The big topic recently in the Rays quest for a new stadium has been the debate over Tampa versus St. Pete. But the bigger problem is how would either city pay for a new stadium.

Everybody agrees that in this economy, it will take some creative financing to get funding for a new park. Well, one investment banker has proposed a solution for the Buffalo Bills that is so crazy, it might just work.

Rather than taxing the residents, he proposes that a new stadium be funded by selling bonds to the local residents. In other words, the fans would be loaning the team money for a new stadium. And in return, the fans would earn a modest profit and closer association to the team.

The proposal suggests a $200 investment in each bond. If a new Rays ballpark costs $500 million to build, that would mean 2.5 million bonds would need to be sold. Obviously a lot of people would “invest” in more than one bond.

So, let’s hear it. Would you be more supportive of a new stadium in your city if the funding was tied to a bond instead of a tax?

 
 

15 Comments

  1. Tom says:

    If the bond were backed by MLB then I would be interested. It would also depend on the interest rate, of course.

  2. Sarah says:

    Is the idea that this would be a true “investment” that gets paid back with interest? Or is it more like when you “buy” a brick for the new park or a pew in the new church — a donation that allows you to say you were involved?

    Is a stadium likely to be profitable enough to support the former model (e.g. bonds are investments)? And if the answer is yes, a stadium would generate sufficient income, then why wouldn’t the owners be able to get financing through traditional corporate borrowing methods?

  3. Greg says:

    I would probably buy a couple of these if they were backed by MLB. It wouldn’t even have to be a great interest rate. In fact, if it happened any time soon, I’m sure it wouldn’t be a very good rate. But I live about 4 hours form the stadium and I’d do it.

  4. nate says:

    I need better backing than just MLB. MLB is just an organization with member teams. Those teams have the money. Not the league. It would be like getting backing from a shell company. Any financial power that MLB has comes from the 30 teams that are a part of it, and the other 29 teams aren’t going to put themselves out there for the sake of a stadium in St Petersburg.

    That aside, an idea like this is asking the people of St Pete to put their money where there mouth is (because really, you aren’t going to get investors outside of St Pete). I don’t see enough people willing to make this investment. The waterfront proposel lead to an informal referendum, which squashed the would-be actual referendum. The people don’t want to stadium, thats the bottom line. Baseball fans..yes. But the community as a whole has already spoken on this issue.

  5. Thad says:

    Bonds are used all the time for municipal construction. The primary difference being they are usually BACKED by the municipality that is receiving the benefit. Podunk Town, USA issues bonds every day for construction projects. But Podunk Town, USA isn’t likely going to go out of business. Another benefit is that interest received from municipal bonds is generally tax-free.

    Bonds issued by the Rays would have to be issued at an interest rate commensurate with the risk involved of a cash strapped baseball franchise for anyone to even consider investing, which would be considerable and likely result in an onerous debt service for the franchise anyway. And they wouldn’t be tax-free.

    Even IF MLB, got involved and backed the bonds, I still don’t think that would be enough to get the risk and interest rate scale to balance to make it feasible.

    Loaning money is fine, but does the interest rate appropriately reward the risk being taken? For a municipality? Generally YES. A financially unstable baseball team with revenue issues anyway? Uhhhh, Negatory.

  6. Thad says:

    Basically, for any bond issue to work the appropriate municipality involved (Tampa or St. Pete) would have to get involved and back the bonds, which is not likely to happen. Then in five to ten years, if the plan didn’t work and the fans didn’t come just because you built it and the team weasles out of its lease and leaves town, there’s no team to draw revenues at said facility and no corresponding revenues to repay debt service. So, the municipality is on the hook for the debt service and it turns into an indirect tax on the population anyway.

    • Sarah says:

      Thad, you are right that many municipal bonds are general obligation bonds, backed by the full faith of the municipal government. But local governments or state development agencies also issue revenue bonds which are backed by the projected income stream of the project. Toll roads, for example, or airports are often built this way.Presumably stadium bonds would be backed by the potential revenue stream of the stadium. So the question of their credit-worthiness would be determined by how the stadium financing were structured.

      • Thad says:

        Understood, but revenue bond projects like toll roads and airports have defined revenue streams that aren’t going to pick up and leave town after five years. Bonds backed by the revenue stream alone from a new stadium are even less likely to work unless they can force the team to occupy the stadium, which they can’t. I can’t envision the potential revenue streams from a new stadium (especially given the current lack of support and revenue struggles) being enough to convince investors to risk their capital, UNLESS it’s also backed by the municipality. I wouldn’t invest in that bond with YOUR money or unless I could get my principal back in less than five years, which isn’t feasible.

        • Sarah says:

          I agree — that’s kind of what I was getting at when I posted further up this thread — if bonds could really generate that kind of guaranteed return, why would they need us? There would be more traditional investors willing to take the risk. So this only make sense if the payoff is uncertain – in which case our “loans” are more like “donations”.

  7. Don says:

    BONDS who the hell wants BONDS…Tell Stuie if he wants money to bulid a new stadium I’m in…BUT I want STOCK in the team (business), sell shares for 50% of ownership or how ever much Stuie wants to give up…..Then he gets his stadium
    100% payed for and all he has to do is give up some ownership in his “LOSING MONEY” business…..
    Tell him I’m in! By the way Stu….you don’t get to move out of the county if I’m one of the owners!

  8. BenJah says:

    yes, the rays should sign bonds. i think he can still hit

  9. Mike says:

    You guys definitely know more about this stuff than I do. And it sounds like there would at least be some risk involved. But isnt that still better than a tax? There is zero chance of getting that money back, right?

    • Thad says:

      In a vacuum? YES. It’s a much better deal for the taxpayer, IF someone can guarantee (or reasonably guarantee) repayment of principa TO the taxpayer.

      Rather than the taxpayer PAYING for the new stadium thru a new tax, under the loan scenario, the taxpayer (or whoever is willing to buy the bonds) is LOANING the money to the team so that the TEAM can pay for it out of future revenues.

      But the deal is not feasible from the outset if no one is going to guarantee the principal repayment to the taxpayer/buyer. At which point it becomes a terribly sucky deal for the taxpayer to have lost their principal. And even if the municipality ALSO back the bonds (not just future revenue streams), everyone is screwed if the team decides to pack up and ship out in five years, leaving an empty stadium and a hefty debt service left for the municipality, at which point said municipality would be forced to RAISE taxes to pay the debt service.

      Bottom line: Just not a workable solution.

  10. rayray says:

    I back it… I’ll most definitely chip in for part ownership… Let’s do it now, I’m ready to invest only if the stadium is in St. Pete were the Rays were born and where it belongs, so get over it tampons.

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