DALLAS — Arlington, Texas, appears to have regained its footing on debt service for the $1.2 billion Dallas Cowboys stadium and could retire the sales tax revenue bonds early, officials said.
Five years after the city issued its first bonds for the voter-approved project, revenue is running ahead of projections, officials said, as is income from parking and ticket fees. The trend lines are significant because the stadium financing coincided with the recession and a bond market upheaval that forced the city to refinance its variable rate debt.
Moody’s Investors Service last year shifted the outlook to negative on its A2 rating on $298 million of stadium bonds, including a $61 million refunding in April. No downgrade followed.
“The negative outlook reflects the softening in economically sensitive special tax revenues and the reduced level of available cash following the fall 2008 restructuring and the completion of this transaction,” analysts wrote.
Mayor Robert Cluck said the costly refinancing represented the city’s greatest financial peril to date.
The Series 2009 bonds completed the refunding of Arlington’s $164 million of Series 2005B bonds — originally sold as variable-rate demand notes supported by a standby bond purchase agreement and hedged with an interest rate swap. The 2009 issue ended the 2005B swap and shifted all the debt into fixed rate.
In 2008, the city retired $104 million of the original $164 million in 2005B bonds after some became bank bonds held by liquidity provider, Depfa Bank PLC. The rest were remarketed in February 2009.
With $20 million in stadium debt service due this year, the city expects no problem, as pledged revenues are running at $27 million.
The revenue bonds are backed by a half-cent sales tax, 2% hotel-motel tax hike, and 5% increase in car rental tax. The lion’s share comes from sales taxes, which have fallen across north Texas the past two years.
However, Arlington has suffered less from falling sales tax revenue than most Texas cities and actually bucked the trend with some recent monthly gains.
In addition to the sales tax bonds, another tranche of $147 million is supported by taxes on game tickets and parking. Those revenues climbed to $15 million in the stadium’s first year, about $6 million more than projected.
Fitch Ratings maintains an A rating on the sales tax bonds, as does Standard & Poor’s. Both have a stable outlook.
Arlington, whose estimated population has grown more than 11% to more than 370,000 in the last decade, has had good luck financing stadiums. Debt for nearby Ballpark at Arlington, which hosts Major League Baseball’s Texas Rangers, was retired 10 years before the bonds matured.
The 100,000-seat Cowboys stadium ranked as the most expensive National Football League stadium ever built when it opened last summer. The recession forced Cowboys owner Jerry Jones to postpone related development that was designed to attract more year-round visitors. The stadium hosts next year’s Super Bowl.
