The public’s share of the cost of the $720 million Lucas Oil Stadium in Indianapolis just got higher.
The Indiana Finance Authority, which borrowed for the home stadium of the Indianapolis Colts, is paying about $71 million to Goldman Sachs Group Inc. to end an interest-rate swap as part of a bond sale to refinance debt.
The transaction shows how borrowers in the $3.6 trillion municipal-bond market are still extricating themselves from the contracts after the financial crisis caused the deals to backfire. Issuers have paid at least $9 billion to unwind the transactions, which are agreements to exchange floating interest payments for fixed, according to data compiled by Bloomberg.
“They have so much money tied up in sports, I don’t think they care about the taxpayers,” said Pat Andrews, a local blogger and community activist. “They pay $71 million for this, but then they turn around and tell us they don’t have enough money for streets and sidewalks and sewer lines.”
The swaps are bets on interest rates made on debt with yields that reset. They were intended to save money when interest rates rose, but most failed to do so when yields fell as the Federal Reserve kept borrowing costs near historic lows.
The authority is refinancing $273.2 million of debt sold in 2005 and 2007 to finance the 63,000-seat stadium.
The payment to Goldman Sachs is being funded from a $296.5 million bond sale that it lead-underwrote May 4 for the Indiana Finance Authority. The bank also is being paid $34.7 million to unwind a swap on a separate issue to refinance debt sold for the Indiana Convention Center, according to bond documents.
Michael DuVally, spokesman for Goldman Sachs, declined to comment.
The refunding allows the authority to replace the debt with fixed-rate bonds as yields aren’t far from historical lows, Dennis Bassett, head of the authority, said in an emailed statement
“We feel confident that we achieved the goal of reducing a range of financial risks and creating additional value,” said Bassett.
The financing of the stadium prompted local officials to raise hotel, restaurant and rental car taxes, and generated about $43 million of unexpected financing costs related to sports and convention facilities. Officials have previously restructured the debt after the collapse of the auction-rate securities market in 2008.