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Official wants more county control of Sports Authority

Hillsborough Commissioner Jim Norman wants greater county oversight of Tampa Sports Authority finances after learning of a controversial investment deal the authority made four years ago.

County officials fear the arrangement could result in big losses. And because the county and city of Tampa are responsible for any financial losses of the Sports Authority, they say taxpayers could end up taking the hit.

"We have no say, but we have to write the check," said Norman, who serves on the Sports Authority.

Sports Authority Executive Director Henry Saavedra disputes that the deal the Sports Authority entered poses a risk for taxpayers. And he said he does not think the county needs more review powers over the authority, which manages Raymond James Stadium, Legends Field and the county's public golf courses.

"On day-to-day investments, we ought to continue what we've been doing in the past," Saavedra said.

Norman presented what amounts to a six-point plan to authority members Tuesday. It would require County Commission approval of all contracts and agreements relating to the Sports Authority debt, any contracts not related to the golf course that involve more than $100,000, the authority's budget and even its selection of an auditor.

"From my perspective, there's no hardship in that," Norman said. "It's accountability."

It was not immediately clear whether Norman's proposal is going anywhere. None of the authority's other members expressed support for his idea. They would have to agree to the proposal.

Norman's ire was piqued in recent months after learning from county staff members that they were unable to essentially refinance the debts taken on to build Raymond James and take advantage of better interest rates. The roadblock was the disputed investment deal.

The Sports Authority issued three sets of bonds in 1997 to build the stadium. They will be paid off over 30 years with the Community Investment Tax, state sales tax and tourist tax dollars.

Insurers required the Sports Authority to have a $14-million reserve as a safety net for two of the three bond issues. That money was invested.

Three years later, Morgan Stanley & Co., the authority's financial adviser on the original bond sales, proposed that the authority sell the rights to reinvest that money, and make a profit in the process.

The proposal was put out to bid. Lehman Brothers Special Financing Inc. won the job.

Lehman Brothers paid the authority $715,000 for an option to reinvest the reserve money any time before 2027. The company agreed to guarantee a 5.45 percent annual return, slightly better than their rate of return before.

Money for nothing? Not quite, says the county's debt manager.

"It's not a deal I would have done, and I certainly wouldn't have done it this way," said Mike Merrill, the county's director of debt management.

His problem came first with the refinancing of the original bonds. The Lehman Brothers deal required the Sports Authority to pay the company to terminate the agreement, which would have been necessary for the refinancing. The county estimates that would cost about $1.6-million, which would have wiped out any savings from the refinancing.

The agreement also gives Lehman Brothers flexibility in how it reinvests the reserve fund. For example, if it can provide the same annual interest payment to the Sports Authority with an $11-million investment, it could keep the $3-million difference. The county think the market would allow this around 2009. That's one way the company can make money off the deal.

That would leave the reserve fund lower than is required by insurers. The fund would need to be replenished. And since the Sports Authority now routinely runs a deficit, that obligation would fall to taxpayers.

On Sept. 2, Merrill and several of the county's financial advisers and lawyers met with representatives of the Sports Authority and their financial advisers from Morgan Stanley. Morgan Stanley officials said the county's concerns were overstated.

Nevertheless, they said they have reached a tentative agreement with insurers to waive the $14-million reserve amount requirement, and Lehman Brothers has agreed that, by the time the deal expires it 2027, it will return the original $14-million.

They said the agreement would be modified to make it easier to refinance the bonds.

"There's no $3-million, $5-million or $10-million loss," said Saavedra on Tuesday, likening the whole arrangement to the Sports Authority simply investing in certificates of deposit.

This is nothing like a certificate of deposit, Merrill said. The county was never consulted about the investment, despite risks to the county, he said. Norman's proposal would change that in the future.

He said he's skeptical that the insurers would agree to loosen their reserve requirement, which is standard in the industry. And he's skeptical that Lehman Brothers would agree to new terms. Those things have financial value.

"That's like someone ordering a T-bone steak at a restaurant and getting a side salad instead," Merrill said. "Someone's making it up somewhere."