Dear Mr. Berko: Several years ago, I bought $25,000 of the Arizona Sports and Tourism Authority bonds maturing in 2036. These bonds financed University of Phoenix Stadium, where the Arizona Cardinals play their home football games. Now the Arizona court system claims that the bonds are not entitled to receive taxes from rental car revenues. How will this affect my bonds? Where does this stand now? Should I sell? — HM, Moline, Ill.
Dear HM: The 63,408-seat University of Phoenix Stadium opened in 2006 and only cost $485 million. And there must have been a whole lot of pork delivered with that amount. The result of this legislative influence is that quite a few local politicians may have extra-cushy retirements soon.
According to my daughter, Hilary, an attorney (one of the good ones) in Phoenix, the Superior Court of Arizona in Maricopa County issued an "advisement ruling" in June 2014. The ruling holds that car rental tax revenues relate to the operation of automobiles on highways and streets; therefore, those taxes can only be used for public highways or streets as set forth in the state constitution. Makes sense to me! The court's final judgment should be announced soon. According to Hilary, whether or not the advisement ruling holds, appeals will be filed on numerous issues, so the Arizona Sports and Tourism Authority will be paying high-priced lawyers in bespoke suits millions of dollars all the way up to the Arizona Supreme Court. It could be years before a final determination is made.
Fitch Ratings downgraded the bonds for the Orlando Magic's Amway Center to junk status in 2010 because tourist revenues were insufficient, and that voided the indenture of the bonds. The bonds crashed but were rescued much later. Fitch will tell you that if car rental tax revenues are "estopped" by the court, your bonds will also be given a junk status rating and may temporarily fall in price. It could be sooner than later because the management authority overseeing the stadium was $48 million short in meeting its voter-approved obligations. That's concerning!
Phoenix, Atlanta, Houston, Chicago, St. Petersburg, Miami and other cities have issued stadium bonds that depend upon tourist taxes to pay the interest and debt obligations. And those bonds tend to be lower-rated because of their reliance on seesawing entertainment and tourist taxes for revenues. They also are very sensitive to the health of their local economies and can be volatile if the tourist trade begins to wane. Without tourists, many of the amenities that cities like to brag about (arts, public parks, convention and entertainment centers, museums, etc.) would not be affordable. So those amenities come with a price.
Municipalities that must have tourist dollars to pay off their bonds are courting tourists, aggressively and without shame. But in some locales, tourists are a niggling nuisance to year-round residents. Some people are offended at their intrusions on their normal daily amenities. St. Petersburg, Florida, jingoistically courts tourists as politicians seek campaign money. And those tourists descend on the city's infrastructure like locust plagues, smothering local golf courses, restaurants, shopping malls, movie theaters, beaches, medical practitioners' offices and marinas. Then they clog the roads, subsume parking spaces and are responsible for the seasonal spike in traffic accidents. And this angers UPS, FedEx and taxi drivers, one of whom told me of various intersections on his route where making a left turn during the tourist season can take as long as six minutes. Another of those fellows told me that on his day off, he fantasizes about walking St. Petersburg's main streets while holding a big placard that says, "Tourists, stay home." I suggested that he could be fired and arrested for disturbing the city's peace.
Phoenix is in Maricopa County, and the county's treasurer, Charles "Hos" Hoskins, says there are millions in the county's many slush funds, emergency funds and special funds to keep the bond interest current. Certainly, Phoenix would not want the negative publicity of a defaulting bond, and Hos would be quick as a bunny with money to avoid any hint of default. Those bonds are good to hold.
Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at [email protected] To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.
Photo credit: Frederick Lang Jr.