Power and Blight District

I've been worrying a lot lately. Not about the election. What will be will be. I've been worrying about the financial situation I will inherit if I'm fortunate enough to be elected. Finance wonks like myself are always thinking about the numbers. I'm excited about the Power and Light District. Even with Minnesota barbecue. I hope the district will do well. It will certainly help us attract conventions. What I'm not excited about is the deal we signed to make it happen. BlogKC reported recently that Power & Light District revenues are projected to only cover 104% of the City's bond debt. A former City Councilman was quoted as saying "the council relies on forecasts and other imperfect information to make financing decisions.” Admitting you rely on “imperfect information” and then allowing a deal to go through with a 4% margin for error? Yikes! It seems the City was talked into assuming way more debt load for this project than we should have because of the old "blight" scenario. Finance is about interpreting imperfect information, knowing your constants and reducing your risk to an acceptable level. Your constant in this case is the payments to the bank. Financial institutions are kind of funny about expecting to be paid. There is no crystal ball when it comes to projecting revenues from a retail/commercial project so that’s your risk (and a huge one it is). The imperfect information? Every promise, supposition, estimate or wish that the Power and Light District will be a smashing success. From my calculator this deal requires 100% occupancy plus the projected Economic Activity Taxes (EATs) for the duration of the bond life meeting projections. If just one business goes under. One business model fails to meet projections. One crazy happenstance and the taxpayers are going to be left picking up the tab. 4% is not a margin I'm comfortable with. It's certainly not a margin I would have allowed. Not if I was signing the checks!