HOUSTON – The Harris County-Houston Sports Authority is fending off a legislative effort by the company that insures nearly $1 billion of its sports facility bonds to restrict use of revenues to debt service.
The sports authority, which has been in a long-running legal battle with its bond insurer MBIA and its spin-off National Public Finance Guarantee Corp., went on heightened alert when a proposed amendment to House Concurrent Senate Bill 14 surfaced last week, the authority’s chair, J. Kent Friedman, said in an interview.
The proposed amendment to the bill would restrict the authority’s use of revenues to debt service and require the authority to boost its reserve funds. Friedman said that would cripple the authority’s successful mission of bringing athletic events to Houston. Tuesday, the 2017 Super Bowl was awarded to the authority’s Reliant Stadium.
MBIA-National’s push for the legislation follows a Houston State District Court decision in April to dismiss the insurer’s lawsuit seeking an increase in the authority’s debt-service reserve. That ruling is on appeal.
The insurer’s credit rating plummeted in the wake of the financial crisis, triggering an accelleration of debt service on bonds issued by the authority in 2001 to build the retractable roof for Reliant Stadium.
The bonds, which had been on a 30-year maturity schedule, were stepped up to a five-year schedule after the collapse of MBIA’s ratings.
Those bonds are scheduled to be paid off by the end of the year. However, the special tax that supports that series of bonds will also terminate.
Despite the fact that the crisis over the accelerated bonds will be over, National fears that the authority will again face risk of declining revenue or other events over the 30 years of its remaining debt, particularly capital appreciation bonds, which will push total debt beyond $1 billion on final maturity.
“The legislation that we have been promoting seeks to achieve greater transparency and accountability from certain governmental entities that are in financial distress,” said Kevin Brown, spokesman for National. “The sports authority’s opposition to that legislation should raise serious questions for Houstonians and other stakeholders about the authority’s financial condition and the reasons for its objections.”
Friedman expressed outrage at the insurance company’s maneuver, which he said was designed to take advantage of the confusion that accompanies the last days of a legislative session. The Texas Legislature meets only every two years.
“In effect, they would take over running the Sports Authority,” Friedman told The Bond Buyer. “It would be dreadful for the sports authority and the people of Houston and Harris County if this were to pass.”
The proposed legislative language doesn’t mention the sports authority by name but no other entity would be affected, Friedman said.
National said the legislative effort represented a separate track from the lawsuit. However, the sports authority argued in court that only the legislature could waive the authority's sovereign immunity, a position the court affirmed.
“It’s astonishing that our insurance carrier is spending the amount of time, effort and money to do this,” Friedman said. “They’re not out of pocket a penny. They’ve gotten more than $25 million worth of insurance premiums from us.”
Friedman said the authority’s lack of an underlying credit rating and MBIA dispute have shut it out of the refunding market. He said the authority is working on a refinancing plan to take advantage of the historically low interest rates currently available, but he provided no details.