City will renovate PGE Park first, borrow to pay for it later
Here's a classic City of Portland weasel move, and of course it fits right in with the PGE Park stadium boondoggle, which has been marked by one strong-arm maneuver after another. The city isn't going to sign the long-term bonds for the city's $11 million share of the construction costs for the new soccer grandstands until after all the construction work is finished! It's going to go out in the near future and borrow the money on a short-term, temporary line of credit, and not enter into the permanent financing arrangements until after the renovation is done.
In other words, Portland taxpayers won't get to see (or pass on) the terms of the mortgage until after the stadium project is finished. All we will know when the city forks over the construction costs is that the final mortgage is apparently going to be some sort of subprime "zero coupon" bond deal, and the Paulson family will be finding us some of their pals who will buy the bonds (i.e., make the permanent mortgage loan). In the meantime, the city's putting $11 million on the equivalent of a credit card.
This latest twist on an already misguided transaction is spelled out on the next-to-last page of this document:
The Spectator Fund will contribute $11.9 to the capital cost of the project through a combination of cash and a future bond issue. Initially, the City's share will be financed through a line of credit until the project is finished in the spring of 2011.How much leverage will the city have when the time comes to sell the bonds, which are likely to be far below prime? None -- less than none. The taxpayers will no doubt be taking it in the shorts -- the soccer shorts.
At that time, decisions will be made on the amount of the cash contribution and the balance will be financed through a bond sale. The debt service for the new bonds will be paid for from revenues in the Spectator Fund.
Will the opponents of the project ever get a chance to put the bonds up for a public vote? They're supposed to have that opportunity, if they can collect enough signatures to challenge the borrowing. What if the stadium's finished but the permanent bonds fail in an election? Will the city be in default on the line of credit? And is there going to be any chance to petition for a vote on the interim line of credit?
Particularly given the wildly unorthodox terms that the permanent bonds are likely to bear, this is outrageously irresponsible conduct by the City Council. Just as the no-bid nature of the construction deal makes a mockery of the public bidding laws, the build first/bonds later ploy makes a mockery of the laws providing for public accountability about large-scale municipal borrowing.
Even if these gyrations are legal, they certainly aren't smart.
Meanwhile, who's going to put up the interim line of credit on this one, when there's a good chance that the final bonds could get put up for a public vote, and perhaps fail, later? Wait -- let me guess -- Daddy Paulson's banker buds?