State continues to struggles to pay Saints
BATON ROUGE, La. -- The state will again borrow the cash needed to make its annual payment to the New Orleans Saints, thanks to a loan arrangement approved Monday, though it's unclear how that borrowing will be repaid or how the state will meet its future obligations to the NFL team.
The state has struggled to pay the Saints for the past few years and has yet to repay the cash it borrowed from an economic development fund last year to make its payment. This time, the state will borrow $10.5 million through a financing mechanism it hasn't used for at least a decade.
Members of the State Bond Commission, which approved the plan Monday, said there were few options available since the Legislature adjourned last week without approving a new tax source for the Saints payment or setting aside dollars in the state's budget to make the latest payment, due July 5.
"We have an obligation that we have to live up to. Some of us may not agree that it's the best contract, but it's a contract we have to live up to. The full faith and credit of the state is behind it," said Sen. Diana Bajoie, D-New Orleans.
The state -- through the Louisiana Stadium and Exposition District which oversees the operation of the Superdome -- will borrow the cash through the sale of a "revenue anticipation note," which assumes that money generated down the line will cover the repayment of the loan.
The head of the LSED and members of the Bond Commission aren't sure where the dollars will come from to repay this loan, however. The Bond Commission's staff, which normally suggests whether items on the agenda should be approved or rejected, didn't make a recommendation on the Saints payment loan, noting that the current money streams available to the LSED aren't sufficient to repay the borrowing.
But the New Orleans area legislators on the money panel said the loan arrangement was preferable to defaulting on the state's agreement with the Saints and allowing them to leave penalty-free. Andy Kopplin, Gov. Kathleen Blanco's chief of staff who sits on the Bond Commission, said the governor backed the plan as a short-term remedy until a permanent solution could be developed.
Sen. Francis Heitmeier, D-New Orleans, said defaulting on the deal would harm the state's economic development initiatives and indicate Louisiana doesn't honor its contracts.
"What we did today wasn't pretty," said Treasurer John Kennedy, head of the Bond Commission. "If you look strictly at the numbers, you probably wouldn't do this, but there's a story beyond the numbers."
The annual payments to the Saints are part of a 10-year, $186 million agreement negotiated by Gov. Mike Foster's administration in 2001. A $15 million payment is due to the NFL team on July 5, and the state was estimated to be about $9 million short because the revenue sources designed to cover that payment -- particularly the New Orleans area hotel/motel tax -- aren't bringing in as much cash as was projected.
The dollars from the loan also will help the LSED pay for insurance costs and other items that haven't been paid while the Superdome commission struggles to make the Saints payments, according to Tim Coulon, head of the LSED.
The debt from the payments to the Saints is compounding. The LSED owes the state economic development fund from which it borrowed last year and must repay this newest loan by Jan. 1, 2007. And the annual payments due to the Saints are scheduled to grow to $20 million next year and to $23.5 million a couple of years later.
The Legislature approved a plan that would put the NFL team in line for some of the tax money generated when slot machines start operating at the New Orleans Fair Grounds in 2007 and thereafter, but officials say that won't bring in enough cash to cover the Saints payments and the money borrowed for them.
"We need a significant amount of money over the long haul," said Doug Thornton, an executive for the company that manages the Superdome, New Orleans Arena and other facilities in the state.
The governor said she still hopes to ultimately renegotiate the deal, but Saints owner Tom Benson has cut off negotiations until after the 2005 football season when the Saints have their first opportunity to negate the current deal with an $81 million payment to the state. The state can opt out of the deal after the 2007 season.
MORE NFL HEADLINES
- Nike Men's Home Elite Jersey New Orleans Saints Drew Brees #9