I still have no idea whether this is something we need to worry about or not.
The firm that insures the Harris County-Houston Sports Authority’s $1 billion in bonds – sold to finance the homes of the Texans, Rockets and Astros – is calling on the cash-strapped authority to bolster its depleted reserves and warning of potential consequences if it does not.
MBIA Insurance Corp. Assistant Vice President Kenneth Epstein said this week the authority’s reserves are half what they should be and that the bulk of the agency’s debt, issued in 2001, has fallen short of revenue projections every year but one since then.
“We’ve been a willing participant over the last four years in trying to come up with a solution to the authority’s problems. The authority has not come back with any solution to what’s been happening,” Epstein said. “We want the authority to recognize that a problem exists, to bring people to the table, and to try to come up with a solution.”
The depleted reserve should be $55 million but is $25.4 million, Epstein said, putting the authority “in a very precarious position” and limiting its ability to handle dips in hotel and car rental taxes, its main revenues.
Sports Authority Chairman Kenny Friedman said the group is looking for a deal that could let it replenish its reserves and lower its payments in the long term, but said his board does not share MBIA’s urgency. The deal is structured to protect the city’s and county’s credit ratings and the stadiums, he noted.
“They are focused on what they should be focused on, which is protecting MBIA’s insurance obligations, and we’re focused on what we should be focused on, which is what’s right for this community and for these venues,” Friedman said. “We’re not going to do a deal just because it’s good for MBIA. It’s going to have to be good for the community. If we find one of those, we’ll do it.”
Friedman called MBIA’s concerns “strange” given that the insurer’s 2009 downgrade amid the financial crisis contributed to the strain on the reserves.
Important question: Are “Kenny Friedman” and J. Kent Friedman the same person? Because if they are, it’s the first time I’ve ever heard the name “Kenny Friedman”.
Be that as it may, see here, here, and here for some background. Not being a finance guy, I struggle to understand this stuff every time it comes up. County Judge Ed Emmett is quoted in the story telling MBIA to calm down, which reassures me somewhat but doesn’t really clarify things. I don’t know what else to add to this, so just consider this latest chapter in the saga noted for the record.