Tuesday, February 3, 2004
Sandoval OKs Loan to Pueblo
By Thomas J. Cole
Journal Investigative Reporter
Sandoval County has agreed to loan up to $75 million to an Indian gaming tribe that previously failed in a bid to borrow money from the state.
The County Commission, at a meeting Jan. 22, voted unanimously to authorize sale of the bonds needed to fund the loan to Santa Ana Pueblo, which is seeking to refinance debt on a Hyatt Regency resort and golf courses.
The bonds would be sold to private parties. The tribe is responsible for repayment, pledging profits from its casino, hotel resort and golf courses, as well as some tax revenues.
Sandoval County would not be liable for the debt should the pueblo default.
"There's no downside to us doing this," Daymon Ely, chairman of the County Commission, said Monday. "We're not on the hook."
Ely also noted that Santa Ana Pueblo, located just north of Albuquerque, is one of the biggest employers in Sandoval County, with more than 1,240 workers as of July. "Everybody benefits," he said of the loan deal.
Representatives of the pueblo couldn't be reached for comment late Monday.
Santa Ana Pueblo, as of last summer, had about $87.6 million in debt for its Star casino, Tamaya Hyatt Regency resort, Twin Warriors Golf Club, two ranch purchases and other expenses.
The pueblo faces a balloon payment of $52.4 million in 2006 unless it refinances the debt.
Santa Ana Pueblo has struggled financially in recent years, with revenues at its casino down sharply in 2001 and 2002 and losses at its Hyatt resort in both those years.
The tribe has blamed the troubles on the economic fallout from the Sept. 11, 2001, terrorist attacks, the overall downturn in the economy, increased competition from other gaming tribes and other factors.
Gov. Bill Richardson killed a proposed state loan of nearly $62 million to Santa Ana Pueblo in August, saying the loan didn't meet the standards of his investment principles.
Richardson also said the state shouldn't directly compete with private lenders, shouldn't place itself in the position of becoming part owner of a casino and shouldn't assume undue risk.
Sandoval County, through an underwriter, will sell so-called project revenue bonds to generate the money to loan to Santa Ana Pueblo.
The purpose of the loan is to refinance the tribe's debt related to the Hyatt and its golf courses and not for any debt associated with the casino.
Because of the type of bonds, the buyers won't have to pay federal and state taxes on the interest they receive while Santa Ana Pueblo is paying off the bonds.
That tax savings for the bond owners will mean the interest rate for the loan will be below a conventional rate, allowing Santa Ana Pueblo to save millions of dollars over private refinancing.
The loan is to be paid off in about 12 years.
Tommy Hughes, a lawyer representing the county, said he expects the final loan amount, including fees, to be closer to $60 million than $75 million.
The lending deal won't restrict the county's ability to borrow money or issue bonds for other projects, he said.
If Santa Ana were to default on repayment of the loan, a trustee could appoint someone to take over operation of the hotel resort, casino and golf courses, Hughes said.
"There is no obligation on the part of the county," he said. "There is no way they end up running anything."
The loan deal is not yet final. The county and pueblo still must reach a loan agreement and the underwriter for the bonds still must conduct an analysis of Santa Ana Pueblo's finances. In addition, commissioners will have to cast one more vote on the proposal.
Hughes said the deal could be completed sometime in April. "What you have is the broad outline. It's far from a done deal," he said.
Ely said the loan negotiations with Santa Ana Pueblo have led to talks between the county and tribe on other issues, such as transportation, emergency services and health care.
The tribe was more isolated previously, he said. "This has opened the door for us. ... We want them to do well and they will want us to do well."