Everyone already knows that the ballpark bonds were sold at a high interest rate because of the uncertainty over muni-bonds because of the Detroit fiasco. Although touched upon, the reality is that the additional $17 million in costs were the result of the rush to get the project off the ground. We now know that had the city waited they could have saved some of the costs of financing the deal. However, the city was afraid the project would be derailed and thus the rush to get the financing in place, regardless of the high financing costs.
Back in August 19, 2013, I wrote about how the city was telling the investors that it was projecting that the city would have to subsidize the ballpark by about $1 million for the first six years in order to meet the debt obligations. In my blog, “City Tells Investors It Needs to Offset HOT Tax and Team Payment Shortfalls,” I shared with you what I found in the Preliminary Official Statement. As I explain then, the Preliminary Official Statement is like a credit application where the city explains how it will spend the proceeds and, more importantly, how it will guarantee the payments.
This document is the closest we can get to an actionable document that the city produced to secure the financing. All of the other documents, like the projections, are nothing more than political rhetoric to make it palatable to the voters. It is like me going to the bank and saying I want them to loan me $90,000 for a Porsche 911. I can tell the loan officer that I make “lots of money” and I will get a raise tomorrow. I also add that I really don’t owe much money. The loan officer would be enthusiastic about lending me the money, until they saw my actual credit application. That is where I have to detail my actual figures.
As the loan officer reviews them they will likely notice that I don’t make “lots of money” and that my debt is much larger than what I led them to believe. Oh, and the expected raise is nothing more than my dreaming about getting a raise. I may get the loan to buy the car but what I told the loan officer did not really paint a good picture of my finances that the actual verifiable figures do.
The Preliminary Official Statement is like the loan application. In the document, the city told investors that it projected having to take $973,372 out of the general fund to make debt payments through 2019. That same document projected that the city would shore up the HOT taxes and the ticket revenues by $188,885 in 2014. In 2015, the city estimated having to subsidize the ballpark by $303,052.
On April 11, 2105, Diana Washington reported in the El Paso Times the city had to use $977,000 from the general fund to make up the difference for 2014. Washington quotes a figure of $627,000 from a city “projection.” The article makes it seem like the shortage between the projection and the actual figure is only about $350,000. In reality, based on what the city projected in the financing documents, the actual difference is $789,000. This is the first year only!
Remember, the Preliminary Official Statement stated that the city would be contributing about $975,000 over the first six years. Now the real numbers tell us that the city will have to be contributing much more than originally anticipated, of course the blame will be placed on the higher costs for selling the bonds.
It’s like an uninformed borrower who runs to the nearest Pay Day loan outfit and borrows money just to buy the coolest new phone. When the first payment is due, it is too late to stop and ask; how much interest am I paying?
Typically, the city tries to obfuscate the truth through innuendo and incomplete information.
Washington quotes Mark Sutter, the city’s financial officer as stating that the “revenues from the hotel occupancy tax, sales tax and parking fees fell short of projections.”
This is simply not true.
As I shared with you in “2011-2013 HOT Tax Metrics,” the HOT tax revenues are actually, above what the city projected in the financial documents. The city projected revenues from HOT taxes of about $1.6 million in 2013 and $2.5 million in 2014. According to Washington, the city’s latest financial model is showing “about $2.56 million in revenues in fiscal year 2014” from HOT taxes.
That is almost exactly the same amount projected by the city in the original financing documents.
Yet, in the El Paso Times report, the city is telling everyone that this figure “$90,000 short of the model.”
From the onset of this debacle, the city’s numbers just do not make sense. They have been unreliable and continue to be so.
Because the city likes to play with numbers, the only document that we can rely on is the one document that city will have a difficult time using to mislead the community – the Preliminary Official Statement. This is because it is basically a loan application. The numbers I’m using come directly from this document.
Of course, things change. After the bonds were floated, the city acknowledged that it would be spending an additional $17 million in interest charges. The Preliminary Official Statement did not take this into account. The revenues projected by the city would not be affected by the higher interest fees.
However, and this is important, the latest rhetoric coming from the city is that the “projected revenues were overestimated.” This quote was attributed to Oscar Leeser. [Washington, Diana; El Paso city’s first-year ballpark revenues fall short; El Paso Times; April 11, 2015]
The truth is that the financial documents were accurate in terms of revenues.
This ballpark is the lynchpin to the impending financial implosion of El Paso. It has never been financially sound and it never will be. Therefore, the city is left with “putting lipstick on the pig,” so to speak.
To do so they take out “financial models” that are nothing more than spreadsheets someone dreamed up. They are pieces of paper that mean nothing.
The city knows this and this is the reason they distract you with irrelevant things such as “revenues from parking fees probably should have been better.” First of all, parking revenues will never make a significant contribution towards the debt service because the city has been actively discouraging driving to downtown for the games. The city has implemented buses to the games. Besides, parking is the least revenue generator of all other things patrons would spend money on, like tickets and food.
However, the city needs to distract critical thinkers and the parking revenues is one way to do it.
However, the latest financial models are nothing more than hokey-pokey make believe numbers the city is throwing out to distract from the actual reality – that the ballpark is a failure.
To cover this fact up during election season they lie to you about the numbers.