According to the Muni Bond Watch blog at the Wall Street Journal the current economic downturn appears to be taking a toll on the ratings of municipal bonds issued to finance stadium and arena construction around the country. BondView, a company that tracks municipal bonds, recently reported that 78% of the 4,408 stadium bonds traded in the last month carried a rating of two stars or below. The blog post describes a AAA baseball team and the government agency that operates a minor league hockey arena as unable to service the debt issued to build new sports facilities.
An explosion in sports facility construction took place in the last 10 years. Many of these bonds were issued to finance the construction of minor league facilities. Consumer spending has declined during the “Great Recession,” and this decline in consumer spending appears to have hit some sectors of the professional sports market hard. The possibility of default by borrowers in this market threatens play in existing leagues (a stadium in foreclosure may or may not be allowed to remain open for games) and increases the cost of constructing new facilities in the future.
Hat tip to Skip at the Sports Economist.