Hillsboro bets credit rating on success of baseball
Similar project resulted in Wenatchee downgrade; idea rejected in Vancouver
Tuesday, September 25, 2012
Hillsboro, Oregon's fifth-biggest city, is staking its credit rating on a plan to build a $15.2 million stadium for a minor-league baseball team. Similar efforts in Washington state and New Jersey ended in downgrades.
The Portland suburb with about 93,500 residents broke ground on the venue last week. It will house an affiliate of Major League Baseball's Arizona Diamondbacks that for 23 years played 200 miles away in Yakima. Owners of the Yakima Bears, last year tried unsuccessfully to negotiate moving the team to Vancouver.
Hillsboro plans to finance the stadium by selling municipal bonds by year-end, even as the extra yield investors demand on some of its debt has climbed by 60 percent since July. In the past 18 months, Wenatchee and Harrison, N.J., lost their investment grades because sports-arena projects financed with munis missed revenue projections and failed to spur the development officials were counting on. Hillsboro is taking a similar risk, said Howard Cure, director of muni research at Evercore Wealth Management, which oversees $3.7 billion.
"It's yet to be proven how much a sports team contributes to economic stimulus," said Cure, who's based in New York. Hillsboro's economy has benefited from its location in Oregon's so-called Silicon Forest of technology companies. Intel and Lattice Semiconductor are among those operating in the region.
The Hillsboro stadium is part of "a vision for the city to bring community-based programming and places where the community can get together," said Suzanne Linneen, the city's finance director. "There's a belief that it will bring some economic vitality to the region."
The Yakima team's move is partly a result of the disparate financial conditions of the two Pacific Northwest localities. Hillsboro has a median household income of $60,695,
about $10,000 above the Oregon average, Census data show. By contrast, Yakima has about 92,500 residents and an average household income of $39,706.
The Yakima Bears finished with a 36-40 record in 2012. It is a so-called short-season franchise because it plays about half the amount of other Class A leagues. The franchise has an ursine mascot named Boomer.
Hillsboro will add the proposed 4,500-seat ballpark to an existing 90-acre complex, which has a 7,000-seat multipurpose stadium and seven softball fields, according to its website.
Attendance in Hillsboro may total from 100,000 to 180,000 fans per season, Linneen said. In Yakima, an average of 1,700 people came to the team's 38 home games, according to K.L Wombacher, the team's general manager. That's about 65,000 for the entire 2012 regular-season campaign.
Hillsboro estimates it will pay $1.1 million a year for debt service if it borrows $15.2 million for the stadium. It is considering using cash reserves to finance construction and reduce debt issuance, said City Manager Michael Brown. The city has a $366 million budget for 2012-2013, its website says.
The franchise has delayed the announcement of the new team because of trademark work with Minor League Baseball, Wombacher said. Revenue from the ballpark's naming rights and attendance in the first season will determine how much the stadium will cost Hillsboro, Brown said.
"There are unknowns in this, but what's not unknown is how we pay for it," Brown said. "If need be, if other revenues don't come through, because we have to pay our debt, we'll use general fund monies."