I asked preeminent government finance expert Guy Hobbs, a Ward 2 constituent, for his thoughts on this week’s new plan to give taxpayer funds to the Findley/Cordish group:
Based upon the presentation made by staff at this week’s City Council meeting, it would appear that the following points summarize the revised funding proposal for the proposed soccer stadium:
- The City will cash-fund on and off-site work for the stadium. Previously an amount of $14 million was identified for this, though it was not a comprehensive accounting for all expected site work. It is expected that this amount will be greater than the $14 million.
- The City will “pre-pay” the developer for community events to be held in the stadium. The amount identified is $20 to $25 million.
- The City will share in TIF revenues generated from stadium operations.
- The City will use $20 million in STAR bond proceeds to fund the building of a parking garage to serve the stadium and other nearby development. The developer will have access to the parking garage for an estimated 90+ events days.
- The City will use $3 million per year of room tax collection commissions to bond for up to $50.7 million in projects; roughly half of which would be used to fund an estimated five park projects and the remainder to fund “community access” to the stadium.
As I understood the direction from the City Council at a previous meeting, staff and the developer team was to bring back a funding plan for the proposed stadium that does not include the use of public money to fund the construction of the stadium. The proposal as described above has shifted direct support of stadium construction using public funds, as was previously proposed, to an approach that somewhat less directly supports the construction with public funds. It still, however, commits public funds to support the stadium construction.
It is very clear that the donation or contribution of the land by the City is a use of public resources to enable stadium development. It is also clear that the use of the $14+ million to fund on and off-site costs is a use of public money. Attempts will likely be made to characterize the use of these funds as something akin to “normal costs to promote economic development”. However, these are still very real costs being funded by public monies.
A new element of the proposal is the willingness on the part of the City to build a parking garage to support the stadium. At an estimated 90+ days of use by the stadium, and an estimated cost of $20 million, it can easily be said that the City is funding direct benefit to the stadium of at least one-fourth of the cost of the garage. However, since this project was not identified as necessary until the stadium became the justification, it can be more appropriately characterized as $20 million in contributed capital to the stadium. Bear in mind, too, that parking for the stadium has been a heavily criticized part of the overall plan. This structure – as undersized as it may be for the stadium – is still a necessary part of the overall stadium project (or it is otherwise unworkable). Thus, the public funds spent to build it are contributions to the overall stadium project. Efforts may be made to couch the parking garage as a facility needed for all occupants of Symphony Park. However, it is the stadium that will be the direct beneficiary, and it is the stadium that is the justification for its need.
It should be added that providing use of the parking garage will provide direct financial benefit to the stadium operators, in that the revenue from parking will inure to the stadium. Unless the City plans on charging the stadium for use of the facility, this offers the operators enhanced revenue potential. Thus, the publicly funded parking garage becomes another way of channeling revenue to the stadium.
The most perplexing and concerning element of the new plan is the suggestion that the City will issue bonds to fund not only legitimate park-related capital projects, but will also use bond proceeds to pre-pay rent for the facility. It should be noted here that one of the presentation slides indicates that “cash, (and) some bonds” will be used to fund this community access. However, the only funds that are specifically identified in the presentation are bond proceeds. This leaves the reader to wonder whether, beyond the bond proceeds, there is also intent to fund additional community access with other cash not disclosed in the presentation.
The use of bond funds to pay for community access, or facility rent, is highly questionable. First, the City is already donating land and site preparation dollars to the project and can easily command access to the facility for those contributions alone. Second, using bond proceeds to fund an operating expense – which is what facility rental would normally be – is highly inappropriate and financially imprudent. Bonds are issued to acquire capital assets, and rent is not a capital asset. It would appear that what is really happening here is a contribution of bond proceeds to help construct the project in exchange for “other” considerations. If this is the case, it is identical to the prior proposal to use City bonds to fund a portion of the construction of the stadium and, thus, a direct use of public funds to build the stadium (albeit in a lesser amount).
It is also concerning that the City would dilute the borrowing power of the $3 million in room tax collection commissions by apportioning any of it to the stadium (which seems to be in direction violation of the direction it received from the City Council). If the City is truly committed to parks and other eligible projects (per the room tax interlocal agreement), it would actually maximize the building and refurbishing of parks. Tying up half of the $3 million per year for 30 years to fund the stadium certainly inhibits the City’s ability to deliver parks facilities that are desperately needed.
Interestingly, when the bond funds and the cost of the parking garage are considered together, the City is still contributing $40 to $45 million in public funds to the construction of the stadium project. When the values of the land and site costs are added, the level of public support rises dramatically.