Saturday, September 18, 2010

County bailing out Sports Authority.

Think they wanted to bury this story?


(Harris County OKs bailout plan for stadiums, Chris Moran, ChronBlog)
Commissioners Court approved on Tuesday* the transfer of $2 million in county money to the Harris County Sports & Convention Corporation, the county-created entity that runs Reliant Park. Along with a transfer approved in the spring, it means the county is covering $4 million in sports stadium debt payments this year.
Stadium boosters promised that no property tax money would be spent to build the professional football, baseball and basketball venues. County Judge Ed Emmett and Edwin Harrison, the county's financial services director (interviewed before his indictment on non-job-related charges this week), were quick to say that promise has been kept. The county is transferring hotel room tax revenue to the Sports & Convention Corporation.
Neither Emmett nor Harrison could categorically deny the possibility that lost hotel tax revenue would be backfilled from other sources, including property taxes.




Passed on Tuesday, reported on at 10PM on Friday NIGHT?

Huh?


Not only is the money being diverted from other uses, but it appears that the same problem is going to be with us for the next four years. Moran's story (go read the whole thing) does a pretty good job explaining how the tumblers fell that triggered this mess, except that he (and pretty much every other stadium booster) never address the fact that the entire stadium bond mess was funded on a house of cards that wasn't designed to handle even basic financial stress, much less an economic melt-down.

The result is a huge financial mess that's going to further stretch an already tight County budget and force Commissioners to eventually have to consider property tax hikes. In the middle of all this there's a deal for the Sports Authority to expand their operations to include overseeing the construction & operations of the new Dynamo stadium. Does that sound smart?

What's happening now is that the fare is coming due for the wild cab ride taken by Houston (and Harris County) over the last decade and they're looking to take the money from the taxpayers who have received little, if any, economic benefit from stadium construction. The cupboard is truly bare.

Who will have to answer for this? Given the state of Houston's establishment media (who led the cheering section for these poorly designed deals) doesn't have any interest in providing Harris County citizens with a watchdog voice, and local pols are tied into the power players and rely on many of them for campaign finances, my guess is that no one will ever have to provide an answer.

Harris County taxpayers were oversold on stadiums with overstated revenue projections and understated costs. The risks and potential prat-falls were downplayed by news organizations who spent most of their time vilifying stadium opponents instead of taking a good solid look at both sides of the issue.

In their rush for "World Classiness" the Houston establishment forgot one key thing:

Going broke is most certainly NOT World Class.



It certainly seems to be the norm for a City whose leaders listened too closely to the whispers of outsiders who (falsely) claimed that Houston didn't have enough going for it and should try to emulate the now-failing cities in the North East.

They listened and now Houston has stadiums it cannot afford, a transit system that is going broke and is failing at it's core mission of moving people, a public pension system house-of-cards with a shaky foundation and a development system that favors special interest groups over the public interest.


Joy.





*Emphasis mine

2 comments:

  1. If I can accurately resurrect my understanding of the structure, this $4 million is part of the parking revenue generated by Reliant Stadium and complex. When the bonds were issued, this $4 million per year was committed by the Convention Corp and the County to be "returned" to the Sports Authority if needed in order to pay off the debt. The Sports Authority was able to structure the notes so that ALL parking revenue didn't have to stay with the Sports Authority (which would have been the more conservative route for noteholders to insist upon) but instead could be used by the County's convention entity. The Convention Corp has been able to spend all these parking revenues for 10 years. And as I understand it the $4 million is only part of the parking revenues -- the "return" to the Sports Authority is only partial and the Convention Corp continues to get other parking revenues to spend for its budget. If the noteholders come up short, they lose. I am sorry that the Convention Corp did not plan on this happening and reserve from the $40 million it has taken in and spent over the years, and I am sorry that the County has to now fund the Convention Corp. entity that it created and is responsible for. But it seems to me that this parking revenue would not be there if Reliant had not been built.

    And remember how much money the County put into Reliant. Zero.

    And if the noteholders can't be paid fully on time, then bond insurance kicks in. And if the bond insurer fails, then the noteholders get paid when and if there is money to do so. There is no "going broke." The noteholders took that risk.

    I am not sure why people think there is a chance to "go broke" here. There won't be a bankruptcy because the noteholders can't force that. They just get paid late. All of this is an unfortunate part of a global recession, but would the citizens of Harris County be better off without the Texans, the Rodeo, the hundreds of millions of dollars of revenue over 10+ years?

    And I don't understand how you can say that "taxpayers ... have received little, if any, economic benefit from stadium construction". Really? All the jobs? All the taxes (not property taxes) collected in connection with Reliant and spent on stuff other than debt repayment?

    ReplyDelete
  2. "I am not sure why people think there is a chance to "go broke" here."

    The Harris County/Houston Sports Authority is already broke, having to receive a bailout to cover their revenue obligations. I'm not sure where you're from but where I'm from that's "broke". Also, what you're describing isn't "broke" it's "default". I never stated that the HCSA would go into "default". As I understand it that's not a concern in this case, having to use property tax money to cover costs (which runs counter to promises made in the run up to the referendum) is.

    "And I don't understand how you can say that "taxpayers ... have received little, if any, economic benefit from stadium construction". "

    It's not hard to say. Stadium benefits are oversold and they under-deliver on a frequent basis.

    There have been many reports on many studies that have shown this to be true. Here's just a few of them....

    http://canadafreepress.com/index.php/article/25167

    http://online.wsj.com/article/SB10001424052748704269204575270802154485456.html

    http://reason.com/archives/2010/03/18/politicians-smother-city

    http://www.swcollege.com/bef/policy_debates/stadiums.html


    In the case Houston's stadiums, any marginal gain is more than offset by the loss of general property tax revenues that were created as part of the deal and with the REIT.


    "but would the citizens of Harris County be better off without the Texans, the Rodeo, the hundreds of millions of dollars of revenue over 10+ years?"

    That's a false choice. The Rodeo had the Astrodome and was doing quite well, and there's no economic benefit from Houston "having the Texans". L.A. is finding economic life to be just fine without a major NFL team. Houston would do fine as well. As I've linked to above, the "Millions" in revenues don't flow to the City, they mainly flow to the ownership group of sports teams.


    Stadiums and pro sports teams are ego boosters, not revenue boosters. That's been proven out over time.

    Here's a good post by Tom Kirkendall that sums up the (lack of) economic gain from sports stadiums:

    http://blog.kir.com/archives/2008/04/looking_at_stad.asp

    ReplyDelete

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