The Portland Timbers soccer stadium mess is turning into, well, a bigger mess, with questions about both the financing plan and the site for the new minor-league baseball stadium that would be built as part of the deal.
Starting with the financing: The Oregonian yesterday ran a wordy analysis of the economics of the twin-stadium deal, noting that while Timbers owner Merritt Paulson has promised to guarantee $31 million in rent payments and ticket taxes that are supposed to help fund the $88.8 million project even if the team (or MLS) doesn’t last another 30 years, much of those will go to pay existing debt on renovation of the team’s current stadium. That means, writes the paper, that “the city will have to rely on revenue from Portland Trail Blazers ticket taxes and parking proceeds — or, if those fail, the general fund — to cover about $20 million in baseball and soccer bonds.”
It’s of particular concern, say reporters Helen Jung and Ted Sickinger, because the city’s economic impact study of projected tax revenues from the project is “peppered with basic math errors” and “assumptions that change from page to page,” though they didn’t supply details. (Consultant Brian Harris explained — I swear, you cannot make this stuff up &mdash that this was because he was keyboarding figures into a spreadsheet during an airplane flight, and while he was sick.) Paulson’s projections — which the economic impact study was supposed to verify — include a 50% jump in attendance for his minor-league Portland Beavers franchise in their new home, as well as the Timbers clearing an operating profit in their first year, “despite the fact that 10 out of 13 Major League Soccer teams recorded operating losses in 2007,” notes The Oregonian.
On the city’s end, meanwhile, that suddenly unguaranteed stadium borrowing turns out not to be your garden-variety municipal bonds:
For a majority of the new borrowings, the city plans to issue the municipal equivalent of a subprime interest-only loan. For years, it would make no payments on the debt while interest accumulates at an estimated 9 percent. Then it would retire the loan with a series of increasing balloon payments in later years through 2035.
The structure is so unusual that the city’s debt manager isn’t sure anyone would be willing to buy the bonds. That’s where the Paulsons have stepped in again.
Paulson and his father, Henry Paulson, a former investment banking chieftain and U.S. treasury secretary, have pledged to help find a buyer.
With all this going on, the Portland city council has delayed by a week a vote originally scheduled for tomorrow to finalize Paulson’s development agreement — but not because of concerns about the financing. Rather, the council wants to consider concerns of preservationists who want to save the Memorial Coliseum. The Coliseum, former home of the Trail Blazers, is currently home to the minor-league hockey Portland Winter Hawks and lacrosse Portland LumberJax, who may have trouble booking dates at the Blazers’ new Rose Garden — and who have lease clauses guaranteeing them a year’s notice before they’re evicted, clauses that the city may have to buy out if it intends to demolish the 49-year-old arena.
And meanwhile, the $15 million funding hole remains. See why I’m always warning that stadium deals are never over until they’re over?