July 26, 2012
Let’s take a look inside the engine of the bonds for this project, $197 million dollar deal. (page numbers shown are the pdf page numbers not the actual document page numbers).
Market Study (Page 4) states “There is no assurance that actual events will correspond with the assumptions on which such estimates are based. Consequently, no guarantee can be made that the estimated new TDZ (Tourist Development Zone) Revenues will correspond with the results actually achieved in the future. “
Debt Service Requirements (Page 31) The Principal is $196 million and the interest will be $106 million for a total of $303 million.
Assured Guaranty Municipal Corp (Page 33) is the Municipal Bond Insurer which has a negative outlook from Moody’s.
TDZ Revenues (Page 34) Basically this project and its success in paying off the bonds depends on increased sales tax revenue over and above a base amount when this comes online. Go to page 37 to see the history of TDZ revenues for Memphis. Then go to page 38 to see the projected increase in TDZ revenue.
What Backs Up Increased TDZ Revenue If It Is Not Enough To Pay The Bonds? Good question! Go to Page 41 to see the 2010 Non-Tax Revenue that is pledged to the Subordinate Debt Service Reserve Account. In 2010 this Non-Tax Revenue was $266 million.
Who Made The Sales Tax Projections? Go to Page 51 which starts the Market Study by RKG. Then go to Page 120 to see the RKG Market Study and The Impact Analysis of The Pyramid and Pinch District Development Project. Here are just a few interesting items from the Market Study.
- The City of Memphis has formally requested an Interchange Modification Study from the State of Tennessee for the purpose of gaining direct northbound access into the Pinch District at Exit 1-A of Interstate 40.
- Demographics Indicators (Page 125) They claim a population growth in the Downtown TDZ since 2000 which is dissimilar to the entire City where population has been declining.
- Estimated TDZ Revenue Stream- Bass Pro/Hotel & Existing Downtown TDZ Surplus (Page 131) See the projected New TDZ Revenue {1}. Now go to page 133 to see where they add in additional sales tax income from Steamboat employees, Steamboat tourism, Pinnacle Employees, Marriott Employees, Marriott Hotel (new proposed expansion), and St Jude employees.
Let us hope that all of this spending and debt works out as projected. It all depends on the increase in sales tax revenue which means people must spend for it to prosper. If the economy does not improve (as it has not done in the last 4 years) then all bets are off.