Taxpayers stuck with tab on arena bonds in other cities
In case you missed it, Chris Hansen wrote an op ed for us for Tuesday's paper on why he wants to bring an NBA team to Seattle. We've run op eds that are both critical and supportive of the arena deal.
We're still analyzing the proposal from Hansen's investment team on the editorial board. We have questions and we have not taken a position on it yet.
Anyone interested in the worst-case scenario on cities backing bonds to build sports arenas should read this Tuesday New York Times story "With no vote, taxpayers stuck with tab on bonds." Here are some excerpts:
Surprised local taxpayers from Stockton, Calif., to Scranton, Pa., are finding themselves obligated for parking garages, hockey arenas and other enterprises that can no longer pay their debts. ... Data from Thomson Reuters suggests that local taxpayers are backing so-called enterprise debt at five times the rate they did 10 years ago. The resulting municipal bonds are sometimes called "double barreled," because they are backed by both the future revenue of a project and some sort of taxpayer backstop.
It's unclear how similar these deals are to the proposal Seattle and King County are considering, but it raises another question worth asking, and answering.
The projects mentioned in the story include a soccer stadium in Harrison, N.J., and a hockey arena in Allentown, Pa.
Another city, Scranton, had backed bonds for a parking authority to build a garage. The authority couldn't make its debt payments. When the city council of Scranton refused to honor its guarantee, the city lost access to credit needed to cover the city's payroll. The trustee for the bondholders threatened to get a court-ordered tax increase.
Here is an excerpt about the hockey arena in Allentown:
Allentown, is defending itself against lawsuits by surrounding communities, accusing it of a convoluted plan to make their residents backstop an authority's bonds for a new hockey arena. Construction has stopped on the arena, and residents are living with a big hole in the ground and a cloud of uncertainty
Update 5:42 p.m., 7/3/12:
The SonicsArena website, which represents the investment group behind the arena proposal, posted an analysis on June 29 of all the cities mentioned in The New York Times story and comparing those arena deals to the proposal. Here is the SonicsArena analysis.
It compares the deals the other cities struck, including whether there were new taxes, who owned the land and facility and who paid for cost overruns. It's worth a read.
An earlier version of this story, published on June 26, 2012 at 8:08 a.m., was corrected on June 27, 2012 at 8:20 p.m. The earlier version incorrectly stated that Scranton was in New Jersey. It is in Pennsylvania.
Achenblog by Joel Achenbach
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