Auction-Rate Crisis Hits Stadiums for NY Giants, Colts, Saints

[marmar]

from Bloomberg:



Auction-Rate Crisis Hits Stadiums for NY Giants, Colts, Saints

By Aaron Kuriloff and Michael McDonald

March 27 (Bloomberg) -- The auction-rate bond crisis is raising borrowing costs on more than sewers and hospitals, forcing some states to pay three times higher interest on 65,000-seat sports arenas with moving roofs and 50-foot video displays.

Debt payments for Louisiana's Superdome, home to the National Football League's New Orleans Saints, ran the state about $1.8 million last month -- up from roughly $500,000 in January -- after interest rates tripled to 12 percent, said Whit Kling, director of Louisiana's bond commission. Some private borrowers are paying even more, with rates on bonds sold by owners of the NFL's New York Giants reaching 22 percent this week, according to a person familiar with the debt.

``I don't think anyone ever anticipated this,'' said John Kennedy, Louisiana's state treasurer. ``We're paying the price.''

States and cities that subsidize sports venues to stimulate the economy have often failed, and this year's credit meltdown will make it even harder to avoid raising taxes or reducing services to cover bills, said Dennis Coates, a public finance professor at the University of Maryland in Baltimore. His studies on the effect of major league franchises on U.S. cities show stadiums hurt residents by steering public and private spending away from health, safety or other forms of entertainment, he said.

``Is there a sufficient public justification for borrowing? I'm not sure there is,'' said Coates, co-author of ``The Stadium Gambit and Local Economic Development,'' a paper published in 2000. ``It's not like this is fundamental infrastructure.'' ......(more)

The complete piece is at: http://www.bloomberg.com/apps/news?pid=20601087&sid=amZuAsrWiT3M&refer=home

[Auggie]

1. What a nightmare

[dbackjon]

2. Thank goodness we were smart enough to pay for our stadiums upfront

No bonding needed - sales tax surcharge. Heck, Chase Field (MLB) was paid for before it opened!