Betting the Farm: Restaino Pledges Future Taxes for Centennial Park

Restaino’s Centennial Park project could leave residents footing the bill for decades

Niagara Falls’ leaders might wish to examine what has happened in other cities when they borrow money by issuing municipal bonds for speculative ventures like Centennial Park.

After failing to secure funding, Mayor Robert Restaino plans to issue municipal bonds to fund the $200 million plus arena and pocket park project.

Bonding is like taking out a mortgage. The difference is that a mortgage pledges real estate as collateral, and if the borrower doesn’t pay, the lender takes the property.

Getting a bond involves the mayor pledging the taxpayers as collateral.

Cities typically use municipal bonds to finance roads, schools, and infrastructure improvements.

Issuing municipal bonds adds costs to the city’s budget. These include fees for legal counsel, financial advisors, underwriters, and rating agencies necessary to facilitate bond issuance. Once the bonds are issued, the city must make regular interest payments to bondholders for the length of the bond, which can be, like a mortgage, as long as 30 years.

Pledging Future Taxpayer Revenue

When a city issues municipal bonds, it commits its future income from taxes to cover the payments.

Essentially, the city obligates taxpayers to pay more taxes or see a portion of their taxes allocated to paying the bond investors rather than other public services or projects.

Mayor Restaino’s plan to borrow to acquire the land and build Centennial Park will obligate future taxpayers, some of whom are not yet born, to pay more taxes for an events center planned and plunged into without a feasibility study, without a single event planned, and without an anchor tenant.

Potential bond default, as the city commits future taxes to speculative venture

If the city faces financial difficulties, the burden of repaying bondholders could lead to budget cuts or reduced services. However, if taxpayers move out of Niagara Falls, they will no longer be obligated to pay higher property taxes for what we, at the Niagara Falls Reporter, like to call “Centennial’s Restaino-advanced arena and pocket park (CRAAPP).

Everyone knows that committing future tax revenue to bond repayment for speculative projects with uncertain outcomes, such as CRAAP, carries a risk of failure.

If the project fails, taxpayers will bear the burden of repaying the debt without seeing any benefits.

Financial Prudence: Cities typically use municipal bonds for essential public projects with clear benefits, like infrastructure improvements.

Bonds cost money

For bonds sold for an interest rate of 4.4 percent and paid over 30 years, taxpayers will pay $800,000 in interest, making the total cost $1.8 million for each million borrowed.

If Mayor Restaino issued bonds to cover the cost of an estimated $200 million Centennial Park, issuance costs would equal $2 million, which the bonding company would deduct from the money the City receives.

Issuing bonds for speculative projects impacts a municipality’s ability to bond for roads, sewers, and other infrastructure.

Like a credit limit on credit cards, local governments have debt limits. The New York State Constitution places limits on municipal indebtedness.

Most local governments have a constitutionally established debt limit or statutory limit.

In 2023, The Wall Street Journal highlighted how a sports arena complex in Arizona, Legacy Park, filed for bankruptcy 15 months after it opened, and three years after the Arizona Industrial Development Authority agreed to issue bonds to pay for the park’s construction.

Or consider Houston’s Conroe Hotel and its $142M debt. 

The city issued three separate bonds to fund part of the hotel.

According to city council minutes, Houston’s version of Mayor Restaino, former assistant City Administrator Steve Williams told the council the hotel revenue would pay the bonds and “would not be a burden to the city,” calling the project “an excellent fit for the city.”

He was wrong.

Consider San Bernadino, and a city finance director fired for raising concerns about the cost of bond funding to renovate City Hall.

Barbara Whitehorn was fired as San Bernardino’s finance director because she told the City Council that renovation “has expanded from approximately $80 million to about $120 million.”

Whitehorn said the annual bond payments on interest would be $10 for the next 30 years, primarily to strike the egos of politicians who resemble Mayor Restaino.  She envisions a scenario in which the City Hall renovation would be halted midway through due to lack of money.

It could happen with CRAAP, too.

Will Centennial Park Ever Be Profitable?

According to a 2022 report by Niagara University’s Global Tourism Institute, CRAAP would lose at least $261,000 annually if it had an anchor tenant. Without an anchor tenant it will be much more. Restaino has yet to identify any anchor tenant, and none have been forthcoming.

Who pays for the losses? The city government spends an average of $90 million annually, but has $75 million in annual revenue. CRAAP can raise city expenses by $10 million per year in interest costs if Restaino bonds the entire project.  With taxes already at the breaking point and a steady decline in population, this might be enough to cause the bond to default —as we have seen in other cities.

All for some CRAAP we just do not need.