DALLAS – After years of struggling with junk-bond credit and a legal battle with its bond insurance provider, the Harris County-Houston Sports Authority can expect a revenue windfall from the Super Bowl, analysts said.
"The influx of fans, media and sponsors to Houston for the National Football League's marquee event and related activities will bolster the hotel occupancy and motor vehicle rental taxes pledged to repay the bonds," Moody's Investors Service senior analyst Adebola Kushimo noted in a Feb. 2 report.
"We estimate the Super Bowl will yield a $1 million jump in hotel occupancy tax receipts versus a similar period last year, which is about 3.5% of 2016 HOT collections of $28.5 million," she added.
The 2017 Super Bowl is Houston's third since 1973 and the second to be played in what is now called NRG Stadium.
Revenue from the two tax levies that support the bonds has fluctuated with economic activity in the Houston region, as shown by declines during the 2009 recession and the last two years due to the energy sector downturn, Kushimo said.
"The magnitude of the Super Bowl bump depends on the premium the regional hotels can charge, as well as the level of demand, which is likely to be high for up to a week before the event," she said.
When the Super Bowl was last held in Houston in 2004, combined HOT and MVRT revenues increased 6.2% that year, according to Moody's. That year marked the start of a five-year stretch of annual increases in combined HOT and MVRT revenues, until the recession led to a drop-off.
New Orleans, which has also hosted three Super Bowls, also saw positive results from the annual National Football League championship game, Kushimo said.
"In 1997 and 2013, the event contributed to increased HOT receipts, but both years saw economic growth with healthy demand, she wrote. "However, the 2002 Super Bowl occurred five months after the 9/11 attacks and the resulting economic slowdown led to a hotel tax revenue decrease for the year, tempering the positive impact of hosting the Super Bowl."
Moody's upgraded the Houston authority's $145 million of senior-lien debt to A2 from the non-investment grade Ba3 on Jan. 22, 2015. Moody's downgraded the authority to a junk-bond rating on Aug. 25, 2010 after a downgrade of bond-insurer MBIA turned $125 million of long-term debt into bank bonds that had to be paid off in five years.
In late 2014, the sports authority settled a legal dispute with its bond insurance firm, which had changed its name to National Public Finance Guarantee after the collapse of mono-line insurance ratings in the 2008-09 housing market crash. The insurance companies were heavily invested in mortgage-backed securities that brought down Lehman Bros. and forced the sale of other top investment banking firms.
Paying off the accelerated bond debt to banker J.P. Morgan and settlement of the insurance litigation allowed the sports authority to refinance its outstanding debt with investment-grade ratings.
The HCH Sports Authority was created in 1997 to build major-league ballparks in Houston, including Minute Maid Park, home to Major League Baseball's Houston Astros, NRG Stadium, home to the National Football League's Houston Texans, the Toyota Center, home to the National Basketball Association's Houston Rockets, and BBVA Compass Stadium, home to Major League Soccer's Houston Dynamo.
The authority issued several series of bonds in 1998 and 2001 to fund the construction of Minute Maid Park, NRG Stadium, and Toyota Center. The authority receives countywide taxes that consist of a 2% hotel occupancy and tax and a 5% motor vehicle rental tax.
The taxes, along with $4.6 million in annual lease payments from the Houston Astros, are part of the trust estate securing a portion of the authority's debt.
In another Super Bowl-related report Wells Fargo's Municipal Research team looked at the value of NFL teams, calling it "undeniable that new stadiums and team relocations are helping to drive National Football League franchise valuations even as the public is increasingly pushing back against providing public funding for these projects."
The Atlanta Falcons enter Super Bowl LI having played their final game at the Georgia Dome, built less than 30 years ago, analysts noted. Their opponent is the New England Patriots, whose Gillette Stadium was built in the same year as NRG Stadium, which increased the team's valuation by 32% the year after it opened, they added.
"Since that time, the Patriots have had tremendous success on the field and have also continued to increase stadium revenues by increasing the supply of luxury seating product and signing in-stadium sponsorship rights agreements," the report said. "Moreover, since 2013, the New England Patriots' value has increased 89% with the stadium representing 20% of that value."
Meanwhile, the relocation of the San Diego Chargers to Los Angeles announcement came following the defeat of Ballot Measure C in San Diego County that sought to increase the city's hotel tax rate from 12.5% to 16.5% to finance up to $1.1 billion of the $1.8 billion stadium and convention center.
The vote, which would have required a two-thirds majority, was defeated with 56% voting "no" on Nov. 8. The move to L.A. ends a 15-year attempt to build a new stadium to replace Qualcomm Stadium, which opened in 1967 and was financed by a $27 million bond financing.
The Oakland Raiders are also considering a move to Las Vegas from their aging stadium. The Raiders had also entertained offers from Los Angeles and San Antonio.
The Raiders, who once played in the Los Angeles Coliseum, could move to a $1.8 billion, 65,000-seat domed stadium in Las Vegas, expected to be partially financed by $750 million in Clark County hotel/motel taxes.
The financing plan had called for $650 million from Sheldon Adelson, chairman and CEO of Las Vegas Sands Corp., with the Raiders and the NFL financing the remaining construction costs.
However, on Monday, Adelson released a statement saying the Adelson family "will no longer be involved in any facet of the stadium discussion." The Raiders have reportedly discussed the relocation process with the NFL last month. The Las Vegas Stadium Authority would oversee financing for the proposed NFL stadium project and must approve the development plan.
