DALLAS — Houston is preparing to add a third professional stadium to the downtown area after the City Council approved plans Wednesday to build an $80 million home for the Dynamo professional soccer team.
The new stadium, to be managed by the Harris County-Houston Sports Authority, will require no direct public financing, but will use tax-increment financing under a 30-year lease.
The Dynamo will pay $65,000 a year for the lease.
The authority will own the stadium on behalf of the city and Harris County and lease it back to the club.
Houston bought the land in early 2008, but the Dynamo, with a contribution from Texas Southern University, will cover construction costs. TSU will use the stadium for its football games.
“The stadium will help revitalize the east end, create jobs and business opportunities without issuing any bonds or incurring any public debt,” Kenny Friedman, chairman of the authority board, said in a statement. “This agreement will bring a world-class facility to our community without burdening our taxpayers.”
Houston is the largest city in Texas and the fourth-largest in the nation, with a population of about 2.3 million.
The Dynamo originally had planned to hold a groundbreaking ceremony last Saturday, but postponed the event until the City Council cast a final vote on the plan, according to team spokesman Jonathan Yardley.
The Sports Authority’s role as landlord in the Dynamo stadium comes as it faces the threat of default on accelerated bond payments for existing stadiums. The agency used reserves last year to reimburse insurers MBIA Inc. and National Public Financial Guaranty Corp. for debt service on Series 2001C and D variable-rate bonds held by JPMorgan Chase & Co.
JPMorgan accelerated payoff of the bonds from 2030 to 2014 after MBIA’s ratings were cut below those specified in the bond covenants. The insurer has said it is committed to covering debt service.
The authority’s best solution to the financial quandary — refinancing — is off the table after some of its credit ratings fell below investment grade.
Moody’s Investors Service last year dropped its senior-lien ratings on the authority to Ba3, its third-highest non-investment grade level, from Baa2. Moody’s also lowered its rating on the junior-lien debt to B2 from Baa3 and on third-lien bonds to B3 from Baa3.
Standard & Poor’s downgraded $475 million of authority debt to junk in September. It rated the junior-lien and third-lien debt B, its fifth-highest speculative-grade rating, down five notches from BBB-minus. The rating agency affirmed its BBB on $399 million of senior-lien debt.
The Sports Authority financed Minute Maid Park, home to Major League Baseball’s Houston Astros; Reliant Stadium, home to the National Football League’s Houston Texans; and the Toyota Center, home to the National Basketball Association’s Houston Rockets.
The Toyota Center and Minute Maid Park are downtown. Reliant Stadium is located further south, next door to the mothballed Astrodome.
The authority is seeking a use for the Astrodome that allows the world’s first domed stadium to be maintained as a Houston landmark.