What needs to happen for the City to get a good return on its ballpark investment

The El Paso Chihuahuas and their fans are not the only ones with high hopes as we enter the Chihuahuas’ second season.

The city’s number crunchers are looking at the money it brings in — and the money spent as a result of the deal.

ABC-7 sat down with the City’s Chief Financial Officer, Mark Sutter, to look at where your investment stacks up.

The projections for the Chihuahuas first season came with a healthy fiscal projection.

“That would’ve been a great story to tell,” Sutter said. “Not only do you have a great stadium that everyone seems to enjoy and like but you also had a nice financing to go along with it.”

But, the real story wasn’t a homerun — and El Paso’s City Council was reminded of it a couple of weeks ago.

Let’s talk about the ballpark’s 2014 revenue.

The biggest chunk came from the voter approved 2% increase in the hotel occupancy tax, which brought in $2.4 million.

The city gets 50 cents on every ticket sold which resulted in $246,000 for the city.

The team will pay $400,000 a year in rent. The pro-rated payment was just short of $244,000 for the partial year.

$98,000 was generated in sales tax from merchandise sales and the city also gets 50% of parking revenue, which totalled $107,000.

That gives us a grand total of just under $3.2 million in money generated.

“Those were nice numbers,” Sutter said.

But here’s the problem. The debt service payment on ballpark was $4.1 million.

“The only piece that made the financial deal turn out to be not so good was really being in the market at the wrong time,” Sutter said.

If you look at the original model from September of 2012 the city’s annual bill for construction debt would be more than the money coming in for 7 years, but ultimately, at the end of 27 years, which is the time it’ll take to pay off the construction debt, the city would have a surplus of $24 million.

But then the price of the park went up from $50 million to $78 million.

The city agreed to pay $66 million, while team owners MountainStar Sports paid the other $12 million.

A new, optimistic financing model in June of 2013 showed it would take just one year for revenue to outdistance the debt and 30 years later the city would have a surplus of $28 million.

But right when it was time to sell the bonds and rush construction Detroit declared bankruptcy, among other things.

“The timing in the market then was just horrible,” Sutter said. “There was a pretty good disruption in the market that drove interest rates much higher at that particular point in time.”

So, two months later in August of 2013 — a new projection, and a darker picture.

“If it had been earlier, it had been later, there would have been better rates and we didn’t get those better rates,” said the city’s CFO.

Now that projected $28 million surplus was reduced to just one million by the time the debt is paid off.

Also, the city estimates it will run a deficit for the first 10 years meaning more goes out in ballpark debt than is generated from the ballpark and HOT tax.

This past year, the city took almost a million dollars from the general fund to cover the shortfall.

Rick asked Sutter, “when you are looking at a potential $24 million, $28 million dollar surplus it seems like this is a wonderful investment for the community. Do you still have that strong an opinion when it looks like it may only be $1 million of surplus?

Sutter responded, “I think the way the community has received the project and the effort of the team to really have something that engages the community in a family sort of way, knowing that you have other development that is going to take place downtown because of this project.

“I would just say that it’s too bad that the financing model didn’t turn out more like it was projected than what we actually ended up with.”

Proponents of the ballpark point to intangibles that can’t be quantified.

They stress these numbers don’t include the ballpark’s impact on quality of life and the increases in property values and sales taxes around the ballpark.

If you’d like to look over all three financing models click on the links mentioned section at kvia.com.