Stadium debt

The Chron editorializes about the financial woes of the Harris County Sports Authority.

The Harris County-Houston Sports Authority is not responsible for economic factors that make the sale of $37.2 million in new bonds necessary. The terrorist attacks of Sept. 11, 2001 depressed travel worldwide. If all goes well, the bond sale will relocate financial liability to out years when hotel and car-rental taxes should have climbed appreciably.

However, the authority is responsible for issuing around a billion dollars in stadium debt on the mistaken proposition that tax revenues, on average, would rise 3 percent per year. Over 2002 and 2003, the authority's tax revenues declined 10 percent.

Faced with the prospect of having its stadium bonds degraded to junk status, the authority voted to issue more debt to ensure repayment of old debt that financed Minute Maid Park, Reliant Stadium and Toyota Center.

Most of the hotel and car-rental taxes are paid by visitors. "The taxpayers of Harris County really aren't affected," Sue Millican, the authority's chief financial officer, told the Chronicle.

Harris County Tax Assessor-Collector Paul Bettencourt notes, however, that county residents and business owners pay about half of all car-rental taxes and an estimated one-third of combined hotel and car-rental taxes. Now local taxpayers will pay more to retire stadium debt without getting more value for their money.

About $15 million in proceeds from the sale of additional bonds are to be used to boost the authority's cash reserves set aside for making bond payments in economic downturns. The authority hadn't been able to make the required cash reserve increase because of the decline in tax collections and might soon have had to dip into the fund to make bond payments. (Insurance would pay off the bonds in the unlikely case of a default.)

But every new bond sale adds interest and principal to the debt. The more debt the authority takes on, the more the financing of the new stadiums comes to resemble that of the Astrodome. Though obsolete and seldom used, that facility still carries tens of millions of dollars in debt.

The county's three fine new sports venues are wonderful assets. They contribute to redevelopment of the central city. Without them, Houston would not have hosted this year's Super Bowl or All-Star Game.

After those gigantic events, however, hotel and car-rental taxes should not be lagging. Add the Sports Authority to the list of government agencies that underestimate cost and overestimate revenue — a list that, unlike tax revenues, grows inexorably.

Here's the original story, as noted by Kevin. There's a lot of ground to cover here.

First, full disclosure. I supported these initiatives, and on balance I still support them. I can offer a lot of weasel words about intangibles and world-class and stuff like that, but to be honest, I'm a sports fan and I like these new venues. I'm glad we have them, I'm glad they've been instrumental in bringing big events to Houston (my sketpicism about the trumpeted cash infusions those benefits supposedly bring notwithstanding), and I think Houston would lose something without them. That's just how I feel about it.

That said, there's no question that they were sold with a lot of disingenuousness about cost and benefit. Research about the little-if-any economic benefit of publicly funded stadia was fairly new when the first referendum was on the ballot, but by the third time it should have been (but wasn't) common knowledge. We all deserved a better debate about municipal priorities, and we didn't get it.

Second, it'd sure be nice to get the same kind of followup data on economic benefit projections from the All-Star Game and the Super Bowl that we did for these tax projections. Sure, it's easier to get the actual data on tax collections. My point is that if it's so hard to get the real numbers on special event economic benefits, maybe we ought not to make such specific projections beforehand, since they apparently can never be falsified. For what it's worth, by the way, note that the one post-ASG number we did get was $10 million short of the projection.

Since we do now know that the Sports Authority was all wet (and I have to say, it's hard to disagree with Paul Bettencourt's assertion that the Authority has done the work it was supposed to do and should now be disbanded), it would be instructive to know where in particular they were wrong. Maybe there's an opportunity for improvement buried within, I don't know. If nothing else, I'd like to know if the Super Bowl and the All-Star Game had any effect on the 2004 projections, and if the midyear numbers are currently on track. Will we face the same problem next year because one wildly optimistic prediction led to another?

I suppose there's one consolation here. Sooner or later, the economy really will get better, and the tax collections will start to catch up once again to the projections. At least we can be comforted by the fact that this time when everyone influential has had a chance to forget the lessons of this particular saga, there aren't any more stadia to be built. We'll have to find a new way to repeat history.

Posted by Charles Kuffner on August 12, 2004 to Local politics | TrackBack