Back-Seat Driver: Traffic is big hitch in arena plan

[kennadog]

We don't know if they're trying to form a JPA. That would be one approach, but we don't know if it's the approach they'll take.

If they do take that approach, it's likely that they'll have to have a vote on it (not for legal reasons, but for ethical reasons). Because these would probably be revenue-anticipation bonds and the courts have ruled you don't have to vote on these, technically, they could do this without a vote. But from an ethical point of view, I doubt they would proceed to organize a JPA and approve a $400 million bond sale without a vote.

When it was Raley Field, I think that was around $30-$40 million for those bonds (Sac County, Yolo County and West Sac make up that JPA), with Raley's and others picking up the difference. But when you're talking about $800 million to repay the bonds, politicians get really antsy about that.

Again, no vote would be required to sell such bonds, but... Well, let's just say the JPA consisted of the County and City; they'd have to be willing to put up the full faith and credit of City and County general revenue funds to back the loan repayment. That's where Council and Board members get antsy. When you hear them ask, "What if the occupants can only afford $15 million that year?", you must realize where the other $11 million comes from.

That's where elected officials get nervous. And, seriously, I think that's the ultimate hangup.

There's already legislation on the governor's desk to allow Cal Expo to form an authority for the purposes of issuing bonds. The city and county aren't part of it. I haven't heard if it's still sitting on the gov's desk.

Usually if the bond-issuing entity is loaning the money to another entity, a bank like WaMu or Wells Fargo or B of A, does the underwriting and long-term loan servicing. It's not like they make a loan they think is financially unsound. Yes, all loans are risky. (Witness the current homeowner defaults.) All any lender can do is use sound underwriting practices up front. The ultimate recourse in the event of default (worst case scenario) is the security taken for the loan in the first place.

 

[VF21]

The bill is still on the governor's desk, at least as of yesterday.