Farewell. The Flying Pig Has Left The Building.

Steve Hynd, August 16, 2012

After four years on the Typepad site, eight years total blogging, Newshoggers is closing it's doors today. We've been coasting the last year or so, with many of us moving on to bigger projects (Hey, Eric!) or simply running out of blogging enthusiasm, and it's time to give the old flying pig a rest.

We've done okay over those eight years, although never being quite PC enough to gain wider acceptance from the partisan "party right or wrong" crowds. We like to think we moved political conversations a little, on the ever-present wish to rush to war with Iran, on the need for a real Left that isn't licking corporatist Dem boots every cycle, on America's foreign misadventures in Afghanistan and Iraq. We like to think we made a small difference while writing under that flying pig banner. We did pretty good for a bunch with no ties to big-party apparatuses or think tanks.

Those eight years of blogging will still exist. Because we're ending this typepad account, we've been archiving the typepad blog here. And the original blogger archive is still here. There will still be new content from the old 'hoggers crew too. Ron writes for The Moderate Voice, I post at The Agonist and Eric Martin's lucid foreign policy thoughts can be read at Democracy Arsenal.

I'd like to thank all our regular commenters, readers and the other bloggers who regularly linked to our posts over the years to agree or disagree. You all made writing for 'hoggers an amazingly fun and stimulating experience.

Thank you very much.

Note: This is an archive copy of Newshoggers. Most of the pictures are gone but the words are all here. There may be some occasional new content, John may do some posts and Ron will cross post some of his contributions to The Moderate Voice so check back.


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Thursday, August 27, 2009

Overpromising and underfunded moral guarantees?

By Dave Anderson:


One of my long-standing hobby horses has been the financing and guarantee arrangements that back the bonds that have been issued by the Sports and Exhibition Authority to build the new arena for the Pittsburgh Penguins. There is an implied moral guarantee, backing by the state for the bonds that is not automatic as it requires legislative approval for any funds released, and a lot of wishing going on. As I wrote in June, this is convoluted and the value of the implied moral guarantee seems to be inversely related to the probability of the need to use it.



the state of Pennsylvania will actually pay off the hockey arena bonds if the expected cash flow does not materialize. The bond prospectus basically says that the state is responsible for all payments up to $19.1 million dollars per year if and only if the Legislature approves. The guarantee is contingent on Legislature approval.


One would argue that the probability of needing the backing of the state is inversely correlated with the willingness of the state to appropriate a bail-out of an arena project. When times are good, the state would have the money and the willingness to spend the money but the revenue streams from gambling would be strong. In weak times, gambling revenue would collapse, but still would the state's willingness or ability to pay.


The $19.1 million dollars per year is the long term bond repayment rate, this is a fixed cost. The initial arrangement is for the Penguins to make a $4.1 million dollar lease payment to the bond sinking fund and then two streams of casino revenue to kick in two $7.5 million dollar annual payments to the bond sinking fund. The Penguins will fund their portion from normal operating revenues (ticket sales, hot dogs, programs, parking etc). The two streams of casino revenue are laundered a bit. The first is a straight up $7.5 million dollar payment from the owners of the Pittsburgh slots casino license. The second payment is $7.5 million dollars from the state tax collection of gross terminal revenue.

The big problem that I am worrying about is that the gross terminal revenue pool of funds has already been heavily committed to a series of bond measures for major projects. These committments were based on fairly optimistic projections of revenue by the State Gaming Control Board. What happens if casino revenue does not meet expectations?


The first full week of operations had an annual revenue pace of slightly less than $300 million dollars for the first twelve months of operations. This is 16% to 25% below projections. The Post-Gazette reports that the first full weeks of operations have generated $9.9 million dollars in terminal revenue, which works out to be about $260 million dollars per year. More importantly, the take per machine is massively below projections. The problem is not easily solvable by just introducing more machines.



Furthermore, the casino's average taxable win per slot machine was $221 its second week and $251 its first, lower than the $361 it projected and the gaming board's $306 for the first year.


Casino and state officials are cautioning that normal operations, advertising and promotions have not started and that bus loads of seniors and compulsive gamblers will generate enough revenue to meet the state projections at the very least. I am skeptical. Gambling is, for most people, a truly discretionary entertainment expense. As peoples� incomes are put under more stress, the truly discretionary expenses are either reduced or eliminated.


So what happens if the state gambling revenue pool that is backing the arena bond (among others) cannot make all of the bond payments? What happens if the casino owner contribution is reduced because the casino owners cannot meet their other, potentially more senior obligations? What do these questions mean at a time when there is no Pennsylvania state budget, and once there is an approved state budget, it is a barebones, austerity budget with no political willingness to bail-out an arena project. What happens when the value of the implied moral guarantee is at its lowest and the bond holders attempt to invoke it?



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