SEA revises taxpayers' extra costs on Consol to $625K from $1M
The 2008 economic downturn cost Pennsylvania taxpayers about $5 million in extra payments for the state-backed financing of Consol Energy Center's construction, officials said on Thursday.
Gov. Tom Corbett's office said earlier this week that the state will pay about $1 million extra in interest this year alone because of a credit downgrade for the bond insurer involved in the deal. The city-county Sports & Exhibition Authority borrowed $313.3 million in variable-rate bonds in 2007 to build the 18,087-seat arena.
Authority Executive Director Mary Conturo said the additional interest payment would be $625,000, not $1 million, because the bond insurer — Assured Guaranty Municipal Corp. — recently received a rating upgrade, which lowers the cost of borrowing.
“When it got upgraded in March, the interest rates would have went back in sync a little bit,” she said, adding that the authority considered changing insurance companies but determined it wasn't feasible.
Corbett spokesman Jay Pagni said the original $946,000 figure was an estimate and that it could turn out to be lower.
Since 2009, the state has been forced to pay about $4.4 million in extra interest after credit agencies downgraded the bond's insurer. Assured Guaranty was downgraded in 2009 and again in 2013, according to Conturo's office.
The March upgrade was its first since 2008.
Tim Davis, vice president and director of the fixed-income and municipal bond department for Downtown-headquartered Hefren-Tillotson Inc., said the authority could have done little to avoid the increase.
He said bond insurers across the country went out of business after 2008, and the ones that survived had low credit ratings, which drove up interest rates. He said Assured Guaranty is among the country's top bond insurers. The good news for the authority, he said, is that interest rates have been at historic lows.
“The cost for having (Assured Guaranty) insurance may have been a little higher, but (the authority's) costs because of interest rates going down since '08 or '09 are lower,” he said. “They're certainly paying less now in their interest cost since anywhere before 2009.”
Separately, the authority's board of directors approved a $555,684 contract for the final design of roads and other infrastructure at the former Civic Arena site in the lower Hill District.
Engineering firm Michael Baker Jr. International will take six months to complete a plan that includes about $12 million in road, sidewalk and intersection improvements to Centre and Bedford avenues, Washington Place and Crawford Street, said Conturo. The streets border the 28-acre site.
The board authorized paying $111,000 in cost overruns that occurred because of changes to the street design on the arena site. Original plans called for five streets running through the property, but the authority had to eliminate one because of a steep grade.
The authority has $15 million in state money to cover the cost of construction, which is expected to begin in August.
Conturo said the authority is waiting to hear if it will receive a $21 million federal grant that would pay for the remaining infrastructure costs. The infrastructure work will clear the way for $500 million in residential and commercial development.
The Pittsburgh Penguins hockey team, which has exclusive development rights to the site, intended to submit preliminary land development plans for the first phase of residential construction late last year. The team delayed those plans because of opposition from some in the Hill District who said the project didn't include enough low-income housing.
Mayor Bill Peduto said the Penguins and Hill District leaders are close to a deal after a four-hour meeting on Wednesday with his staff.
Bob Bauder is a staff writer for Trib Total Media. He can be reached at 412-765-2312 or firstname.lastname@example.org.