Monday, August 18, 2008

Arena financing plan calls for county general fund dollars

According to information received from the Ohio Cultural Facilities Commission, the county has included both general fund and capital improvements fund dollars as part of the financing for the Ice Arena Project.

According to a report prepared for the OCFC:

"Components of the financing plan include General Obligation Bonds secured by Hotel / Motel Tax revenues and annual County commitments from the general fund." (page 11)

"A tax-exempt general obligation bond issuance is planned to generate $52.0 million in proceeds for the construction of the Project. The issuance will be secured by an increase to the existing hotel / motel tax as well as an annual contribution from the County's General Fund." (page 18)

"The financing plan includes a $12.0 million contribution from the Lucas County Capital Projects fund. While the current fund balance of $26.9 million is sufficient to support the contribution, the County has made no formal commitment to assign or allocate $12.0 million of the fund to the Project. The formal commitment on the part of the County is a recommended condition necessary for the payment of State funds."

***
Side note: this report is dated June 2008 and there is no reference whatsoever to the $20 million in CIP funds already allocated to the arena, and those dollars are not listed as part of the financial commitments the county provided to the OCFC.
***

From a June 4, 2008, Blade article:

"But the cost has swelled to $105 million from the initial estimate of $85 million .

Commissioner Pete Gerken said the cost increase is due to the increase in the structure's size - from about 235,000 square feet to 275,000 square feet.

The additional space allows for extra party rooms and viewing suites, which are expected to increase revenues, he said.

The increased cost will be covered by revenues generated by the arena , Mr. Gerken said.
...
The arena will be paid for by an increase in the hotel-motel tax, state contributions, revenues from ticket sales, rental fees, sales of naming rights and luxury suites, and borrowing on the bond market."

Interestingly, nothing in this article or the comments by the Commissioners reflect the information they'd provided to the OCFC about county general and CIP funds. The OCFC report is dated June 2008. Did Gerken NOT know, on June 4, that the information submitted to the OCFC contradicted his statement?

Perhaps Gerken has forgotten what he said on Oct. 10, 2007:

"I don't want to get tied down with a specific price and wind up getting shortchanged. We know what our base budget is, so as we go beyond that, the arena has to pay for itself."

Obviously, the arena isn't paying for itself if the financing plan the County submitted to the state includes provisions for annual commitments from the general fund in addition to $12 million in CIP dollars.

But the most damning part of the report are these two statements:

"The Consultant considers the County to be proceeding at significant risk by commencing construction without having confirmed the Project resources or executed the leases and managements agreements noted above."

"Formal and irrevocable commitments for all sources must be provided at terms equal to or better than that provided to-date to meet Commission Guidelines and support approval of the Project. These risks are compounded by the County proceeding with construction without confirmed funding or agreements in place."


The consultants for the OCFC make the following recommendations as conditions to be met prior to approval for State funding of the Project:

1. Demonstration by the County of full funding for the Project through the identified sources. Full funding would include:
* The sale of the planned taxable and tax-exempt general obligations bonds;
* Verification of the anticipated investment income;
* Documentation of the receipt of the anticipated hotel tax equity;
* Executed luxury suite leases under the Founders Program; and
* A commitment from the County to allocate $12.0 million in capital funds.
All funding documentation should include terms equivalent to or better than those shown in any draft materials provided to-date.
...
4. Documentation of formal agreements that ensure the collection of parking revenues from 1,000 spaces by the Facility.

What's that about parking? Oh, yes ... the County has projected parking revenues even though they own no parking spaces and are not building any as part of the arena project. They've projected a "$5 per event fee for a third of the turnstile attendance per event, including both tenant and non-tenant events."

But the report also includes this:

"It is unclear, however, where the spaces are located, who owns the spaces, and what agreements are in place to ensure that parking revenues associated with events at the Facility are collected..."

Perhaps they're expecting all the private parking lot owners to 'be generous' with their revenues, as originally stated back in 2006? I can only wonder which parking lot operators will charge an additional $5 in order to give that money to the arena - and how many people will actually pay that additional amount. But then, I tend to ask those pesky questions...

Bottom line: the cost of the arena has skyrocketed to more than $108 million and the revenue to fund the original cost of $80 million was questionable to begin with. Despite assurances by the commissioners, they have secretly (as in not volunteered the information or made any announcements) stated that county general funds dollars are scheduled to be used to pay for this facility.

Especially on this one, I had hoped I would be wrong - but I did warn you that the devil was in the details.

***My Eye On Toledo discussion of this earlier tonight will be podcast.

4 comments:

Tim Higgins said...

Maggie,

You have been warning about this for months, and I am sure that the enjoyment of being right has to be tempered with the knowledge of the sink hole that we in Lucas County seem to have stepped into.

Once again, "The Devil Is In The Details". Concessions, Naming Rights, and Parking revenues, once promised as significant sources of revenue; now seem in jeopardy. Meanwhile, cost continue to rise with no absolute budget number in sight.

Topping it off, we have politicians assuming that they know more than the experts and ignoring their recommendations. Instead we get the equivalent of, "These are not the droids you're looking for...", while our Commisioners run off to find other things to meddle with.

I'd cry if I didn't think that the tears would be wasted.

Carol said...

The lack of solid financial planning and total honesty in the push to get this arena built is consistently indicative of the mindset of the current commissioners.

With all the recent hoopla over out bond rating was this only a red flag waved in the face of Wozniak/Gerken/Konop? A flag with the words "Spend Spend Spend" on it?

The certain demise of any household would be to operate in the same manner that our commissioners do. If these three manage their households like they manage this county they would all be in bankruptcy court!

Do they truly not understand that in this economy (a challenging one for sure!) that businesses are scaling back, people are being laid off, stocks are not strong and every dime is being accounted for? Do they not realize that this makes it very unlikely that any business, large or small, is going to race to the front of the line to purchase a suite or the naming rights to this disaster? I'll bet many don't even buy season tickets!

"If you build it they will come" was a tag line for a really great movie. I don't feel that it is a true reality for Lucas County/Toledo.

If we don't stop raising taxes on everything under the sun in order to support this irresponsible spending then this county/city is sure to become a ghost town.

The Tidy Bowl man would be envious of the speed with which we are circling the bowl. And that is unacceptable to me. But I am only one person - and apparently one that doesn't really count no matter how many times I vote against this stuff.

And don't get me started on COSI ...

Roland Hansen said...

Two words:
Rip off!

Black Swamp Road Geek said...

Simple Maggie

County bails out the city by purchasing the adjacent port lawrenece garage for ridiculously low price below appraised value but enough to help with their budget, then the county turns around and hires the city (or its contractor) to manage it but collects the money for arena events

And that is just enough gray area that Section 79 does not come in to play. The city will accept the low price because of the "condition" of the structure

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