Friday, January 25, 2013
How a $91 million loan on the Marlins ballpark will cost Miami-Dade $1.2 billion
(www.miamiherald.com)
posted on January 25, 2013 at 05:02 PM by RoyalsRetro (AG#1F) to boondoggle, marlins, stadiums, taxpayers
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88 comment(s)
The good thing is, at least they got that home run display to show for it.
Miami-Dade will use hotel-tax revenue to pay off the bonds. But payments don’t kick in until 2026. Once they do, they get very costly very quickly. The first payment, for example, totals $260,000. The fifth jumps to almost $8 million and the 10th tops $20 million. Payment No. 18 brings the big hit: $118 million comes due in 2042 alone.
The high interest comes from the penalty Miami-Dade must pay in exchange for a repayment plan that lets the county delay by 15 years making it first debt-service payment to the Wall Street lenders who bought the bonds.
“It’s an expensive way to borrow money,’’ said Frank Hinton, head of the county’s bond program. “You’ve got $1.2 billion to pay back. It is a lot of money.”
Because Miami-Dade couldn’t afford a straight-line paydown of the loan — like a home mortgage — the finance team had to be more creative in borrowing the money on Wall Street. Unlike most bonds, these can’t be repaid back early either.
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1 2 >$91M loan; total paid is $1.18B over 40 years. Excel says ~6.62%?
The cumulative effects of QE1 + QE2 + QE3 + QE"n" are already destroying the dollar,
and will continue to do so. The price of gold has doubled since this deal was signed.
Too bad for the lenders it wasn't denominated in ounces of gold!
We'll be very lucky if we don't suffer total societal collapse long before Miami
has to worry about making $114M/yr payments with what will most assuredly be US dollars
at a tenth, or a hundredth (or god forbid, a thousandth or millionth) of their current value.
I find your idea intriguing and would very much like to subscribe to your newsletter :-)
I wouldn't lend Dade County money for 40 years, with no coupon for 15 years, at 6.6%. Hell, I wouldn't lend the Federal Gov't money at 6.6% for 40 years, with no coupon for 15 years.
We'll be very lucky if we don't suffer total societal collapse long before Miami
has to worry about making $114M/yr payments with what will most assuredly be US dollars
at a tenth, or a hundredth (or god forbid, a thousandth or millionth) of their current value.
This is way over the top, but it is fairly likely that inflation over the next 20 years averages more like 5-7% rather than 2-3%, and that yield starts looking really crappy.
Reichsmarks in wheelbarrows!! Billion dollar loaves of bread!!
What, you never heard of debit cards?
Not sure if this was done on purpose, but made me chuckle...
so long
Heck, if it's 4% it's still not very good.
I'm always amused by people who have trouble with nominal vs. real dollars. Even more with the gold bugs.
Debt alone without reference to other factors is a poor predictor of hyperinflation.
n=4? I don't see any ellipses.
So you think the current Federal Reserve will be hit by an asteroid, and the replacements will be all new Keynesianists who aggressively pursue full employment? Inflation hasn't been as high as 3% in 20 years. There is literally no chance that 5-7% inflation is tolerated.
I like how the price of gold is somehow the best measure of inflation.
Gold isn't the best measure of inflation, but food has gone up in price. If not for geological luck in finding lots of gas and oil here, their prices would be going up as well. $3.80 pump gas is pretty high, too.
Unless it's in asset prices, where for 20+ years it's been not only tolerated but encouraged. See, e.g., the various bubbles in stock and housing prices.
If Fallout has taught me anything - and it has - it's that the currency of the future is Coca Cola caps.
Inflation is the only way an unsustainable amount of debt can be converted into a managable burden.
No, No, No ... it's because it has intrinsic value!
Does the whole city send their bill to New York, or just the baseball team?
I grew up in Miami, it's an awful place in every respect that doesn't involve nightclubs.
I wouldn't call increased investment in petroleum engineering as a result of higher energy prices "luck".
In that environment, no one will have any stomach for contractionary policy, and inflation will have to be tolerated to prevent falling nominal wages among the bottom 70% of the income dist.
Why? We're* austere!
*) Strictly speaking not me as I live outside the Eurozone, but as my money still goes into the bailout of Greece et al, I feel entitled to speak for it.
Every currency in the world is trying to devalue versus every other currency.
Let me be clear that I don't necessarily disagree that tolerating higher inflation would be better policy (not as high as 7%, but certainly as high as 4%). However, there is absolutely zero chance that our current policy setters would tolerate inflation above 3%. It's taken four years of hysteresis in the unemployment rate for the Fed to state that they are comfortable with 2.5%.
If Bernanke wanted to, we would have had 4% inflation in 2010-2012. That was the time that conditions MOST called for inflation, and it was resisted. It's taken five years for seven members of the Fed Board to be comfortable with 2.5% inflation. I have no idea beyond an asteroid what it would take for them to tolerate 5%.
You're speaking like the Fed is acting with restraint. It's not. It's printing money as fast as any died-in-the-wool Keynesian would dare. The only reason we don't have more inflation is a broken banking system (especially over-concentration of deposits in 5 financially weak, over-regulated, monster-banks), and lack of demand because no one has any confidence in this economy.
Let me be clear that I don't necessarily disagree that tolerating higher inflation would be better policy (not as high as 7%, but certainly as high as 4%). However, there is absolutely zero chance that our current policy setters would tolerate inflation above 3%. It's taken four years of hysteresis in the unemployment rate for the Fed to state that they are comfortable with 2.5%.
If Bernanke wanted to, we would have had 4% inflation in 2010-2012. That was the time that conditions MOST called for inflation, and it was resisted. It's taken five years for seven members of the Fed Board to be comfortable with 2.5% inflation. I have no idea beyond an asteroid what it would take for them to tolerate 5%.
They're printing money like drunken sailors. I don't see what more he could have done to get to 4% inflation.
Frankly, I think the Fed would love higher inflation. They're just talking restrained targets to keep Treasury debt cheap, and keep things from getting out of control.
Bernanke specifically stated during the crisis that there was a 2% inflation target. Markets knew that if inflation significantly outpaced it, the Fed would cease printing money. The Fed has tremendous credibility on inflation built over the last 40 years.
And Ben Bernanke certainly never thought he was out of ammunition.
From his speech: "Deflation: Making Sure ‘It’ Doesn’t Happen Here":
They don't call him "Helicopter" Ben Bernanke for nothing.
And Ben Bernanke certainly never thought he was out of ammunition.
And I think the markets are wrong. I don't think the Fed will induce a recession to keep inflation from going to 4%.
I think a 30-year Tsy at 3.13 is one of the great sucker bets of all time. It's only because the US is so broke that they keep issuing short-maturity debt. If they were smart, the Tsy would be selling 30-year bonds like hotcakes. Hell, I'd introduce 40-year and 50-year bonds and see how dumb yield hungry investors really are.
Basically, the US can't fix it's fiscal issues (democratically) without major inflation over the next 30 years.
They don't call him "Helicopter" Ben Bernanke for nothing.
He clearly wants the market to believe that. It doesn't mean it's true. Japan has been incapable of generating inflation for 20 years.
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