bonds and the council begrudgingly approved raising the interest rates on the offering. The limit was raised to 6.5 percent from the original 5 percent cap on the $48.7 million of tax-exempt debt, and to 7.25 percent from 5.75 percent for the $12.1 million taxable portion. The moves will cost the city an additional $17 million in debt repayments.
Speculating on a questionable deal
It was “the worst possible time to bring a speculative deal,” said Municipal Market Advisors analyst Matt Fabian, adding especially when the value of a minor league baseball stadium to El Paso is “questionable.” This summer, El Paso found a municipal market that had flipped 180 degrees from a seller’s market to a buyer’s market with little time to wait for a more favorable turnaround.
“You really never want that,” Fabian said. “You don’t want the issuer to be forced to sell – you never know what market conditions you’ll find and it was a very aggressive action on their part.”
They refused? What kind of contract did you sign?
Again from Governing:
Wilson said the city could have waited out the commotion and issued the bonds this fall but “it didn’t seem prudent to do so because predictions are that rates will continue to rise.” She added that, in her view, “our lead underwriter was not as effective as they could have been and took us out twice in early July with no success and then refused to purchase the bonds when they couldn’t culminate the sale.”
Untempered
In any event, the complications have not tempered El Paso’s aggressive attitude as the city plans to issue more bonds at least twice this fall and again in the spring.
What part of this deal has been done well? If we are going to take on projects like this we should at least manage them competently.
We deserve better
Brutus
elpasospeak 
This entire project has been destined for failure from day 1 when City Council voted to rush this project thru their agenda. No prudent businessman would stand behind a ludicrous project such as this, especially when it involved tearing down City Hall and buying/renovating several other buildings to house City Hall. The “nerve center” of our city is scattered about, and the entire scam will cost El Pasoans over $150 million in up front costs, not including interest. When the city realizes that a decentralized City Hall was a bad idea, then we will be looking at building another city hall and trying to unload the other current city hall buildings.
What the heck were folks like Steve Ortega, Courtney Niland, Michiel Noe, Ann Lilly, John Cook, and Joyce Wilson thinking? This lunacy just doesn’t add up….the smell test fails! Additionally, why would fellow El Paso citizens like the Fosters and Hunts place such an onerous burden on their fellow citizens? That’s right…..money! Now I ask, is the money trail being investigated properly by federal authorities?
I certainly hope so. We deserve better
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The indenture for the stadium bonds pledges the HOT increase and stadium rental against the debt. We should stick to that and not use general funds. The investors who bought the bonds also took a risk in doing so and, if the pledged revenues do not service the debt, well that is their problem.
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Brutus,
Thanks for the excellent post, which shows that out-of-town media are often better informed and more truthful than our own local media.
It’s worth restating that Governing literally used the gambling analogy and Joyce Wilson came off as quite cavalier in her comments about our acceptance of the financial risk related to the investment.
The original lead for this bond offering is among the world’s most prestigious investment banks. If they couldn’t sell these bonds and they didn’t want to eat the dog food they were peddling to others, what does that tell you? Goldman was finally successful only because it raised the interest rate to an egregious level, which then made it easier for them to sell the bonds and collect their fees.
The fact that the local media never reported on the financing process and has chosen to ignore the coverage by Bloomberg, Governing, and others, proves once again that the Times and other local media have supported this entire scheme through their shameless promotion and by turning a blind eye and choosing not to provide substantive coverage throughout the process. Like our local politicos, they are serving special interests and their own interests, which would be fine if they would quit posing as objective, professional news organizations.
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out of town media are more unbiased which is probably why they make more objective analysis on the situation in El Paso
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