Here's what I said at Council this morning, 2/3/2010, when voting on the Development Agreement for Major League Soccer at PGE Park. My staff and I are confident of our facts. I am posting the information with comments open, so anyone who disputes the data can offer corrections.
First, I acknowledge the good work our negotiating team led by Ken Rust has done in getting the best possible deal for our City under the circumstances. I also commend Tim Crail and Tom Bizeau on my staff for their expert investigation and analysis of the twists and turns of this saga.
Many of the concerns that I have raised over the past year have been addressed by the terms that are included in this agreement. I appreciate the personal guarantee that Merritt and Henry Paulson have made to cover any shortfall for the first seven years, and to ensure that once started, the project will be seen through to completion. I like the stipulation similar to the one negotiated with the Trailblazers, requiring the team to stay in Portland or pay as if they were.
I appreciate that our finance experts have been able to reconfigure the debt structure in a way that reduces the total debt payment substantially. By using a line of credit and delaying the issuance of bonds until construction is completed, I am told that the City will likely not need to issue Zero Coupon Bonds. The result is that instead of paying off the bonds in 2034 at a total cost of $44.5 million, the bonds will be paid off in 2028 for a total cost of $24 million. If taxpayers have to pay for something that does not provide many family wage jobs after the construction phase, it is better that they will be paying $24 million instead of $44.5.
Still, that is $24 million that could be used for other purposes. Add to that $4.7 million over the course of the contract, for the taxpayers to subsidize top-up wages for stadium event staff, which the city will continue to pay even if workers are successful in using their one shot with an organizing meeting to form a union. And $600 – 800,000 every eight years to replace the turf. Projected ticket taxes of about $5 million paid by Timbers fans don’t begin to cover the costs. What else could we do with over $29 million?
Today, PGE Park is a multiple-use stadium that serves soccer, baseball, football, and other sporting events. In 2001 the City decided to redevelop PGE Park into a better baseball facility, spending $38.5 million to redevelop the Park and an additional $33 million in debt service on those bonds. Currently, we are scheduled to pay those bonds until 2022 - 12 years after eliminating the ability to use the facility for baseball.
For over 100 years, Portland has had a sports facility that was capable of hosting professional baseball. At the end of the Beavers 2010 season, that will change. That is sad.
I could have supported a solution that would have allowed both sports to coexist in PGE Park through use of movable stands. The inflexibility of MLS and the decision of my colleagues here today will likely cause us to lose baseball in Portland. I love the game of soccer, and I appreciate that Timbers fans are happy to be getting an MLS franchise. Soccer fans must recognize that their joy comes at significant costs to baseball, basketball, and hockey fans. The Beaver fans will likely lose their team, and the Winterhawk and Blazer fans will be subsidizing soccer for many years.
It has been said that this deal protects the taxpayers and that no citywide tax dollars or general funds will be used for this project. That is true at this time, but it is hard to imagine how it can remain so. The project will be tying up the bulk of the spectator fund until 2028. The first six years are particularly precarious, with annual shortfalls ranging from $250,000 to $720,000. No contributions will be made to capital reserves during those years. In fact, it will be necessary to draw down the Spectator Fund balance significantly to cover that shortfall.
It is the lost opportunity for other uses of those funds that is the real cost to taxpayers. We are currently in the midst of a Coliseum repurposing project. The Coliseum needs to be rehabilitated, which will take significant resources. By going forward with the soccer redevelopment, spectator funds will not be available for the Coliseum. Council created the spectator fund and directs what those funds could be used for. Council maintains the ability to redefine allowed uses of the spectator fund and what revenue streams go into the Spectator Fund. It is not like Water or BES rates that are restricted by state law and City Charter. Of course we must pay off the bonds that are backed by the spectator funds. But what then? Then, the Council can choose to spend ticket taxes in any way.
How will we pay for the Coliseum improvements with no spectator funds available? The only realistic answer is to use urban renewal dollars. Now, we are talking about impacts to Portland and Multnomah County taxpayers, since the Oregon Convention Center Urban Renewal Area is an Option 3 district, supported by citywide property taxes. While it may be true to say that there are no direct impacts on citywide taxpayers in redeveloping PGE Park, the indirect cost to taxpayers is substantial. Without further bonding, once the old PGE Park bonds are paid off the ticket taxes could be used for the Coliseum, or any other purpose the Council chose.
The Spectator Fund would be in better shape if PGE Park sat empty for the next 25 years, than if we go forward with incurring additional debt on a project that can NEVER pay for itself. Any use of PGE Park that does not involve additional debt would leave the spectator fund in better shape than moving forward with this project.
I honestly hope that MLS soccer succeeds in Portland. I hope that the day arrives that the revenues generated from PGE Park will pay for the cost of operations and debt service on PGE Park. In the meantime, I hope that every Timbers fan will hug a Blazer fan for paying for their MLS venue.