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[quote=Anonymous][quote=Anonymous][quote=Anonymous]It passed the house of delegates and now goes to the state senate. I hope Louise can stop it over there.

The key phrase in the financing is :”the full faith and credit”. This is a term of art in public finance which means Youngkin wants to pledge the full faith and credit of Virginia towards payment of the bonds (assuming general obligation bonds). This is VERY important because that essentially means that Virginia is promising to use whatever money it has to pay the debt service on the bonds to bond holders and cannot simply default or refuse to pay should the proposed revenue stream (ticket sales, sales tax, property tax, etc) not raise enough at any time to pay the debt service.

Furthermore, this means Virginia would literally need to go bankrupt as an entire state before those bonds could default. This also means every single Virginia tax payer’s money is on the line, no matter where you live in Virginia. The federal government put its full faith and credit behind Fannie Mae issued bonds in the 2000s, and look how that turned out. It’s the main reason the fed had to bail out the banks.

This is serious, and we have a bunch of elected clowns in both parties who don’t seem to really understand the niche of public finance. [/quote]

Virginia could make monumental indemnifying Virginia a condition of the bonds. They'd still be backed by Virginia, but Virginia would have the right to go after monumental in the event of a short fall. All states should do that when teams offer up ridiculous economic analysis to support new stadiums [/quote]

Sure, they can do that, but that does not absolve Virginia of the risk and it's also not the typical turn of events for a full faith and credit to kick in. First, the regular revenue streams would be collected to pay debt service, second usually Monumental would be on the hook, and if they cannot pay then the full faith and credit would kick in. If Monumental cannot pay, what difference does an indemnification make?  You cannot collect money that isn't there.

The full faith and credit of Virginia is an unconditional guarantee, it is used to market the bonds as less risky and thus pay a lower interest rate. It should not be used very often. Mortgage backed securities on HUD loans were backed by the full faith and credit of the United States and people used to joke, they're a sure thing, the country would need to go backrupt for these bonds to fail.... Just because you don't think it could ever be possible doesn't mean it cannot be possible. I have yet to hear from anyone on the governor's or Monumental's teams that is an actual public finance underwriter or attorney. Or from a rating agency. We have a potential $5 billion dollar, tax dollar deal here, with random people who are in the GA voting on it who have zero idea what's going on and what it means. Youngkin is a salesman. If he thinks he's got this all worked out, bring out of the public finance team and have them speak.[/quote]

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