Balloon on stadium payments could coincide with those on older bonds
By Risa Polansky
The balloon bond payment structure proposed to finance a new ballpark for the Florida Marlins is not a new concept for Miami-Dade County.
Should the county use tourist tax dollars to pay off bonds for a new stadium over the next 40 years as proposed, it will be tapping the same revenue source set to pay down hundreds of millions in older bonds whose principal payments have been put off for decades.
The proposed funding scheme for the stadium calls for issuing up to $326 million in bonds backed by bed tax revenue and paying them down in relatively small increments — beginning at $2.6 million — that gradually increase until 2038, when payments balloon to more than $105 million.
In 2044, they hit more than $143.8 million before shrinking annually over the last five years to $59.6 million in 2049.
The county years ago used a similar structure in issuing bonds to help fund the performing arts center in downtown Miami and to buy the land for the nearby American Airlines Arena.
Convention Development Tax revenue — one element of the county's 6% bed tax — is to pay the hundreds of millions in outstanding principal on these "zero coupon" bonds beginning in 2026.
This means there's overlap with the proposed Marlins bond payment schedule, and decades from now hundreds of millions in Convention Development Taxes will be tied up in completed projects.
In a memo to commissioners, County Manager George Burgess acknowledged the plan to put off payments as the county has in past issuances, banking on seeing more revenue in later years.
He included payments on the outstanding zero-coupon bonds in his financing plan.
"Our intent is to structure debt issuances to optimize the revenue streams over the next 30 to 40 years similar to existing county debt issues supported by these revenue streams," the memo says.
Mr. Burgess also concedes "there remains limited capacity for other eligible projects."
In November, before the county released the stadium financing plan, Commissioner Carlos Gimenez raised concerns over the existing balloon bond payments, worrying that committing hundreds of millions of dollars in Convention Development Tax revenue to pay off completed projects years down the road could jeopardize future endeavors.
"Like I said months ago, when you start issuing zero coupon bonds, it means something: it means you don't have enough revenue to cover the costs today… and you're also gambling," Mr. Gimenez said. "I'm more against it today than I ever was."
County projections assume 5% average growth in bed tax revenue over the next 40 years, though collections this year have been falling.
William D. Talbert III, president and CEO of the Greater Miami Convention & Visitors Bureau, last month projected a 12% drop in Tourist Development Tax collections through "the balance of this fiscal year."
The stability of the revenue source set to back a bond is key, said Wifredo Gort, a senior vice president with securities firm Samuel A. Ramirez & Co. and former Miami commissioner.
Mr. Gort said he is not versed on the Marlins deal itself, but that in general, "any decline in the revenues coming in will provide a risk for the issue itself, for any issues."
If the revenue tapped to back revenue bonds is decreasing, "it would be very difficult for them to get a high quality bond or a high rating," he said.
Another important element: outstanding bonds backed by the same revenue source.
"They will have to analyze every issue that's outstanding and new issues and make sure that the revenues will be able to cover," Mr. Gort said.
Miami Commissioner Marc Sarnoff said he's seeking that information from the county.
"I need to know the capacity of all the bonds, all the indebtedness and what the projections are," he said. "The capacity and the ability to bond is on my radar."
The bond market itself may not pose a problem, Mr. Gort said.
"The market's coming back for municipal bonds."
In planning for bond issuances, the county must keep an eye out for any big change in the market, he said, but "all I can see personally is improvement in the market."
In addition to the $326 million in tourist tax-backed bonds, the stadium deal calls for issuing $55 million in general obligation bonds and $39 million backed by non ad valorem revenues.
Proposed annual rent payments from the Marlins are meant to offset the expense, Mr. Burgess' memo says.
"While not paid directly from the team's rent payments, these annual payments will exceed the annual debt service payments and consequently offset those debt service expenses budgetarily."