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Mayor on arena: NH to blame
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By SCOTT BROOKS
New Hampshire Union Leader Staff
Tuesday, Nov. 10, 2009
MANCHESTER – The city likely won't have the money to cover the bill for the Verizon Wireless Arena in years to come because the state is withholding some much-needed dollars, financial analysts say.
The analysts at Moody's Investors Service have responded to the apparent shakiness of the arena's financing by downgrading the bonds that made it possible to build the 11,000-seat arena. The bonds are now considered "non-investment grade" -- also known as junk.
Mayor Frank Guinta has described the downgrade as a cause for concern. A failure to pay off the debt on the stadium would, at some point, lead to a default, an event that could have unwanted consequences for both the city and, according to Guinta, the state.
Guinta warned Gov. John Lynch about some of those consequences in a letter last Friday, suggesting the situation could hurt the state's credit rating. In addition, he wrote, bondholders could sue the state for not dealing with them "in good faith" this spring when it froze Manchester's share of rooms-and-meals tax dollars, which the city uses to pay for the arena.
Mike Brunelle, executive director of the state Democratic Party, said Guinta, a Republican candidate for Congress, is "just trying to stir the pot to try and score some cheap political points."
"He can't blame the Legislature for this," Brunelle said. "During an economic recession, he knew rooms-and-meals was going to be level-funded, and he failed to plan for it."
The city itself is not on the hook for the projected shortfalls on the arena's bond payments, nor is the Manchester Housing and Redevelopment Authority, which issued the bonds in 2000.
"The city is well-protected," said Ken Edwards, assistant executive director of the MHRA. "The original deal assured that the housing authority and the city would not be liable."
However, a default would create some uncertainty for the arena. City officials have warned before that a default could put the arena at the mercy of the bondholders' trustee, Bank of New York Mellon, which could opt to sell the building or put it under new management.
Joe Ailinger, a spokesman for Bank of New York Mellon, said he could not comment on the situation yesterday. "It would be a matter of client confidentiality," he said.
Moody's announced last week it downgraded the arena bonds from Baa3, a rating that already suggested some riskiness, to a less healthy Ba2. The agency said it was concerned the state's decision to cap the amount of rooms-and-meals tax money it shared with cities and towns would lead to a $66,000 shortfall on the arena bonds next July, to be followed by additional shortfalls over the life of the 30-year bonds.
There are still $43.1 million in bonds outstanding, out of an initial $50 million.
The city's decision to build the arena rested on expectations that the state would continue sending rooms-and-meals tax money to Manchester. Traditionally, the city has used its share of the rooms-and-meals money to pay off the bonds and kept about $455,000 for itself.
City officials sounded the alarm last spring when Lynch called on the Legislature to withhold all of the rooms-and-meals tax money. Ultimately, the Legislature raised the tax from 8 percent to 9 percent and froze each community's share at last year's levels.
Manchester's share is slightly more than $4.8 million. Moody's warns that won't be enough to cover the $4.4 million in bond payments due this fiscal year, assuming the city holds onto $455,000, as it always has.
Colin Manning, a spokesman for the governor, said the freeze had no impact on Manchester this year because rooms-and-meals tax revenues were down.
What that means, he said, is that under state law, "There wouldn't have been an increase in meals-and-rooms distribution this year, regardless."
Manning suggested the city could cover the shortfall if it gave up some of the $455,000 it was planning to retain. Guinta was unavailable for comment.
The bondholders are protected by an insurance policy. Officials have previously speculated that the policy might be worthless because the insurer, ACA Financial Guaranty Corp., saw its own ratings slip after getting caught up in the sub-prime mortgage crisis.
The company's rating has since been upgraded, and Edwards said he believes the policy is good.
Clarification: The story reported that Manchester officials have previously warned the Verizon Wireless Arena could be sold or put under new management if there is a default on the bonds that paid for its construction. The city’s bond counsel, however, has since said there is no such risk. A Nov. 10 letter from the firm, Hawkins, Delafield & Wood, states that neither the bondholders nor the insurer would receive a mortgage, security interest or title to the arena in the event of a default.
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YOUR COMMENTS
What about the managing company - SMG - how much are they making as a profit - and how much are they giving to the city? I understand they need to make 1 million dollars a year to stay the managing company, SMG can make that in half a year with the shows they book - do they pay anything?
- Joyce Cardoza, Mont Vernon< NH
Pat, going to a ballgame is entertainment, a hobby. Its not the government's business to entertain anyone, and its especially not the government's proper function to steal money from some people so that other people are entertained.
- Jon, Manchester
typical democrat hogwash...underfund rooms and meals to Manchester...cause default of civic center bonds...blame republican mayor for default even though he wasn't mayor (or even an alderman) when the deal was conceived 10 years ago.
John Lynch is such an effective governor. Massive deficit, illegal seizure of money to fund spending, hundreds of layoffs, downshift state deficit on cities and towns, ruin civic center project...the man is brilliant!
Dump Lynch!
- Seth, Manchester, NH
Jack Alex, thanks for writing.
How much do you think we would have to increase the tax rate by to pay off the bonds and own Verizon Wireless Arena in 1 year? How about 2 years? How about 3 years? How about 5 years? How about 10 years? Has any person tried to figure out the answers to the previous questions?
"There are still $43.1 million in bonds outstanding, out of an initial $50 million." Manchester is supposed to pay $4.4 million in bond payments this fiscal year. How much of the $4.4 million is principal? How much of the $4.4 million is interest?
The sooner we own Verizon Wireless Arena the sooner we may use rooms and meals tax revenues to reduce property taxes and improve city services.
If we own Verizon Wireless Arena, I think Manchester would be able to have the ticket surcharge and not have to ask Verizon Wireless Arena to think about doing it. I believe Manchester signed a contract that said it could not place a ticket surcharge on tickets. If Manchester pays off all the bonds, I believe it then could do what it wants to recoup its investment.
- Ken Stremsky, Manchester, NH
I'm one of the key voices that got the civic center project through and also the baseball stadium. Both projects were of great economic interests to our city. If it wasn't for my arm twisting we wouldn't have the Monarchs and all the shows we had nor the Fisher Cats.
I have a plan if anyone is willing to listen that would put us in control of our destiny in one full swoop. Since roughly every 12 cents on the tax rate equals a million bucks we could fund the final payment next year and own the verizon outright thereby being in control of our destiny.
Sounds like a great plan. Lets do it!
- Jack Alex, Manchester
Want to make suer I am clear....the city projected the meals tax to go up in a recession and the state is saying that the reality is that the meals tax has gone down.....and this is the fault of the democrats? Sounds like its a failure by teh city to properly project revenue....
- Scott, Manchester
Before people got to vote on Verizon Wireless Arena, I believe they were promised there was going to be a ticket surcharge placed on tickets.
I hope Verizon Wireless Arena will agree to have a ticket surcharge of a $1 or more on tickets and donate 50 percent of the money to the police department and 50 percent of the money to the schools. I hope MerchantsAuto.com Stadium will do similar.
People should have been allowed to vote on MerchantsAuto.com Stadium before it was built.
- Ken Stremsky, Manchester, NH
This is a typical Frank Guinta shenanigan blame the problem on someone else this time the State. If I recall correctly, when Guinta was an Alderman he voted for the tax wasting Verizon arena, what a hypocrite. and he wants to go to Congress and do the same there. The only difference with Carol Shea-Porter is that he is a nominal Republican and male.
Voting for this tax waster is a wasted one.
- Richard L. Fortin, Manchester
Just another example of Guinta trying to shift blame and duck responsibilty. If Guinta would roll up his sleeves and try to solve problems, rather than playing politics, Manchester could realize its full potential.
At least with Guinta gone, we will have a fulltime, working mayor.
- Jim, Manchester
Heh, Tom from Manchester: You've never been to the Verizon Arena or Fishercat Stadium? You need to get out more buddy. Do you live under a rock? What a boring life you lead!!
- Tom, Auburn
Is anything your fault, Mayor Guinta?
No no... Of course not.
- Richard L. Fortin, Manchester
Before voters got to vote on Verizon Wireless Arena, I believe they were promised that there was going to be a ticket surcharge placed on tickets to help pay for it.
Page 5 of January 5-11, 2009 Manchester Express has dealing with Verizon Wireless Arena the following:
"This amount will increase to about $5.2 million per year during the next 20 years, at which point the loan will be paid off, Sanders said." Bill Sanders is the city finance officer.
I hope Verizon Wireless Arena will agree to have a $1 or more ticket surcharge on tickets sold at Verizon Wireless Arena and donate the money to Manchester. I hope Verizon Wireless Arena will also agree to have a 2 percent tax on tickets sales, merchandise sales, and other sales and donate the money to Manchester. I hope MerchantsAuto.com Stadium will do similar. I hope the people who manage Verizon Wireless Arena and MerchantsAuto.com Stadium will agree to help reduce the burden of them on Manchester's taxpayers.
People should have been allowed to vote on MerchantsAuto.com Stadium before it was built.
Verizon Wireless Arena might want to try to have more UNH hockey games and other college games at it.
MerchantsAuto.com Stadium might want to try to have more concerts and college games. If MerchantsAuto.com Stadium is able to have college football games and college soccer games, it might want to. The games might have to be exhibition games instead of regular season games if the field is not regulation size.
- Ken Stremsky, Manchester, NH
I just went to ACA's website, the insurance company that insured the bonds. I read the auditor report which did not sound optimistic about the bond insurance company. It stated they are no longer writing bond insurance and have made payments in the hundreds of millions. But the language is quite opaque and difficult to understand. If the City defaults and if the Housing Authority defaults and if the insurance company is essentially bankrupt, of course the bond ratings of all entitites will suffer. And maybe that's a good thing....then we simply pay as we go and don't borrow what we cannot afford.
- Jeff Kassel, Manchester, NH
Why has Bob Baines been exempt from blame in all the criticism? He was at the helm of this disaster! Oh wait, he isn't running against Carol Shea-Guevarra in the 1CD next year.
- Joe, Manchester
What most people never understood is the civic center was costing taxpayers 4 to 5 million every year. The city shouldn't be in the entertainment business. You don't see Concord building statdiums or Portsmouth. A lot of Aldermen voted for this huge debt including many on the board now. Guinta supported both the civic center and the baseball statium. As a taxpayer I opposed it and warned people this day was coming. Every taxpayer pays for mediocre hockey and Monster Trucks whether you want it or not.
- Jeff Kassel, Manchester
Yet another fine example of what happens when someone’s political aspirations get in the way of them actually doing their job and keeping their commitment to the constituents. Go ahead and blame the State Guinta, but you’re equally to blame for the shortfall. All this political stone throwing proves is that you lack the polish and substance to get my vote for your future political endeavors.
- Hugh, Manchester
Why is government run heath care insane ? Read this aticle and see how they point fingers at each other over a $50 million failure. Lets give these people trillions and hope for the best -god help us. The idea is novel but reality is the feds will destroy everything health related in two years flat.
- brian, weare
The ugly secret Guinta won't tell you is that city employees are getting raises in January and again in July...great savings Guinta. Ooops, I guess he forgot to tell the taxpayers. I believe the total is in the neighbohood of 5-7% between the raises in January and July. Not a bad increase in a down economy.
- Mike, Manchester
The Arena (and the Ballpark) add to the quality of life in New Hampshire. The discussion of out-of-state license plates is an important one (for the sake of meals tax revenue) but one should remember that each New Hampshire license plate on cars parked at these venues means that we didn't have to drive into Boston to enjoy sports, concerts, and other entertainment. Downtown Manchester also has many new restaurants, thanks largely to the presence of these destinations.
- Pat, Nashua
Sounds to me like they're blaming each other for this?? I'm not a politician by any means and I wouldn't want to be with what's going on in the city as well as the shaky state budget. I don't know what the solution is but I wish there was one available.
- Maureen, Goffstown
Let them sell the darn place...what do we care. Lack of planning on their part does not constitute emergency on our part.
- tracy, manchester
The real problem is that the Arena does not draw in enough people. The Monarchs can't fill the place up. The food service is another problem. They are a total rip off. The food and drink prices are not very family friendly. Guinta is just letting loose hot air.
- Ted, Manchester
The arena may have created a few local jobs. And it may bring in a few bucks from out of state patrons. But what good is that if the value created is less than the cost?
- Brian, Farmington
This is a great lesson in finance; but is anyone willing to learn?
The government is just that; an entity to govern the people. The government does not create wealth, it "gets" money by taking it from people and the businesses people own.
The Verizon Arena is a great example of "providerment", not government. The providerment spent the people's money and assumed they could continue to take money from the people to pay for this nice, but unneccesary expense. When the people experienced a hardship, as in economic and employment hardships, the providerment's model failed. They have already squeezed all the money they can out of the people. Now, with no where to turn for more money, the finger pointing begins.
If the city and state governments entered a contract, then they must be held accountable for their end of that contract. If it means New York Mellon Bank takes over the arena or sells it, let that be a good lesson. Spend money wisely and anticipate how to survive economic hardships.
One solution is for the city to sell the Arena. Pay back the bondholders and let a private company run the Arena. It will still be here for all to enjoy, but not at taxpayer expense.
- Michael Layon, Derry
@MJ from Hooksett:
Amen to everything you've said! Nothing else need be added!
Brent in Manch.
- Brent, manchester, Nh
Wasn't it his job to advertise the space? Why didn't he try to use it for more trade shows, job fairs, larger events to benefit the community? It's always someone else's fault.
- Maria, Manchester, NH
Guinta is blaming Lynch for being fiscally conservative when city workers got raises? 52 days until Manchester is rid of him.
- Alyssa, Manchester
This is what happens when you have a bunch of politicians playing God with our tax money; The building of stadiums on the assumption of increased property taxes on yet to be built condos, toll money used to support everything but roads, Impact fees used to build dog parks. It is very easy to says it's not going to cost the taxpayer any taxpayers dollars. IT IS OUR MONEY! I'm sure the rooms and meals money (taxpayers money) would be better spent helping us struggling property tax owners. This funny accounting game they play with our money is no different then the Wallstreet fiasco or Madoff's ponzi scheme!
- MJ, Hooksett
Another Arena that loses money. When did one of them make money? So now I get to subsidize an arena I've never been to, don't care about, and have no interest in. Just like the baseball park I've also never visited. Thank god Manchester will have a mayor soon who has "owned" his own business. Like or dislike Ted Gatsas, he has met a payroll, run a business.
- tommy, manchester,nh
Remember this the next time a big-spending bond comes up for vote!
1) Borrowed money isn't "free" - you have to pay it back some day.
2) Politicians get re-elected for spending money, not for sound financial analysis, so be wary of any numbers they give you!
- Alec Muller, Manchester, NH
The Arena has been a huge success for Manchester and the region as a whole. Look at the jobs that come with it and the economic spinoffs as well. The area around it has been redeveloped which had also increased tax revenues to the city. The various restaurants in the area have added to meals and rooms revenues.
Go to any of the concerts and you see plenty of MA and ME license plates; undoubtedly many of those people are contributing to the economy as well by eating here beforehand, paying for parking, etc.
Scott, you obviously don't go there and that is your choice. Perhaps you ought to stop reading your "talking points" and get a grip. Perhaps you have a solution for the state to balance its budget other than trying to steal insurance money that is not theirs, and doing the same to rooms and meals taxes. What's next; taking all of the local property tax revenues too?
- Bill, Bedford NH
The plan was fiscally sound at the outset. This is just another example of how Governor Lynch expanded government services without the means to pay for them, and sticks the communities with the bill. Brunelle is only a couple of steps out of childhood. And is a political opportunist that puppet master Buckley wants him to be. You cannot take him seriously. This project had widespread support and backing from people of all political persuasions. I personally think Gov. Lynch does not give one hoot about Manchester or its key role in this state.
- Rick Olson, Manchester
How could such a success not being paying for itself?
The arena was built on deception. Too bad the proponents could not have figured out how to finance it on deception. Sadly, it has been largely paid for by tax dollars.
- Peter Sorrentino, Manchester
If blame needs to be given, we can blame the Democrat Majority and Manchester's Democrat Delegation that agreed to helping Manchester receive it's share of the meals and rooms tax the state collects and then decided in 2009-2010 session to say; "Sorry, you can't have that". We also can make a note that meals and rooms tax revenue was down due to a recession, how is raising such a tax going to increase revenue during such difficult economic times? Blame can also be placed at the feet of the democrat majority in Concord for passing other taxes and fees onto cities and towns thus driving away even more revenue, all the while giving state money to a private bus company to do business in this state. It's time to elect new representatives and senators in Concord to see that we fix all the issues created since the Democrat majority took over the state's capital in 2006. Otherwise we will only have ourselves to blame if we just sit home and not cast a vote when the State Elections come around in 2010.
- Robert M Tarr, Manchester
Depending on the State paying something annually with intent to put it towards the Arena was not very sound policy unless what was written was in law or contract.The Arena is a nice venue for indoor sports and concerts (okay, concert sound management can make a hugh difference, some groups can't grasp that and the sound often sucks because the group thinks Loud or Louder is the only way to go. ) It is unfortunate that there aren't more events there. I talk to a lot of folks who prefer coming here rather than going to the over price parking and difficult to access venues in Boston.
- Jeff, Goffstown
They don't seem to be that worried about the state not funding the education bill! Hmmm....maybe it's because in past years that money isn't used for education anyway.
- Ed, Manchester
Why would you even bother to quote a political party spokesperson/executive for this? Maybe that's why the electorate is getting sick of politicians: every issue now needs to become a partisan issue and we have to go to the parties for spin. "cheap political points..." - what are you doing then, Mr. Brunelle? In the end, I don't care what party you are a member of, just fix the problem with paying off the bonds so that the state's credit rating doesn't suffer!
- Peter, Jaffrey
The ones who should be paying for this fiasco are the morons who rammed it through in the first place: the Board of Mayor and Aldermen. With those idiots at the helm, I guess we're lucky we didn't wind up with a monorail.
- Scott, Manchester
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