Another day, another $44 million of debt for Portland
The City of Portland had a bond sale scheduled for yesterday, but now it's been rescheduled for next Tuesday. Did somebody not want the deal on their books until the third quarter, which starts that day?
Anyway, it's more insane borrowing for "urban renewal" -- this time for the "South Park Blocks" district -- kind of a misleading name when you take a look at the map. Did you realize that the Crystal Ballroom is near the South Park Blocks? Me neither. Even crazier, only about half the South Park Blocks are actually in the urban renewal district that bears their name.
The sales document for the new bonds, which are being sold privately to a group led by Citigroup and Bank of America, is here (a large pdf file). Just a little over $67 million will be borrowed, about half of which is supposed to be paid back within 10 years, and the rest maturing within 16 years. Around $35 million of the bonds will bear taxable interest, which will trigger a higher interest rate than the rest, which will pay tax-exempt interest.
Nearly $44 million of the borrowed money will go for new "urban renewal" toys, while about $23 million is earmarked to pay off similar bonds that the city sold in 2000. Of the new money, quite a bit is scheduled to go for housing:
CITY OF PORTLAND, OREGON
South Park Blocks Urban Renewal Area
PLANNED BOND-FUNDED PROJECTS (1)
(FYs 2007-08 through 2011-12)
|Project Category||Amount (2)|
|Commercial Development||$ 3,875,000|
|Parks and Public Facilities||4,800,000|
(1) The planned projects are based on the budget of the Commission, and may be changed in the future.
(2) Preliminary, subject to change.
(3) Includes bank fees paid from line of credit and staffing and indirect costs which will be allocated to projects based on final project amounts.
Source: Portland Development Commission
Hmmmm... $23 million to refund old bonds... $34 million for new projects that they're telling us about... That comes to $57 million. But hey, they're borrowing $67 million. I guess the extra $10 million is for art.
Actually, this particular urban renewal district is about to turn into a pumpkin soon -- the borrowing authority for it legally ends on July 23 -- and so it appears they're borrowing even more dough than they know what to do with before time runs out, just to have it around to play with later. But interest, of course, starts running immediately.
The bonds are rated Aa3 by Moody's -- far from a top rating, and just a notch above A1. The likely reason for this is that the bonds are payable only out of increased property taxes from the district. It's not a risk-free proposition for the banks and their investing partners. Good luck to them -- they may well need it. Unlike the 2000 deal, here's no bond insurance this time around, because... well, the bond insurance companies aren't much more creditworthy than the City of Portland these days.