The latest City of Mesa funding plan calls for selling 30-year bonds to build the new Chicago Cubs spring training facility. Money for the payments on this debt would primarily come from the incremental sale of farm land which Mesa owns in Pinal County. City officials claim this land is worth “at least $100 million”. That being the case, wouldn’t it make more sense to simply sell the land now and not be forced to pay interest on the bonded debt? The savings would be at least $72 million over the life of the bonds. The answer, of course, is that the land in Pinal County is not worth anywhere near $100 million and the city is fully aware of that fact.
With regard to the 30 years of payments on this project, obviously, one advantage to borrowing money over a longer period of time is a lower periodic payment on the debt. This is true on home mortgage loans and on municipal bonds. However, there are some drawbacks involved. The interest rate on a longer-term loan is higher than over a shorter borrowing period in both cases; mortgages and bonds. In the case of the Cubs facility there is another consideration – the agreement with the Cubs is only for 25 years with the provision that the Cubs can leave after 20 years by paying a penalty. Does it make sense to still be paying for this development in those years after the baseball team has moved on to greener pastures?
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