I Told You So - The Tax Even I Can't Escape

Marty "I Should Know Better" Schladen had the report in today's paper about the downtown arena deal I've been telling you about.  If you haven't seen it yet, read it HERE.

Remember when I told you that a group of private individuals were planning on making YOU pay for their arena?  You didn't believe me, did you?  Well, Schladen proved me 100 percent right on all accounts.  Let's look at what was written:

"The Downtown Redevelopment Task Force, a subcommittee of the influential Paso Del Norte Group, wants to build a $123 million Downtown arena and fund it from city, county and private sources. Such a project could help drive the revitalization of Downtown, said Ruben Guerra, a member of the task force."

There's your proof of the "private" part of this deal and also the cost, which I was wrong about, it's actually $123,000,000.   I don't feel too bad about being wrong about the cost, what's $23,000,000 when you're spending $100,000,000 already?  It's a drop in the bucket and the money comes from a nameless, faceless source - YOU, the taxpayer.

I do have to laugh when I read "could help drive the revitalization of Downtown." Really?  It "could help?"  For $123,000,000 I would surely hope to get a better a guarantee than that.  Then again, this is the same Paso Del Norte Group that unvieled a very dramatic and ambitious downtown plan and did absolutely zero with it - NOTHING!  Paul Foster stepped up to the plate on his own and started the downtown revitalization movement with his... hold on - wait for it.... OWN DAMN MONEY! 

The uncertaintanty is reiterated in the next paragraph:

"Time spent in Oklahoma City and other cities has convinced Guerra that arenas such as the "multipurpose center" his group has in mind "tend to end up anchoring whatever happens Downtown.""

These people want $123,000,000 for a project to anchor "whatever happens downtown."  Whatever happens?  There's no real plan other than building a very expensive arena at YOUR expense and then wait and see if it actually does anything for downtown?  Wow!  Take that attitude into a venture capital firm and they'll ask you to never darken their doorway again right after they stop laughing hysterically. 

Something tells me here that the Paso Del Norte group is going out of its way not to make any promises lest they fall into the trap Jim Scherr did when he promised to hire a certain amount of folks at Hotel Baghdad in exchange for a taxpayer backed loan and then didn't hire as many people as he said he would.  It's not like things turned out too bad for Mr. Scherr, a major fundraiser for democrats, seeing as how council - all democrats - forgave his unfulfilled promise in the end. 

Are you worried yet?  It gets better.

"Guerra said his group wants to fund the 17,000-seat arena with bonds secured with city and county funds and revenue from hotel, restaurant and motor vehicle rental taxes. Private funds would come from naming rights, premium seating, seat licenses and other sources, Guerra said."

That first sentence proves what I've been saying all along - you're going to fund this project through the city and county issuing bonds (going into debt) and then handing that bond money over to this private group to build an arena.  It's clear that the Paso Del Norte Group is asking to have the Hotel Occupancy Tax revenue be shifted to them.  They wanted to move about $8,000,000 in tax monies to their bank account through a vote of the County Commissioner's court.  What you need to see here is that they are trying to keep any funding of this project out of the voter's hands. 

It is clear that the Paso Del Norte Group is not ready to put up any of their own capital for the project.  They are relying 100 percent on tax dollars for the $123,000,000 to build this project.  The private funds they speak of in the article don't come until the building is built and those monies go directly into the pockets of the Paso Del Norte Group to be spent however they see fit - usually split among the top shareholders as bonuses for "performance."  They would not pay their loan from the city and county off early with these dollars because that would be stupid and I'll tell you why in a minute. 

The saddest thing here is that your city and county governments are going to put you into debt in order to pay this group of private individuals $123,000,000 to build an arena.  It's not like they are investing money they have in the bank already in this project.  It's a debt situation and  you have to ask yourself if this is the best thing to go into debt over.  I should say "more debt," because we are already in a lot of debt.

Here's the dark truth about what's going to happen here in chronological order

1.  The money to be made on this project is on the construction of the building itself.  The average construction company puts about 15 percent profit into their bids.  In this case the contractor stands to make around $15,000,000 profit or significanly more.  And who is to say that the Paso Del Norte group isn't padding their total cost to increase that profit for the contractor/contractors.  We'll never know because we aren't privy to the plans and will never be privy to them. 

The Paso Del Norte group has already established who will design and build this arena.  If you are not a member of this group, you will not be considered to receive any work in connection with this project. If you sell carpet, finish concrete, provide lighting, hang sheetrock or any of the many other trades and suppliers associated with construction, you will not be asked to bid on this project even though it is being funded with tax dollars. 

And that's the major problem I have with this project - it's a "no bid" situation with taxpayers dollars and the money to be made on this boondoggle is in the construction phase.  There's no money to be made after the building is built - we'll get to this in a minute.

2.  The project will be built with zero public input because it's being built by a group of private individuals.  That means that Paso Del Norte group can make some pretty cloudy promises about what it will be and what it won't be.  When they say "17,000 seat arena," that can mean a lot of things.  You don't know what you are getting until it's finished.  And please excuse my language - you aren't GETTING anything!  You won't own it (for now) and the best you can hope for as a taxpayer is that they pay the $123,000,000 back of the next 30 years or so... if they pay it back at all.

3.  Here's what I've been gearing you up for.  There's no possible way this thing will turn a profit.  The El Paso area has no less than five public entertainment venues and they aren't booked every day of the year and they sure as hell don't fill the house with every event.   The Don Haskin's Center seats 12,000 and doesn't fill up - ever.  Anybody in the business will tell you that this arena is destined to fail miserably.  Remember, these arenas literally cost millions each year to run whether they're booked or not.  The Paso Del Norte Group has no second income to help fund the money loser that the arena is going to be for the first year.   You can't open an arena and expect Britney Spears and George Strait to book that first year - they're usually a year or more away from scheduling.  The place is going to sit rather empty for at least a year while they try to get into the scheduling cycle. 

So that sounds pretty bad for the Paso Del Nortegroup, right?  Wrong.  Since the money is being loaned to a "group" of people, it's really hard to go collect from them when they miss their first loan payment or every loan payment, for that matter.  The deal will be simple - if the group can't pay back the loan, the city takes the arena from them and operates it as their own.  The Paso Del Norte take what profits they've made and distributes them to their board of directors before handing the whole thing back to the city with a note saying "we're sorry."  The cash from naming rights, season tickets etc.. will all have been put in someone's pocket before this thing goes south. 

So, now you know how the deal works.  The $123,000,000 gets disbursed to the members of the Paso Del Norte group who will be designing and building the project no matter what happens in the future.  It goes into their bank accounts never to be seen again by us.  They don't care to run the damn thing long-term because it won't generate any revenue seeing as how there aren't enough "acts" willing to come to El Paso and pay the higher premium to be at the arena when they could go to the three cheaper venues - County Collesium, Don Haskins or Pan Am Center.  Why do you think Bill Blaziek and Bryan Kennedy don't give a shit about this project?  Because they know they can beat the arena's price every day of the week and keep their acts like they always have.  Hell, Kennedy is so damn good he took the votes right out from under County Judge Veronica Escobar's nose!  She's definitely a part of the Paso Del Norte move, but didn't realize how damn savvy Mr. Kennedy can be.  Too bad city council has already probably been co-opted by the Paso Del Norte group and will fall over with their legs in the air at their whim. 

Anywho...  

When the building goes back to the city in default, that's the end of it.  They won't track anyone down to get the money back because that's now how the deal will be structured.  Once the city has control of the building they'll have to try to sell it at a loss, which probably won't happen since there are currently hundreds of these arenas sitting vacant around the country and nobody wants to buy them (read HERE).  There has even been talk at the federal level of buying them and turning them into giant FEMA relief centers (your tax dollars still paying for the building).

In the end, that means the city and county will have to split the cost of creating a department to run the place. Again, these places cost a few million a year just to sit vacant.  Don't be surprised when the city and county both have to raise your taxes in order to babysit this huge turd until it falls down or gets taken over by the next group of "investors."

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Here's the part that pisses me off.  I still have property in El Paso and I'm going to be hit up for the taxes for this boondoggle and never have the chance to vote it down.  First of all, they aren't going to let this go to a vote.  Second of all, I don't live there anymore, so it would be illegal for me to vote in an election of any kind there anyhow.

Even if it did come to vote, the El Paso masses are so stupid they'd gladly hand over $123,000,000 to this group if they were given hollow promises of super rock concerts and blatantly false claims of the Mavericks moving to town. How often has the pro sports team rumor been dangled in front of El Pasoans? Often.  The bond election for the arena would be propped up by a couple million dollar advertising campaign (Mithoff Burton would do the honors, of course) because spending a few million to make $123,000,000 free and clear isn't all that bad of a deal in the end.

You won't see any honest talk about this in any newspaper in town.  All of the local media rely on members of the Paso Del Norte group for advertising.  The word has already been sent to each entity that they will support this arena, or they will feel it. 

I am admitting defeat right here, right now.  There's no way to stop this.  This blog simply isn't popular enough and most of you are halfwits anyhow and probably think this is a great idea.  I shall call you halfwits the "Shiny Spoon Crowd" from now on - it fits you better. 

But in the meantime... you'll be arguing over this stupid recall until next year while the real fleecing of El Paso takes place quietly in the background.  Luck you. 

I must say, very rarely do you get to see in the paper exactly how someone is going to screw you and when they plan on doing it - very ballsy.  They don't even for a second think you'll wake up long enough to notice.  Gotta love their cajones. 

Comments

[pissed off]

ruben guerra ? wasnt he on the p.s.b. board and now he is on this task force ? from one questionable board to another. jesus, this town is so screwed up.

[Old Fart]

Strange how these big dollar projects get started with little or no public knowledge. Many times by private groups who want taxpayers to pay for it.

At least now this whole arena thing is out in the public! Now people can start figuring the tax impact and cost to their pocket books.

There has always been a lot of fanfare and slanted pro news coverage on past arena dreams and proposals. Give voters credit. They are pretty astute and will figure things out if an arena is not a good deal.

Like you David K, I certainly have many questions. Please keep writing on the issue as your points of view are pretty interesting.

[Gossip Girl]

Sounds like an entire new round of corruption will be happening in El Paso with the construction projects.

[peesed off]

old fart, our vote doesnt count, remember !

[Old Fart]

Poster "peesed off," on this arena I think it would be prudent for the city consider voter.

The last week, it seems some of the local entities are being careful on their tax increase for the coming year. The city's tax vote was 4 to 4 with the mayor breaking the tie.

On this new council we may have four members who understand the impact of taxes. From the council's TV discussion it seems they were not rubber stamps.

One possibility for those arena supporters going after some of that hotel HOT money, might be they know voters aversion to tax hikes for questionable projects. Especially those which cover such a small part of the city and is not in the most desirable location.

David K, the blogs colorful "Oracle of the Patomic," provided a rather interesting take on this arena issue. He expressed his concerns much better than others.

[livingelpaso]

I'd rather have a new baseball stadium downtown if I had the choice along with an affiliated minor league ball club.