True cost of El Paso's Downtown ballpark
Updated On: Jan 16 2014 02:08:38 PM CST
The original cost estimate for the ballpark was $50 million, but the actual cost of some amenities caused it to rise to $64 million.
To cover that $64 million the city set out to sell $60.8 million in bonds with the the additional $3.2 million needed coming from a year's worth of the Hotel Occupancy Tax.
The expectation was that the bonds would sell at a premium, meaning it would bring in more than the bond asking price of $60.8.
The bonds, however, didn't sell.
Deputy City Manager Bill Studer believes an announcement by the chairman of the Federal Reserve played a huge role.
"We hit a point in the market where when we went out to sale (Ben) Bernanke started talking about how the Federal Reserve was going to cut back on their purchase of treasuries and it drove the interest rate market up substantially. Over about a three-day period it went up six-tenths of a percent, 60 basis points."
So, was there some fault there? Should someone have moved quicker?
Studer says "I don't think so. There were a number of circumstances that came together that forced that. There were a lot of reasons for it. You try to time your sale for a certain market and you really can't."
But, that's not the only reason the city had to offer a higher interest rate on their ballpark construction bonds. Something happening nearly 2,000 miles away also had an impact.
"They looked at what was happening in Detroit and said 'oh no, El Paso is another big city like Detroit,'" said Studer.
Because of Detroit's bankruptcy, El Paso had to entice bond buyers even more, and that meant higher interest on the debt.
"You're probably talking about $10 or $15 million dollars over the 25 years so you're talking about half a million per year," said Studer.
The city borrowed $60.8 million, but how much will it actually pay out when the bonds are ultimately paid off.
A 30-year-debt service schedule shows the city will pay $76.5 million in interest alone.
That amount coupled with the actual cost of the ballpark comes to a little more than $137 million dollars.
"Why should the taxpayers of today pay the total cost of building that facility? Why shouldn't it be shared by my children or grandchildren who are going to use that building over the course of 25 to 30 years," Studer said.
A bullet or balloon payment in 2013 might give the city the chance to pay more to the principal and refinance the remaining debt if rates are better then.
Studer says "You're going to have to refinance in year 10 some portion of it."
The city will pay for the debt using the HOT tax, team revenues and sales tax subsidies.
And, if and when necessary, the general fund.
According to the Texas comptroller, El Paso's total debt stood at $1.4 billion as of August 2012. That number does not include the additional $137 million for the ballpark.
That averages out to about $2,132 per person.
According to the website tellthetruthtexas.org, maintained by the state comptroller, El Paso is much less than cities like Houston, Dallas, Austin and San Antonio with debts of upwards of $5,000 per person.
To see those numbers look under links mentioned at KVIA.com.
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