Our favorite quote from the column..
“I think the point has come across really well,” says Zimbalist. But, he adds, “you ask, do people understand this? I think in Worcester, they don’t even want to understand it. There’s a tremendous amount of excitement about bringing the team there.”
Here is a link to the Pro-Forma . You need to convert this to an Excel file to actually make sense of the numbers..
First lets all agree that we all want to see the project be built on time and succeed, but we as the taxpayers, who will have to cover any shortage in your pro forma, Mr Zimbalist “we need to understand it”.. Here are the basics:
- The City of Worcester is going in debt to the tune of 100,000,000 to build a stadium, land purchases, etc.
- The Commonwealth of Massachusetts is going to build a 15,000,000 garage that costs us nothing.
- Private Developer is going to invest their own monies with various local and state incentives to build 250 New Market-Rate Apartments, Two New Hotels (150 Rooms in First, 110 Rooms in Second Boutique Hotel Overlooking the Park) and 65,000 Square Feet of New Retail and Restaurant Space.
All of this will start July 2019 and finish March, 2021.
The question we need to ask is “How are we going to pay back the bonds on a 100,000,000 million dollars starting 2022 extending for 30 years?”
- Series B debt of $28,000,000 is to be paid by the lease with the team.
- Series A debt of $68,325,000 is to be covered by the extra money the city will receive from all the private development listed above.
Now lets juts focus on the Series A Debt of 68,325,000 starting in 2022:
- Debt Service 2,733,000
- Insurance on Stadium 46,920
- City Operating Costs 50,000
- Total 2,829,920
- Ball Park Revenues 147,168
- Garage Lease Payments (garage built by Commonwealth) 250,000
- Parking Revenues from other lots 595,650
- Block A and Block B: Net Real Estate Tax Revenue from Boutique Hotel and Restaurant less TIF and existing taxes 313,060
- Block C and Block D: Net Real Estate Tax Revenues from Hotel, Restaurant, Apartments and Retail Space less TIF and existing taxes 1,628,067
- Personal Property tax 11,526
- Hotel and meals tax 571,388
- Advertising 156,000
- 8 city revenue events 40,000
- Total Income 3,712,589
Profit= 882,669 (total income of 3,712,589 less expenses of 2,829,920)
This looks great but if any one of these things does not happen by March 2021, for example;
- Block C and Block D are not developed, we go from a profit of 882,936 to a loss of 746,000.
- What if the developer decides he does not need to rent the garage? Another of 250,000 in lease payments and 279,905 in real estate taxes are gone.
- $595,650 of parking revenues outside the garage seems awfully high???
The main thing we realized, however, after looking at the pro-forma is that this debt increases every year. Remember before the housing bubble burst when you could buy a house with interest only then the amortization would start later. Here are the annual payments on the Series A debt every 5 years of the term of the loan:
- 2022: 2,733,000
- 2027: 3,572,000
- 2032: 3,754,000
- 2037: 4,154800
- 2042: 4,676,600
- 2047: 4,911,800
The pro-forma looks great, but make no mistake about it–THERE IS ALOT OF RISK TO THE TAXPAYERS OF WORCESTER!! If even one portion of this plan does not get finished by March, 2021, we are paying the shortage. We have knows all of this for the past couple of weeks.
On the other hand , we had no idea the 30 year schedule on these notes were so back-end loaded.