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May 04, 2011
Goldman Sachs touts Louisville arena as part of its plan to eat humanity's face do good deeds
If you read the kind of publications that Goldman Sachs advertises in, you may have noticed some ads from the vampire squid touting its role in helping save Louisville by selling bonds for its new basketball arena. (There's a Goldman-created video, too.) As the San Francisco Chronicle's David Sirota picks up the story:
As Goldman's ad tells it, Louisville's major problem was its need for a new arena. That's when the bank swooped in with a "financing strategy" to build the stadium, which then supposedly led to "a vibrant downtown scene, where new businesses are opening (and) existing businesses are expanding."
The only problem, writes Sirota: "If you do bother to click around the Internet, you'll inevitably find that the Louisville economic picture is anything but 'vibrant.' Today, the city is suffering from an 11 percent unemployment rate and a $22 million budget shortfall." He also cites the article we mentioned last fall that noted that Louisville's TIF district wasn't generating enough tax revenues to pay for the arena construction costs, which would leave the city having to dip into general funds to pay off those Goldman bonds.
And it gets even worse, according to Insider Louisville's Terry Boyd:
The truth is even weirder: Goldman Sachs fell short of being able to place all the arena bonds.
It was in fact Louisville-based brokerage Hilliard Lyons that saved the day, placing the highest-risk, lowest rated piece of the arena debt.
How do I know? I wrote the story for Business First last year.
Concludes Boyd: "We'll find out pretty soon if the arena's revenue will match our collective debt obligation. But one thing is for sure — you can bet Goldman Sachs makes money no matter what happens to tax payers."
Ladies and gentlemen, your KFC Yum! Center!
The next phase in this process is for the city to panic and aggressively overpay for a professional franchise to "anchor" the building. Hi, Nashville. And this keeps the cycle going, because it's not long before the franchise asks for more concessions, then renovations and infrastructure improvements, then a new building altogether. Or just leaves.
Well played, Tobacco Town.
Posted by Anderson on May 4, 2011 11:39 AM
Neil,
We all know that the fine folks at GS would never want to eat humanity's face. This would be counterproductive, and thus morally wrong.
What I believe they would prefer to do is consume humanity's face at the maximum sustainable level indefinitely, leveraging their investment in aggressive healthcare corporations to keep the patient alive at any cost & forever if possible.
If, tragically, the patient dies, perhaps they could take solace in an onerus "client involuntary early termination" payout clause. If that clause could transfer all their debt obligations to the general public while allowing them to retain past earnings, their pay structure and hold no obligation to repay the debts should they become solvent again, well now we're getting somewhere.
Welcome to the monkeyhouse.
More Goldman Sachs here:
munibase.elabra.com/SacramentoTRAN2010FOS/doc/fos.pdf
Page A-18:
General Fund Obligation Debt Service; Interest Rate Swap
"In 2007, the City entered into an interest rate swap with Goldman Sachs Capital Markets, L.P.
(the "Counterparty") in connection with the City Financing Authority (the "Authority") of its $73,725,000
1997 Lease Revenue Bonds (Arco Arena Acquisition) variable interest rate bonds (the "Arco Arena
Bonds"). The Arco Bonds carry an interest rate equal to 3-month London Interbank Offered Rate
("LIBOR") plus 0.25% (total rate not to exceed 14%), payable quarterly, until July 19, 2017."
"The City�s interest rate swap transaction entails risk to the City. Actual interest rates may vary
from assumptions made at the time the swap transaction was executed, and the City may not realize the expected financial benefits from the swap transaction. In addition, the potential future exposure to the City relating to the difference in payments between the amount the City receives in connection with any swap transaction and pays pursuant to that transaction, including termination payments or other nonscheduled payments, cannot be predicted."