And so it begins. Since the ballpark fiasco hit the airwaves, many of those opposed to the ballpark argued that the revenue projections produced by the city were too optimistic. In essence, many of us argued that the taxpayers would end up paying for the ballpark and not the hotel occupants as the city and supporters argued. Yesterday we witnessed how the perfectly crafted lie is starting to unravel. Unfortunately, it is the taxpayers that will end up paying the bills for the ballpark.
Yesterday city staff notified city council that sales taxes, franchise fees, fines and forfeitures and building permits were under the projected revenues for the current budget. Those items make up the bulk of the city’s budget when you exclude the property taxpayers. In essence the economy is not doing as good as the city had projected for this budget cycle. The city is now projecting a 2% shortfall, or about $7.4 million. In response, city council approved some of the budget transfers requested by the city manager’s office.
Remember that the city’s debt is now about $1 billion, almost $900 million of that is property tax-backed debt. Although, the reality is that the full amount is taxpayer debt because should the city find itself in the position of not being able to make debt payments it will resort to what it did yesterday, transfer monies between accounts, calling them budget transfers.
Eventually the city will find itself unable to cancel services from where to transfer funds from and it will use the encumbered funds it has at its disposal to make the debt payments while calling for a tax increase to provide the necessary services required by the taxpayers.
What happened yesterday, no matter how the city words it, is nothing more than cancelling certain services in order to offset the declining local economy. What is the city going to do once it has cancelled all of the services it can? You might remember that in August I posted what the city had told the ballpark bond investors that it already knew it was going to have to offset the hotel occupancy taxes (HOT) taxes in order to make debt payments. You can read about it on my “City Tells Investors It Needs to Offset HOT Tax and Team Payments Shortfalls” blog post.
The first pitch hasn’t even been thrown out, yet the city is already scrambling to figure out how to pay off the debt. Guess what’s next? Yup, a tax increase. Remember you read it here first when the city budget talks begins once again.
There is a solution to this and that is to strictly adhere to the terms of the bond indenture that makes the 2% HOT incremental the source of repayment for the bonds. If the HOT falls short, then the bondholders do not get paid the full amount until it doesn’t fall short. They took a risk, too. Not the same as a total default, but it is a partial default and the taxpayers should demand it be done and not listen to Wilson and the CFO who have been full of crap on their projections.
Unfortunately the city stated in the Preliminary Official Statement, which is the offer document, that it would use Sales Tax (almost $1 million) the first six years to make the payments. That was when the city was projecting a 3% sales tax growth rate. We now know that the projected growth rate is actually negative 2%.
The bond holders would force the city into bankruptcy should it not make the payments. In my opinion this would be highly detrimental to the taxpayers of the community.
add to the economic woes that general belief about
the baseball field that was built and nobody came
[after the initial glamor]