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Friday, September 5, 2008

What is Paulson peddlin'?

Merritt Paulson, the recent New York transplant who wants to reach into Portland taxpayers' pockets for at least $75 million (probably much more) to build and renovate palaces for his privately owned soccer and baseball teams, sure is giving it the old hard sell. Some of what he's saying sounds dead wrong. On the Trib website yesterday, we got this:

The Beavers and Timbers have enjoyed successful years recently, and Paulson claims the past renovation project "is almost totally paid off. ... And that was done through ticket tax – a great case study in low-impact public financing."
The past renovation "is almost totally paid off"? I don't think so.

The city borrowed $35 million in 2001 toward the massive cost of renovating Civic Stadium and turning it into PGE Park. The official statement for that bond issue is here.

As of April 2, 2008, the city still owed $28,350,000 on those bonds, at least according to page 3 of this document. No principal was scheduled to be paid off between then and now.

And so unless someone miraculously came up with tens of millions of dollars in the last six months and drastically paid down the debt, it is not "almost paid off." Indeed, it appears that the vast majority of the bonds are still outstanding, and large amounts of the debt will continue to be outstanding (at interest rates up to 7 percent) until 2023.

Paulson owes Portland taxpayers either a further explanation or a correction. And the kids at the Trib should make a few phone calls before they repeat the stuff that the sharpies tell them. Yeah, I know, it's work.

UPDATE, 12:50 p.m.: City debt manager Eric Johansen confirmed this morning that the current outstanding balance on the Civic Stadium bonds is $28,530,000.

Comments (24)

Still owing $28 million is "almost totally paid off".

I'm sure the entire city council now believes this and they're all experts on the topic.

There's nothign to see here. No scandal or corruption like in Alaska.

drip drip drip

If you stop by the Atlanta Journal-Constitution site, you can read about the new Class AAA baseball stadium they're working on in Gwinnett County (near Atlanta).
What a surprise. The price tag just jumped up from $40 million to $59 million ... and guess who pays for the difference? Hint: It's not the team owner.

Like the new UofO ballpark, the initial "sell it to the citizens" price tag is much lower than the projected costs now. They have only dug the hole for now and watch the price go up even more. It's like the Sam the Tram Phenomenon.

Those are some pretty big ellipses in that quote.
Here's what the Trib reported in March:
"Currently, the city needs a bit more than $3 million a year to make its debt payments on bonds it issued to renovate PGE Park in 2000. The city paid about $33 million of the $38.5 million in renovation costs.

Part of the money generated from a local hotel and rental car tax generates about $2 million a year for the debt payments.

And the current owner of the Beavers and Timbers now is paying about $1.1 million a year to provide the rest of the money needed for debt payments, said David Logsdon, spectator facilities manager for the city of Portland.

“We’re kind of at a break-even point at PGE Park, except for the capital improvements,” Logsdon said.

The city, which owns PGE Park, is responsible for all capital improvements — including, for instance, the recent $1 million it cost to replace the artificial turf at the stadium.

The current owner of the Beavers and Timbers, a group led by Merritt Paulson, pays an $800,000 “license fee” to use the stadium this year. The city gets another $200,000 to $300,000 per year from ticket sales at PGE Park — a fixed amount for most Beavers and Timbers games and a percentage of sales for other events."

I see that's the SCHEDULE for the pay off. Is there any reason to think that has been paid off early? Or that Paulson was referring only to THIS YEAR's payment being "paid off" from the ticket tax?

I'm in whole-hearted agreement that, by the schedule, the loan is nowhere near paid off, but the story seems too fuzzy (which might be the point).

I've heard the land upon which PGE park sits is actually owned by the Multnomah Athletic Club (MAC). If true, I am wondering if the city pays MAC anything like rent for PGE park land. Even if not true, I wonder what the annual maintenance costs, beyond renovation, on PGE park might be.

It is at least somewhat comforting to know there is a stream of revenue helping payoff the renovation bond. But then if there's going to be another renovation before the first renovation has been paid off, the debt gets extended and any small rate of return the city would have made on the original renovation is probably toast.

There would seem to be so many higher priority items in the city, then going into deeper hoc for the opportunity to host a relatively few major league soccer games each year. Maybe, Amanda Fritz would help cityhall steer towards other services. I am not a big Fritz fan but she does have a significantly different agenda than the borrow big and spend big current set of councilors.

Out of that $7M paid off to the bonds, how about some accounting for how much of that came from PGE Park operations.

I'll take bets that it is $0.

Also, I tried to look up the CUSIP No. for the bonds, and came up empty. Would finding information about the bonds let one know if they have been paid off?

Perhaps the fact that the Tribune is a transparent shill for Portland big business is worth noting in regards to their dubious reporting on this matter.

CUSIP 736740

Ah, usually CUSIPs are 9 digits long.

The CUSIP numbers are on page 2 of the official statement.

Jack, thanks for this info.

When I heard that Merritt Paulson was looking for $35 Million to renovate the stadium, my immediate thought was, "Didn't we just spend $35 Million to do just that?"

How much revenue would have to come in from Soccer to meet the expenses of a combined $63 Million indebtedness?

"How much revenue would have to come in from Soccer to meet the expenses of a combined $63 Million indebtedness?"

For a 30-year fixed at 6.7%, the monthly payment would be $406,525 or $4.978M annually. Not exact - but close estimate.

The proposed bonds that are on the table at the moment would be for $75 million. As I've written, at 6 percent the interest alone would start out at $4.5 million a year.

And that's not taking into account the fact that the Beavers may bomb out in Lents, meaning less revenue to pay off the old bonds, where the payment is currently in excess of $1 million of principal a year, not including interest at up to 7% on $28.5 million (that's in the neighborhood of another $1.8 million a year), and with a couple of huge balloon payments due at the end.

There is no way this is going to pencil out. It's going to have to be paid for with taxes, plain and simple -- just the way it is now. And if property taxes aren't made liable for the bonds, they probably won't sell.

Yes, it pencils out when the Council falls back on that old
stand-by, the taxpayers, to bail them out of their silly over budget projects.

I wish there were a news organization in this town that would have the common sense to demand to see spreadsheets with the projected cash flows. And the cash flows on the existing bonds. But given that the MSM outlets have slashed their budgets and have no one around who knows anything any more, they just keep repeating whatever guys like Paulson tell them.

"Didn't we just spend $35 Million to do just that?"

According to published reports, we spent $42 million to renovate Civic Stadium into PGE Park. And many of us who looked at the before and after versions of that facility didn't really see $42 million worth of improvement -- or even $32 million.

"didn't really see $42 million worth of improvement "

It only took about 7 years for the chorus to start shouting that PGE Park is good for nothing, so we got some life out of it. BTW, I hear the view from Vera's luxury box is something.

Maybe Hank Jr. could ask the Feds to bail out the old PGE bonds before we issue any new ones.

Vera's luxury box

Hey I thought this was a family blog.

It was until you wrote that.

Maybe Hank Jr. could ask the Feds to bail out the old PGE bonds

Actually, his dad is Hank Jr. The baseball guy is Hank III.

Part of the money generated from a local hotel and rental car tax generates about $2 million a year for the debt payments.

The legality of using the car rental tax for this purpose has recently been called into question.

Wouldn't that make his dad Henry Merritt Paulson II?

Maybe they could just have Fannie Mae sell another $75 million worth of preferred stock, and then declare it worthless?

It worked before.

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