Providing Greater Lancaster with an Alternative Source for Local News and Commentary  _________________________________________________________
 February 2, 2007                                         Publisher: LLC                                    Volume 1, Number 23


Center Financial Advisor:
Authority might have to go to county "begging" for tax increase

In a stunning admission of the financial risk of the proposed convention center project, chief Authority financial advisor Tom Beckett conceded that the Authority may end up "going up to the county commissioners and begging" for relief, presumably in the form of a county tax increase.

Beckett made the comment when pressed at the Jan. 31 Convention Center Authority meeting by board member Laura Douglas concerning what would occur if the convention center failed to meet its financial projections and the Wachovia Bank bond guarantee was not renewed.

Previously there had been a rare agreement between project critic Robert Edwin Field (President of and Beckett, in which Beckett concurred with and praised Field's analysis of what

would occur if Wachovia's guarantee of the bonds was not renewed. According to Field, Wachovia Bank would be obligated to purchase the $64 million in bonds when the bank's five year guarantee expires. (Field referenced the PKF Feasibility Study which sharply contradicts the Authority's more optimistic projections).

Field said he had been advised by a financial expert that Wachovia would be hesitant to incur the criticism of bank examiners by failing to foreclose.

The Authority would face the alternative of "throwing the keys to the bank" or asking the commissioners to guarantee the bonds and fund all of the losses through increases in taxes.

Beckett said it was his opinion that

rather than foreclosing, the bank would try to work out some sort of "an accommodation."

Field had pointed out Wachovia's guarantee of the first five years was made possible because bond proceeds were set aside to meet interest payments. There would be no such protection for a future guarantor.

Field spoke during the public comment period held at the outset of the meeting. He said he was relaying to the board members an analysis from a financial expert concerning what would occur if the operations of the proposed convention center did not meet Authority financial projections and the five year bond guarantee was not renewed.

Beckett offered to take questions from the floor but, when Field sought to be recognized, Chairman Ted Darcus ruled Field out of order.
224 days...

until county appointees make up a majority on the Convention Center Board.

Clipper Stadium vs. Convention Center:
Safe vs. risky financing

Several major legal obstacles stand in the way of the Convention Center Authority being able to finance the project.

Clipper Stadium:

A comparison between the actual financing of the $24 million Clipper Magazine Stadium and the proposed financing of the Convention Center shows that Clipper Magazine Stadium bonds were sold for a finite term of 20 years.

These bonds will fully amortize over the 20 years. Bonds for the stadium were further secured by Sky Box rentals and a County guarantee for the 20 years. The County pays 5.6% interest annually for the entire 20 year term.

Convention Center:

Convention Center "low floater" bonds are to be sold for an initial two weeks and resold every two weeks thereafter. They are to amortize over 40 years. $64 million in bonds would be secured by Hotel Room Revenue Tax and by $25 million in a county guarantee. Interest rate, including credit enhancement fees, will approximate 4.0% during initial five years.

Wachovia Bank's enhancement of credit is only for five years. With escrowed funds no longer available to cover interest payments, obtaining future credit enhancement is highly unlikely.

If the center fails to meet projections, a new five year guarantee will be unlikely. Then the bonds must be purchased by Wachovia. Without a county bailout, they likely will foreclose.

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Sorry, Authority:
Commissioners alone choose Authority Board appointee asked County Solicitor Don Lefever his opinion on whether the commissioners alone can choose the pivotal fourth seat on the Convention Center Authority board.

Lefever said: "The appointment is made by the vote of the commissioners. They determine the individual's appropriateness.

"Bottom line: It is the prerogative of the commissioners to decide on that appointment and when they make it."