The proposed financing arrangement to pay for a new arena, a performing-arts center and Citrus Bowl renovations is so complex and expensive that Orange County's top auditor is calling it "a nail-biter."
Budget-crunchers from Orlando and the county are negotiating an agreement that lays out how they'll share costs of the unprecedented deal. The $1 billion lineup of projects announced in late September requires a massive amount of borrowing, with the loans being paid back with a tax on hotel rooms and downtown property. The projects could actually end up costing $1.7 billion or more as loans and interest are paid off over several decades.
A preliminary version of the agreement obtained by the Orlando Sentinel calls for spending audits, pre-approved building plans and construction-cost caps, and it even secures luxury seats for politicians at each venue.
"It may be a great political idea to say `Let's do the three projects altogether,' " Orange County Comptroller Martha Haynie said. "But administratively, I don't want to say it's nightmarish . . . but it is an unusually complex deal.
"This one's going to be a nail-biter," Haynie said.
The county's earliest draft of the agreement -- which will still take weeks to complete -- puts previously agreed-to provisions of the deal into a legally binding document the city, county and all other parties must sign off on.
For instance, it requires the Orlando Magic to "unconditionally and irrevocably guarantee payment" of $100 million in case tourist taxes fall short, a provision to which the team already has publicly agreed.
Other key provisions:
Contractors hired to work on the three facilities must set a "guaranteed maximum price" for each one, capping costs. Magic executives had already agreed to cover cost overruns for the $380 million arena.
The county comptroller would have the authority to audit the books, not only during construction but until the loans are paid off. All building plans for the city-owned facilities also must be approved by the county.
The county would not chip in its share of the performing-arts center until arts boosters raise the $75 million in private contributions to which they have committed, including $25 million that would be set aside for an endowment that would help pay future operations.
County officials want the agreement to guarantee that county leaders will receive the same number of suites or premium seating in each of the venues that city leaders receive.
Of the $1.04 billion needed to build the venues, about $772 million would be obtained by issuing bonds that would have to be repaid over time, boosting the cost at today's interest rates to about $1.7 billion. Under the terms of the draft agreement, tourist taxes would be used to pay down the debt beginning in October 2008.
County plan's restrictions
The county's proposal prohibits spending the tourist tax on city staff salaries, operational expenses, outside consultants or land and infrastructure costs. All of those would be borne by the city or private parties.
County officials control the tourist tax, and the proposed agreement gives the portion of the tax that doesn't already go toward the Orange County Convention Center and tourism marketing to the venues. But the county would not carry any risk if the volatile tax were to fall short. That risk, along with the responsibility for most land, salary and infrastructure costs, would fall on the city.
That's the main concern Haynie has with the potential deal, so far.
"The city is going to be under serious stress on this," Haynie said. "But they have some smart financial minds working on it. We're just going to have to be alert continuously on this."
Tax concerns
Orlando commissioners, who are generally supportive of the three projects, have stressed that they want to make sure the deal won't put residents' property taxes at risk.
"We need to make sure this is safe so taxpayers aren't left holding the bag. We need to be very careful on this -- we're talking about spending over a billion dollars," said Commissioner Phil Diamond, who has taken the most cautious position on the projects and recently voted against buying land for a new arena.
Officials in Orlando Mayor Buddy Dyer's administration have sought to reassure commissioners that the deal isn't too risky.
The city has increased the size of its reserve account -- comparable to a homeowner's emergency rainy-day fund -- to about $75 million, and it is trying to line up a bank line of credit to serve as backstops in case tourist taxes fall short in coming years. The larger reserve and credit line will also allow the city to get more favorable financing for the projects.
Even so, Dyer said there is "just the remotest possibility" that it would be necessary to dip into the city's reserves to cover debt payments on the three venues.
Commissioners also are concerned about the cost of running the facilities after they're built.
Orlando officials say they're trying to make sure the facilities won't be a burden on the city. The goal is to be "bottom-line neutral," said Rebecca Sutton, the city's chief financial officer.
That goal could be a tough one. The arts center is expected to need as much as $1.5 million a year to fund its operations, though the city hopes to reduce that cost by squeezing more out of private commercial development that will share the site. And while the city is used to operating a basketball arena, the new one is to have more than twice the square footage.
"The facility will be twice as big and have twice the operating costs," Sutton said.