More missing pieces in news articles on the Arena

On Monday's Eye On Toledo, I documented a report prepared for the Ohio Cultural Facilities Commission (OCFC) on the arena financing. I also did a blog post detailing how the report says the county plans to use public funds for the arena.

I'm glad the paper has caught up to me on the issue, but have to question the omission of key information.

They write:

"The county commissioners have said the project will be paid for by its own revenue and the increased hotel-motel tax.

But the report says the county should have done more to document funding for the arena. To release $7.7 million in state funds, the commission wants:

•More documentation of funding sources.

•An executed lease agreement with Toledo Arena Sports.

•A signed agreement with an Arena League Football team.

•Documentation of expected revenue from nearby parking."

Here's the actual language from the report, starting on page 28:

Based on all of the analysis outlined above, the Consultant recommends the following conditionso f approval of State funding for the Project:

􀂃 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 obligation bonds at interest rates equal to or lower than those included in the provided project documentation;
• 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.
􀂃 Execution of outstanding legal agreements, including the Facility lease with TASI and the management agreement with SMG with terms equivalent to or better than those included in the draft materials.
􀂃 Acquisition of an af2 franchise or revised operating projections that consider the operation of the arena by SMG with only an ECHL team as a sports tenant.
􀂃 Documentation of formal agreements that ensure the collection of parking revenues from 1,000 spaces by the Facility.

Why would they write of the commissioners' contention that only hotel/motel tax and revenue from the arena will be used for the project and then omit the criteria relating to the Capital Improvement Fund dollars?

They do mention the $12 million later in the story, with the explanation that those CIP funds will be repaid from the loans. If that were clear in the information submitted to the OCFC, why would it be a separate requirement? Wouldn't that be covered under the requirement for the issuance of the bonds?

The Blade article says:

"The report also implies the county will be using general operating fund dollars to finance the project, but county officials strongly deny they plan to dip into that fund."

However, the actual wording from the report's page 11 states (not 'implies'):

It is also important to note that the Project Sponsor intends to utilize other sources of funds, completely unrelated to the financial performance of the Facility or its tenants, to service bond obligations. Components of the financing plan include General Obligation Bonds secured by Hotel / Motel Tax revenues (see Section C.3, below) and annual County commitments from the general fund. (emphasis added)

Tom Chema, a consultant to the commissioners for the arena, was interviewed by Fred Lefebvre about this, but never really answered the question - first saying the reference to the general fund was the hotel-motel tax and then saying it was the capital dollars. However, those are three separate funds: general, hotel-motel tax receipts, and capital improvements, and Chema knows that. I'm certain that both the report authors and the OCFC understand the distinction between the separate public account funds, which is why the items are identified separately in the report.

This is a question that must be answered: why did the the county tell the OCFC that they intend to make annual contributions from the general fund to help supplement the financing if they have promised the arena must pay for itself???

What will it take to get the paper to ask this question and actually dig to be sure they're getting a truthful answer and not just a 'you'll have to trust me' response?

"County officials said they've complied with many of the requests. Since the report was issued, the county has borrowed $90 million in "bond anticipation notes," or brief, one-year loans with small interest rates."

Issuing notes in anticipation of bonds is not the same as issuing bonds. While the action of issuing the notes is probably best in this market, as it will allow the county to hold off on the permanent bonds to see if they can get a better interest rate, the county cannot say that they've met the threshhold requirement of the OCFC. The issue of uncertainty exists until the permanent bonds are actually issued, the interest rate set and the ability of the county to meet the debt obligation is proven to the OCFC.

All along, I've said that there are numerous fiscal questions that need to be answered and serious financial risks that must be considered. Commissioner Pete Gerken is fond of saying that you have to take risks if you want the rewards (though I question the responsibility of taking such risks with money that is not your own...). The problem here is that we've begun the project without calculating the risks and sharing those risks with the public so they could make an informed decision. As the OCFC report says, Lucas County is at a greater risk because we began the project without having the funding in place, leaving the only option, should any funding stream not be met, of dipping into the public's general fund dollars to make up the difference.

Lucas County citizens may have supported that risk - if they'd known about. But in this political environment, you're not supposed to ask such questions and demand such accountability - you're just supposed to accept that you don't 'need anything other than their word' and then dutifully fork over the dough when the time comes.