After countless hours and thousands of dollars spent on legal advice, the Greater Boise Auditorium District learned their bank was no longer interested in making a loan.
Wells Fargo Bank backed out of an agreement last month to fund a $24 million construction project that centered around a new ballroom in a building being constructed by the Gardner Company.
Turns out the big boys at Wells weren’t up for a $24 million risk on an unsecured loan to finance what GBAD sold to the Idaho Supreme Court as “a single year’s lease with annual renewals.”
The bankers offered to spring for 65%, but GBAD lawyers said they needed 100% or it was back to the drawing board. Idaho’s constitution requires a two-thirds approval from voters for debt that exceeds a single year revenues. To avoid citizen scrutiny (rejection) GBAD sought “judicial confirmation” for a convoluted annual leasing scheme with yearly renewals. They lost twice in Fourth District Court, but won on appeal to the Supremes with the lease deal which involved an unsecured $24 million loan from Wells through the Capital City Development Corp. which is Boise’s urban renewal agency.
Latest plan is a deal with U.S. Bank to sell some sort of bonds under the same terms the court approved, using the CCDC to act as landlord. They are hoping for a 3.25% interest rate over 20 years of annual leases with a “non-appropriation” clause that allows the District to walk away at the end of any single year lease.
“I cannot imagine any investor willing to lock themselves into bonds at 3.25% for 20 years, especially when the payback is unsecured risk that can be cancelled at any time,” said Frazier.
Since GBAD has no authority to levy property tax and the hotel-motel room tax is their only source of revenue (except user fees) Frazier reasserted his position that the cleanest method of financing would be voter approval at a bond election.
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