Why can’t the proposed soccer stadium bond be a traditional municipal revenue bond? With a revenue bond, bondholders look to the bond project – not the taxpayers – for payment.
On Aug. 16, the Albuquerque City Council passed resolution R-21-187, which puts the following question on the Nov. 2 ballot: “Shall the City of Albuquerque acquire property for, and to design, develop, erect, construct and otherwise improve a public stadium for multiple uses, including, but not limited to, professional soccer events to be financed by up to $50,000,000 of its gross receipts tax revenue bonds?”
Although the resolution describes the proposed bond issue as “gross receipts tax revenue bond,” it is more akin to a general obligation (GO) bond. Bondholders will not have a lien against the stadium, but, instead, a claim against future gross receipts’ taxes. By contrast, if the bondholders could only look to the stadium for satisfaction of the bond indebtedness, that would be a revenue bond.
I have some comments and observations.
1. According to the New Mexico United website, the team has seven owners: Ed Garcia, Jason Harrington, Ian McKinnon, Jos Shaver, Ben Spencer, Sloan Swanson and Peter Trevisani.
2. As is, this bond issue will primarily benefit the team owners and not the taxpayers of Albuquerque. The bond underwriter will be able to secure a lower interest rate because the bond is considered safer as it is backed by tax revenues. Lower financing costs would allow the city to charge less rent for the stadium, greatly benefitting the team owners. In contrast, if the bond issue were a traditional revenue bond, the interest rates would be slightly higher because the bond is considered riskier. If there were a default in bond payments, the creditors could look only to the stadium property to recover losses. The taxpayer is not on the hook.
3. Maybe I’ve missed something, but I’m not aware of any contract between N.M. United and the city of Albuquerque binding the team to anything with the city. If we wait to enter into contract negotiations until after the bond is approved, what happens if the team says no to a lease? Isn’t the city’s best leverage to make stadium construction contingent on N.M. United doing a number of things before there is a bond vote, such as agreeing to a long-term lease, substantial upfront payments toward the stadium construction and personal guarantees from the owners in the event of lease default?
4. To say the proposed bond question is open-ended is an understatement. We don’t know how much the land is going to cost because we don’t know where the stadium is going to be put. Shouldn’t we know where the stadium will be located before there is a bond vote? The stadium has a projected “bare bones” cost of $50 million. Does that mean the ultimate cost will be millions more?
5. The history of successful minor league sports teams in Albuquerque is dismal. In the past 50 years, I believe that only the Dukes and the Isotopes have lasted longer than 10 years. We’re being asked to spend a ton of money for a sports franchise with a very brief history in the city.
6. For all the previous reasons, it’s unfair to put a $50 million-plus tax burden on the city’s taxpayers.