Report confirms election delay was main culprit in expensive ballpark financing

A report detailing what led to an unfavorable financing plan for the ballpark confirms the former city manager decided to delay the issuance of the bonds until after an election despite warnings from the city’s financial advisor that it was a risky move.

“At that time, the Financial Advisor advised the City’s CFO of the general market rate risks associated with further delaying the financing and the CFO relayed such concerns to the City Manager,” the 2013 report states.

The report was prepared by the City’s bond counsel, Norton Rose Fulbright at the request of Mayor Oscar Leeser after he became concerned about why the city delayed the issuance of the bonds, an expensive decision that cost the city $22 million.

The report shows the city faced several obstacles in issuing the bonds but also demonstrates it purposely skipped an almost four-week time frame when interest rates were at historic lows and the market was ripe for a favorable ballpark financing deal.

According to the report, the City cleared a legal hurdle on March 8th, 2013 when a court issued final judgement on a bond validation suit, essentially giving the city the green light to move forward with the financing of the project.

Then on April 30th, 2013, the city completed a public notification period and it could have began the process to issue the bonds then. The report shows the council was planning on voting on the issue that same day but former City Manager Joyce Wilson removed it from the agenda.

“The City Manager removed the item from the April 30th agenda because of concerns raised by certain City Council members… According to the City Manager, several Council members raised concerns about the timing of these agenda times in relation to the upcoming general election, specifically beause of the ongoing controversy over the Ballpark,” the report states.

It was then the City’s financial advisor, First Southwest, warned Wilson of the risks associated with delaying the issuance, according to the report.

According to the report, Wilson was more concerned with cash flow and any “drain on the city’s general fund from ballpark construction and “not seeing any immediate market indicators of increasing rates,” decided it wouldn’t be harmful to delay the issuance of the bonds no more than 30 days.

The City Council did not approve the debt amount of $52.8 million until May 28th , nearly three weeks until after the May 11th election.

After that, the City was tangled for weeks in talks with the contractor CF Jordan and the baseball team ownership group MountainStar Sports Group, according to WIlson’s email. CF Jordan advised the City it could not construct the ballpark for the approved amount and MountainStar agreed to increase its commitment by an additional $12 million.

That process wrapped on June 18th and the City started the process to issue the bonds.

But the next day, June 19th , the bond market experienced the greatest rising interest rate movement in the last 25 years up to that point.

A month later, the City of Detroit filed for bankruptcy, worsening the problem and forcing the city to issue the bonds in August 2013.

If the City had started the process of issuing the debt early on after it had the green light on April 30th , it could have potentially avoided the stormy market that began mid June.

The report states unidentified council members initially raised concerns about issuing the bonds so close to the election because of the “ongoing controversy surrounding the ballpark.”

Wilson said she “doesn’t remember” who those council members were.

According to the report, Wilson relayed the concerns of the council members to former Mayor John Cook and Mayor Pro Tem Ann Lilly, who gave Wilson the okay to delay the issuance.

But both Cook and Lilly deny ever speaking with Wilson about delaying the issuance for the election.

Former City Representative Steve Ortega, who was running for Mayor at the time against Oscar Leeser has denied even knowing the issuance of the ballpark bonds were delayed for his election.