DALLAS -- Grand Prairie, Tex., plans to sell up to $65 million of revenue bonds to build a horse racing track if city voters approve a new half-cent sales tax to pay for the project in a Jan. 18 election.
Wayne Usry, the city's finance director, said Grand Prairie wants to create a sports corporation to sell the bonds under a state law approved last year so neighboring Arlington could build a new baseball stadium for the Texas Rangers with bonds backed by a sales tax.
Voters must decide whether to increase the city sales tax to 7.75%, from 7.25%. The tax would secure the revenue bond financing for the proposed $95 million racetrack.
Officials in Grand Prairie, a southern suburb of Dallas with a population of 100,000, believe voters will approve the tax increase because there is little organized opposition to the plan and because of the expected economic benefits to the city.
A city-paid consultant, Perryman Consultants Inc. of Waco, Tex., has estimated that the racetrack could create 6,500 jobs and $422.7 million a year in economic activity in the Dallas-Fort Worth region. Of that, Grand Prairie would gain an estimated 2,244 jobs, the study says.
"We think there will be a significant economic impact," he said. "A lot of the people who would be hired will be from Grand Prairie."
Private developers have proposed a $95 million facility in which they would invest $30 million in equity or unsecured debt.
The city's sports corporation then would issue up to $40 million of municipals by late 1992 that would be secured only by the sales tax. The half-cent increase is expected to generate $4.1 million a year, which Mr. Usry said could provide coverage of up to 1.35 times for the first series of 30-year bonds.
A second series would be sold in 1993, when construction of the track would be completed, and would include 20-year first mortgage revenue bonds secured by the sales tax and lease revenues.
The bonds would not have a security pledge from the city, and therefore the project would not likely affect the city's $60 million of outstanding general obligation debt -- rated A1 by Moody's Investors Service and A-plus by Standard & Poor's Corp.
Mr. Usry plans to meet next week with investment bankers from three Wall Street firms about a negotiated underwriting if voters approve the tax and state officials grant a operating license.
Under current plans, the city-created sports corporation would own the racetrack and lease it to private operators. While the city's bond counsel, Fulbright & Jaworski, has not yet begun working on the project, it is expected that the deal would follow the legal structure used by Arlington to circumvent tax code restrictions on the use of tax-free bonds for such projects.
"We'll use whatever legal mechanism we can to maximize the use of tax-exempts," Mr. Usry said.
For triple-A rated Dallas, using such bonds backed by sales taxes is not an option under the 1991 law. The city council last week voted to support the use of an unspecified amount of revenue bonds to help finance a racetrack that another group has proposed to build in Dallas.
However, the law passed last spring to benefit Arlington also can be used by Grand Prairie because it is a city located in a county with a population of at least 750,000 and whose total sales tax does not currently exceed 7.25%.
"The law that was used for Arlington can be used in other places," said Ray Hutchison, senior partner at Hutchison, Boyle, Brooks & Fisher of Dallas, bond counsel on the Arlington project. "All they have to do is meet the criteria."
Later this year, Arlington expects to sell $110 million of taxable and $25 million of tax-exempt bonds secured by the half-cent sales tax approved by voters a year ago.
It would be the largest-ever issue of sales tax-backed bonds sold in Texas, where the security was never used before 1991. Last January, the Amarillo Economic Development Corp. became the first to use the security when it sold $6.5 million for a job-creating project.
Last summer, two other issuers followed. The New Boston Special Industrial Development Corp. sold $1 million of bonds supported by sales taxes, while the Weslaco Economic Development Corp. sold $495,000 worth in August.
Mr. Hutchison said most future sales tax-backed bonds will be in smaller increments for more traditional economic development projects. For instance, a small town in Tarrant County this month will also seek voter approval to use sales tax funds to finance parks and playgrounds.
