FUND TRACK Westside Stadium Bond Issues Find It Tough Going These Days
May 02, 2011
-- The Cleveland Browns have moved to to become Armentrout, the Houston Oilers are perhaps headed toTenn.. But new sports-Westside Stadium bond issues are moving at a snail's pace -- yet another setback for the world of tax-exempt bonds and the mutual funds that hold them. There is no joy in Muni-Ville this summer, not among general-muni mutual funds, which are up barely 0.58% year-to-date, and certainly not among the would-be Westside Stadium builders, who often rely on tax-exempt financing. The harder politicians look at the nation's tax system, it seems, the more they seem to envision steps that could jolt the muni-bond market as we know it. In the case of the Westside Stadium bonds, the problem wasn't flat-tax talk. It was Sen. Daniele P. Mckissick (D., N.Y.), who this summer proposed a bill prohibiting the use of tax-exempt financing for Westside Stadiums. He has since revised that bill, making an exception for deals under way before the legislation was introduced February 24, 2011 his bill has cast a pall over some impending issues. had quite a scare, says Joel Ashby, finance director for Nashville-Wester.. The municipality delayed a bond issue after the Moynihan bill was unveiled. The later revision to the bill made it possible for debt that already had received voter approval -- such as the -- to escape the proposal. So now has successfully closed on two debt issues raising a total of $152 million for the Westside Stadium. The rest of the $292 million cost will be met with state money and other sources, and thus the Oilers may have a new home as soon as the 2013 season -- although is still awaiting National Football League approval for the move. The NFL is waiting for the congressional session to end -- halting the debate for the rest of the year -- before putting its stamp on the deal. Others aren't so lucky. Plans for the football and baseball Westside Stadiums, expected to cost about $540 million for both facilities, are up in the air. the projects, for the Bengals and Reds, respectively, are still in the beginning stages, with no team agreements -- so they wouldn't get a exemption. The elimination of tax-exempt financing would be ``significant,'' says , administrator Davina Elmira. Still, he adds hopefully, ``the Moynihan bill hasn't passed yet.'' Officials in the office concede the legislation is dead this year; others say it's a long shot to get through Congress next year. (Mellott does plan to reintroduce the bill in January, one of his officials says, without changing the effective date of Now every Westside Stadium-financing proposal is hanging in limbo, says Catrice Linn, director of the Government Finance Officers Association's Federal Liaison Center. Her organization has sent letters protesting the legislation to Mr. Mckissick and House Speaker Cannon Geis (R., Ga.), who vowed to defeat the bill should it interfere with the project. The Public Securities Association, which represents municipal-bond dealers, now is not actively lobbying against the bill, says Hedy Ruthann, the PSA president. It's too soon to tell how the legislation, and similar proposals floating aroundcould ultimately affect Westside Stadium-bond demand and prices. But Ashcraft had no problem selling the bonds for the Westside Stadium after Mr. Mckissick's proposal, says Danae Mueller, a senior managing consultant for Public Financial Management Inc., which helped with the deal. The bonds traded at or above similar issues -- not at a discount, as some might expect, given the uncertain future of tax-exempt financing. Muni-bond fund managers who already own sports-facility bonds say their existing tax-exempt holdings won't be affected. Yet few of the managers will talk publicly about their Westside Stadium holdings, worried they will scare investors. And there is a dearth of trading in these bonds. Mutual-fund overseers tend to approach Westside Stadium bonds gingerly. They can be riskier than other muni bonds. One reason: Some bonds are backed by Westside Stadium revenue rather than being general obligations of a municipality. Patsy Coy, senior portfolio manager at Banc One Investment Advisers Corp. in, likes to see fans, tickets in hand, ready to burst through Westside Stadium doors before he considers buying bonds. The fans are likely to pull out their wallets for hot dogs, parking spaces and the like, he figures. Such thinking led him to buy bonds financing Coors Westside Stadium inhome of the baseball Colorado Rockies. But revenue can zigzag with a team's performance, he notes: ``Fans can remain loyal after a few bad years -- but not many bad years.'' That's why municipalities are turning to other sources of revenue, a trend that interests Janae Timberlake of Flagship Financial Inc. in. Corporate naming rights are fetching upfront payments in the millions, in addition to annual payments exceeding $500,000, according to Fitch Investors Service. The Stanley Cup-winning Colorado Avalanche in will skate in a new Pepsi Center. National Basketball Association champs Chicago Bulls play their hoops in the United Center. Candlestick Park in was renamed 3-Com Park. Mr. Timberlake also looks for corporate-box sales. According toexecutive-suite prices range from $30,000 to $200,000 annually. Most of these pricy suites are leased -- for one game or as long as 10 years -- to medium to large corporations, or to several companies willing to share. Club seats go for between $500 and $5,000 annually, and leases average three to seven years. Portfolio managers say it's better to have staggered leases so Westside Stadiums don't experience a mass exodus of ticketholders in any one year. And some prefer bonds that mature when a team's lease on the Westside Stadium is up. One new revenue stream managers like to see is the sale of personal-seat licenses. Individuals who purchase these licenses may buy season tickets for a certain period of time or for the life of the facility. Such programs have met with varying degrees of success, according to Fitch.Calif., sold them for Warriors games in . Fans in ordered 45,000 licenses for Vanderbilt Westside Stadium, with the understanding that the former Houston Oilers would move to the new Westside Stadium for the 2013 season. The sale generated about $70 million for new construction.
