Harris County is bailing out a public sports agency that does not have the cash to cover soaring payments on the debt for the region’s stadiums.
Commissioners Court approved on Tuesday the transfer of $2 million in county money to the Harris County Sports & Convention Corporation, the county-created entity that runs Reliant Park. Along with a transfer approved in the spring, it means the county is covering $4 million in sports stadium debt payments this year.
Stadium boosters promised that no property tax money would be spent to build the professional football, baseball and basketball venues. County Judge Ed Emmett and Edwin Harrison, the county’s financial services director (interviewed before his indictment on non-job-related charges this week), were quick to say that promise has been kept. The county is transferring hotel room tax revenue to the Sports & Convention Corporation.
Neither Emmett nor Harrison could categorically deny the possibility that lost hotel tax revenue would be backfilled from other sources, including property taxes.
“Commissioners court could decide to do that,” Emmett said, but he added it is far more likely that the loss will be covered by spending cuts.
“It might be $2 million that’s not available for us to spend on tourism development,” he said.
The hotel tax revenue is earmarked for tourism promotion and arts.
The potential consequences of transferring $4 million from county coffers became evident at the same Commissioners Court meeting at which it was approved.
Dick Raycraft, the county’s budget officer, put the brakes on Commissioner Steve Radack’s proposal to give $75,000 in hotel tax money to arts organizations. Radack spontaneously offered the money after arts administrators on Tuesday made the latest in a months-long string of pleas for the restoration of a funding cut earlier this year.
“We’ll have to check to see how much money we do have,” Raycraft told Radack. He acknowledged the money was budgeted and could be used at Radack’s discretion, but said, “Whether or not the cash is there, that’s another question.”
Asked whether transferring county money to stadium debt is impacting county services, Emmett said, “Not yet.”
Former Tax Assessor-Collector Paul Bettencourt, a longtime critic of public funding for stadiums, said that, technically, the county is keeping to its pledge not to use property-tax money on stadiums, but, “The fact of the matter is that it’s taxpayer money nonetheless.”
The Harris County-Houston Sports Authority carries about $1 billion in debt on the Toyota Center, Minute Maid Park and Reliant Stadium.
Its schedule to pay off bonds on Reliant Park changed about a year ago after MBIA, a firm that insured those bonds, was downgraded by analysts. Investors fled from $117 million in variable-rate bonds, forcing the bank JPMorgan Chase to buy them up, under a contractual obligation with the Sports Authority. JPMorgan then converted the debt into a loan and, per the contract, required payment in five years instead of 23.
‘Nowhere else to go’
That caused the Sports Authority’s debt payments to balloon. The Sports & Convention Corporation’s agreement with the Authority for the use of Reliant Park includes a clause in which the Corporation pledges to cover $4 million in annual debt payments if the Authority’s revenue from hotel and car- rental taxes and parking fees falls short.
The Sports & Convention Corporation never had to deliver on its nine-year-old pledge until this year. The money comes out of the budget it uses to pay its maintenance and operations bills, prompting the Corporation to ask the county for the money.
“The county, basically, backstops our operations by covering any of our operational deficits or losses that we have,” said Willie Loston, executive director of the Corporation.
Loston said the problem is not a debt crisis so much as a cash-flow problem. While it is difficult to meet the steeper debt payments, he explained, when the accelerated debt payments end in four years, the Authority might be able to start reimbursing the county.
“In the scheme of things, it (the shortfall) is short-term, even though it’s pretty severe,” he said.
Bettencourt said the result is typical of agencies created by governments to finance sports facilities.
“These (sports) government corporations simply have to phone home for cash when they’re short,” he said. “They’ve simply got nowhere else to go.”