The city has sold $26.1 million in bonds that would be used to finance Pilot Field's expansion if Buffalo gets a major league baseball team.
The bond sale is speculative because it is uncertain whether Buffalo will get a franchise, especially in light of recent comments by Buffalo Bisons President Robert E. Rich Jr. in which he questioned whether the area can sustain a team.
The city, however, had to act by the end of this year if it wanted to finance the work with tax-exempt bonds under a 1986 federal law that is expiring. Changes in the federal tax code prohibit cities from selling tax-exempt bonds for stadiums, but the city received an exemption that expires next week.
Tax-exempt bonds are a less-expensive way for government to finance work than their taxable counterparts because bond buyers don't have to pay income tax on the payments they receive and are thus willing to buy bonds carrying a lower interest rate.
City Comptroller Joel Giambra estimated that the city would save $10 million to $15 million in finance costs over the 20-year life of the bonds.
The bond sale allows the city to pay off the bonds in their entirety within 18 months if Buffalo doesn't get a team. Giambra said the city would be out about $300,000 in issuance and interest costs if that occurs.
"In my opinion, it's not a bad investment ansion
-- approximately $300,000 to save $10 million to $15 million," he said.
All but $1.9 million of the $26.1 million in bonds would be used to pay for expanding Pilot Field to 40,000 seats. The total cost of expanding the stadium is pegged at $32 million, and city officials are hoping to make up most of the difference with state money.
The remaining $1.9 million in bonds will be used to cover the cost of building additional bleacher seats for the stadium earlier this year.
The bonds would be paid with the proceeds of a tax levied on hotel rooms in Erie County, if the stadium is expanded. If it isn't and the bonds are paid off within 18 months, the city would use the money yielded from investments made with the proceeds of the bond sale to retire the debt.