MBIA, the company that insures the Harris County-Houston Sports Authority’s bonds, has filed a lawsuit to force the Sports Authority to collect more money to pay its obligations.
If MBIA must cover payment shortfalls and cannot reimburse itself from the authority’s reserves, the amount owed to the insurer will accumulate with interest. In such a scenario, MBIA officials have said, hotel and car rental taxes would be tied up for years paying off MBIA when those dollars could have been put toward local projects had the bonds been paid off on time.
Authority Chairman Kenny Friedman said MBIA’s urgency is driven by a desire to skirt its obligation to pay the bonds, an accusation the insurer denies. The authority bought bond insurance for a reason, Friedman said, and added that neither the stadium homes of the Texans, Rockets and Astros – which the authority was created to finance – nor the land under them are at risk.
“It’s a frivolous lawsuit. I think it’s designed to get them some perceived PR advantage,” the agency’s chairman said. “We’re the third-largest county in the country and we’re not going to be bullied by a second-rate insurance company. What MBIA is looking for is a bailout, and it’s just not something we’re going to do.”
It was MBIA’s 2009 downgrade that strained the authority’s reserves in the first place, Friedman said.
After MBIA’s downgrade, $125 million in variable-rate bonds the authority sold to help build Reliant Stadium were converted into a loan due in 2014 rather than the original 2030. The authority since has struggled to make much larger payments under this “term-out,” and MBIA has had to cover shortfalls seven times, including last November, reimbursing itself each time from the authority’s reserves. Three term-out payments remain.
Again with the “Kenny Friedman” stuff. Did I miss a memo or something? Is there a new style guide out that says the name “J. Kent Friedman” is, like, so 2012? First this and then David Ward – where will it end?
Ahem. See here for the background. I don’t know who’s right and who’s wrong, but I do know that if MBIA prevails, the price of tickets and parking at Reliant will go up, because the current tax levied on tickets and parking, which is where the revenue to pay off these obligations comes from, are lower than the law allows them to be. You Texans and Rodeo season ticket holders might want to keep an eye on this.