From yesterday’s Miami Herald:
As Miami-Dade County commissioners worked late into the night to finalize financing for the Florida Marlins stadium last week, Commissioner Katy Sorenson posed a simple question: What’s the total cost of financing going to be?
If you’re a regular reader of this site (or the book Field of Schemes), you already know: That is not a simple question. When you’re talking about future payments, there are about a million ways to dice the numbers: You can just add them all up (the nominal cost), which is misleading because much of the cost won’t be paid for decades — it’s like saying you own a $2 million house because that’s the total of all your mortgage payments. Or you can discount the future payments by some percentage — but what discount rate to use is more art than science.
The Herald, though, punts all this and goes with the nominal cost:
With bonds issued last week in New York, the total cost is finally in black and white: $2.4 billion, spread over 40 years, to repay $409 million in bonds that will primarily, though not exclusively, cover stadium construction.
Even if the cost isn’t really $2.4 billion, though, it’s likely a good bit higher than $409 million, because as the Herald reports, the county had to resort to some pretty dubious bond terms to finance a stadium in this economic climate. The bulk of the stadium debt carries a hefty 6.4% interest rate; the remaining $91 million carries an even heftier 8.17% rate, and will be paid off entirely with balloon payments between 2038 and 2046. “This is the sort of financing you do when you cannot afford it,” financier Leo Guzman told the Herald. Sounds like somebody should have listened to the stick figures.