Apparently the Sports Authority is looking for ways to save money:
The Harris County-Houston Sports Authority may refinance as much as half of its more than $1 billion in bond debt if doing so would save money.
The authority has asked investment banks to submit refinancing proposals, and could get a deal done by late this year or early 2006, Sports Authority Chief Executive Oliver Luck said this week.
And why does the Sports Authority need to save money, you ask? Because hotel occupancy taxes and car rental taxes — which the Authority uses to pay off the bonds — haven’t been keeping pace with the Sports Authority’s needs:
Money for repaying bonds comes from hotel occupancy taxes and car rental taxes. When the bonds were floated, repayments were structured based on the assumption that these taxes would increase 3 percent annually.
The hotel occupancy tax revenue for the Sports Authority declined 5.42 percent in 2002 and 4.58 percent in 2003, said Harris County Tax Assessor/Collector Paul Bettencourt.
In 2004, the revenue was 11.27 percent higher than the previous year, Bettencourt said. Through the first two quarters of this year, revenues are 4.55 percent higher than last year, Millican said.
Despite those increases, the authority’s revenue continues to fall short of projections, Millican said.
Revenue for September is expected to be down because hotel occupancy taxes were waived for at least some evacuees from Hurricanes Katrina and Rita.
And then there was that little problem last year:
Last year, the cost of the three sports venues went up when the authority floated another $37.2 million in bonds.
The money was needed because hotel and car rental taxes weren’t meeting projections. An investment rating agency, Moody’s, was threatening to reduce the authority’s holdings to junk bond status unless it beefed up its cash reserve fund.
(You can read more about last year’s close call with junk-bond status here.)
We know how the Sports Authority can save $1.5 million per year:
The sports authority has about a $3 million operating budget, about half of which is dedicated to contractual obligations and professional fees that either the city or county would have to pay even if the authority were dissolved. However, the bonds are amortized over 30 years, so saving $1.5 million a year over that period is not chump change.
And as we learned the other day, $800,000 + per year could be saved immediately in staff (six people) salaries alone.
It’s time to shut that bureaucracy down.