elpasospeak

Starting with an acknowledgement , I want to say to my good friend who has been telling me that the owners of the baseball franchise were tied to the ballpark construction scheme — you were right, I was wrong.

Word on the street is that the refiner bought out the construction guy.   The press release announced a new company, a combination of some of their interests.   The timing of this is horrible.

Conflict

The agreement between the city and the team owners gave the team owners input into the selection of the construction company.  I wrote in Efficient, hardworking staff how remarkable it was that city staff was able to rate four different offers to build a multi-million dollar stadium  and decide who should get the business in only one day.

Now it appears that one of the team owners is either buying the construction company or participating in some sort of merger.

This looks bad.

Circumstances

The former vice president of the construction company has had his guilty plea vacated and is currently out of federal prison preparing for new trials.  The case he plead guilty to involved alleged bribes to a former county commissioner in order to get work for the construction company.  Some still wonder how the vice president could have acted alone.

The head of the construction company has had his house for sale but has evidently decided to give it to UTEP.  Word on the street is that he has moved out of town, actually out of the country.  I have not seen confirmation of this so it may not be true.

Rumor, strictly rumor, has it that the city has not been forthcoming with either the owners of the team or the construction company relative to the costs to build the stadium.  It may be that the city knew early on that the ballpark could not be built for 50 million dollars.

The press release claims that the old construction company will maintain responsibility for projects started before August 8, 2013.  That would include the ballpark.  People who have run businesses know that their operations depend in large part upon a continuous flow of business.  Severing the new income while winding down old projects is very hard to do.  I doubt that it can be done here.  Maybe the deal includes a bailout for the old firm.

Financing for the project is still an issue.  We know that the city has had difficulty selling the bonds.  In fact, I have not been able to find them for sale anywhere.  The public does not know how much money has been raised at this point.

The city manager said in public that she would have to stop construction of the ballpark if the bonds were not sold.  How the current construction is being paid for is not known by the public  The ballot issue limited funding sources to the increase in the hotel occupancy tax and funds generated through the operation of the stadium.  There is not enough money from these two sources to fund the construction.

Is it possible?

Risking hearing a round of clucking from my friend I wonder if the refiner is bailing out the construction company.  Is the contractor getting paid by the city?  Has this turned out to be a bad deal for the contractor?  Is it possible that the refiner has done this to bail out the contractor and the city?

New dimensions

While we will have to wait to learn the real facts, one thing that is not so obvious comes to mind.  Now that one of the owners of the team now owns the successor to the construction company, any claim the team owners have against the city relative to the ballpark (lateness, cost, completeness …) will be much harder for the team owners to pursue.

We deserve better

Brutus

Correction

I would like to start with a correction.  The other day in Not yet I wrote that city council was planning to discuss the email issue in executive session and that there was no item that allowed them to take action after the session.  I was wrong.  The agenda told us that they might take action after executive session and they did.  They delayed for another two weeks.

Bonds

Let me say again that I am personally in favor of building a baseball park.  I disagree with how ours was done and where it will be.

It turns out that selling our baseball park bonds to investors is not as easy as selling a bunch of baloney to our former city council.

Investors are allowed to make choices, unlike the citizens of El Paso.  They get to choose whether or not to buy the bonds while we did not get the right to choose whether to tear down city hall and build a ball park on the site.

Investors rely on bond rating services to analyze the risks and returns of bonds.  Relying on what the bond issuers say would be putting the fox in the hen house.

Fitch Ratings is a bond rating agency that issues reports about  bond offerings around the world.  I read their analysis of the El Paso ball park  bonds and point out the following from the report:

• The bonds are scheduled to sell via negotiation as early as the first week in May.
• HIGH OVERALL DEBT BURDEN: Overall debt levels are moderately high. The pace of principal amortization is slightly above average at just over 50%, but is projected to slow given the city’s debt issuance plans.
• LARGE CAPITAL PLAN: The city’s capital improvement plan (CIP) and debt issuance plans continue to grow to support the city’s ongoing growth related needs and voter-approved quality of life projects. Balancing debt issuance with tax base growth and capital needs is essential to the rating given the city’s growth-related capital pressures and already above average debt service tax rate.
• ESCALATING DEBT: Rapidly increasing debt burden without offsetting improvement in other credit areas could apply some pressure to the rating.
• HIGH DEBT BURDEN AND LARGE CAPITAL PLAN  Fitch believes the city will need to balance ongoing capital needs against an already above-average debt service tax rate, slower tax base growth in the near term, and the area’s below-average socio-economic characteristics. The currently average pace of principal amortization is projected to slow in the near term as the city refinances a large bullet maturity and issues additional debt.

Ultimately Fitch rated the base ball bonds as A+, two steps riskier than the city’s AA rating.

Why didn’t they sell the bonds in May?  The bond prospectus was not even issued until June 27, 2013.  Were they planning changes even back then?  Lying to the bond market has federal repercussions.

City staff was forced to approach the Downtown Development Corporation (that’s city council in different clothing) and ask to raise the interest rate they could pay.  Investors did not want our bonds.  The hope is that if we pay higher interest we will be less ugly and someone will invest in the bonds.

I’m hard pressed to think of a single part of this whole city hall, ball park mess that has been handled properly.

We deserve better

Brutus