DALLAS — Dallas is expected to pay off the final $10.45 million installment on bonds used to build the American Airlines Center, retiring the debt 16 years ahead of schedule.
In a memo to City Council members, Dallas chief financial officer Jeanne Chipperfield said she would seek approval at Wednesday’s council meeting to close out the debt, saving the city nearly $2 million.
After a close election on the then-controversial issue of building the arena for the National Basketball Association’s Dallas Mavericks and the National Hockey League’s Dallas Stars, the city issued $140.4 million of revenue bonds in 1998 to fund its share of the construction costs.
The total cost of the arena, including private investment, was about $420 million — $520 million in 2011 dollars.
Of the city’s total issue, $104.8 million, or 75%, was tax-exempt, and $35.6 million was taxable.
An added 2% hotel occupancy tax and a short-term 5% car rental tax were authorized by voters to service the debt. The taxes will end once the debt is paid off.
Revenues in excess of debt service on outstanding bonds have been collected in the debt-service reserve fund and the surplus debt redemption fund. The surplus fund has $8.3 million, and the reserve fund has about $1.1 million, according to Chipperfield’s memo.
The call date of the bonds is July 15 and the bonds would be redeemed a month later, she said.
The bonds to be paid off carry coupons of 6.65% for those maturing through 2015 and 6.625% for maturities through 2027.
Dallas’ ability to retire the debt so far ahead of schedule puts the city in an enviable position. This month’s Mavericks NBA Championship made the payoff even sweeter, extending the team’s season and filling the 19,200-seat arena with fans willing to pay dramatically higher ticket prices.
Glendale, Ariz., by contrast, is committed to paying an additional $50 million to cover the losses of the NHL for keeping the Phoenix Coyotes in the $180 million Jobing.com Arena financed by city revenue bonds. Glendale fears that the loss of the Coyotes would not only leave the arena vacant for most of the year, but that the adjoining Westgate City Center retail and entertainment complex would see a dramatic loss in revenues and in taxes that financed the development.
Like Glendale, Dallas authorized a tax-increment finance district around the American Airlines Center known as Victory Park. The $3 billion, privately financed Victory Park is a much larger development than Glendale’s Westgate City Center, including office towers, a new W Hotel, restaurants, and other amenities.
While the American Airlines Center has enjoyed greater success than anticipated, Victory Park has lagged because of the impact of the recession. Projects were delayed or reduced in scale, but the overall project was delivered as promised.
In 1998, the bond issue was approved by a narrow margin of 1,600 votes, even though the project’s backers outspent opponents by 20 to 1. Years after the arena was built, Dallas reluctantly demolished the teams’ former home, nearby Reunion Arena. If there was a downside to the project, it was the fact that it impeded the city’s ability to pursue a new Dallas Cowboys Stadium in downtown.
With rental and hotel taxes committed to the American Airlines Center, the city and Dallas County could not afford to elevate their tax rate on visitors without hurting the vital convention business. The Cowboys’ $1 billion stadium instead went to the suburb of Arlington.