Harris County Faces Unexpected $100 Million Debt
by: Laurie Johnson, October 16, 2009 5:10:40 pm
Most of Harris County's billion dollars or so of outstanding debt on its sports facilities involve long-term bonds with fixed interest rates. But about $120 million of Reliant Stadium's fixed debt was swapped a few years ago for variable rate debt. Then, as part of the economic downturn, the bond's insurer was downgraded, which triggered clauses that allowed JP Morgan Chase to buy back the bonds. Now, Chase is demanding the county pay back the debt in 5 years instead of 30 years.
"It's very similar to a home mortgage that you took out that was going to be paid-off in 30 years and now for some reason you have to pay it off in five."
J. Kent Friedman is the chairman of the Harris County Sports Authority. He says the Sports Authority is
negotiating with JP Morgan Chase to refinance the debt, but there's a good chance that won't happen.
If it doesn't, the county will be on the hook for a lot of money it didn't expect to have to pay-off in five years.
"If for some reason the Authority is not able to make those payments when they come due, nothing happens to the
Authority, nothing happens to the stadium, nothing happens to the teams that play in the stadium. The insurance underwriter, MBIA, would be forced to step-up and make those payments to the bondholders. That's why the Authority bought that insurance and that's what the insurance is there for. There is absolutely no scenario under which the taxpayers of Harris County or the City of Houston would be required to make any payments at all."
Not so fast, says Harris County Judge Ed Emmett. Because the Sports Authority will be looking for money wherever
it can find it, it won't be able to give the Harris County Sports and Convention Corporation, the entity that operates Reliant Stadium, about $7 million it currently forks-over for operational expenses.
"Suddenly, the Sports and Convention Corporation is going to be $7 million lighter than they were before, $7 million per year and that money has got to be made up from somewhere if Reliant is going to be operated at the same level it has been, and that's where it gets to be very, very interesting."
Emmett says it won't be easy for Harris County Commissioners to find the money needed to fill the huge hole in the
Sports and Convention Corporation's budget.
"It is concerning and there are going to have to be some hard decisions made as to if we're going to be out $7 million
then where does that $7 million come from to make up the operating revenue needed by Reliant."
Sports Authority officials say they still have hope that revenue from hotel occupancy and rental car taxes, along with parking revenue and money from the Houston Texans, will allow them to make the accelerated debt service payments, about $25 million extra each year over the next five years.