Wednesday, October 19, 2005

Overture Refinancing: Coda

by Tom Bozzo

The refinancing plan for the Overture Center ended up passing the city council by an ostensibly veto-proof 15-5 margin after all. The meeting was live-blogged at the Isthmus Daily Page site by Kristian Knutsen, if you want fuller details. The Cap Times is reporting that the mayor may nevertheless veto the measure, and that Ald. Austin King (who voted for the refinancing plan) has indicated he wouldn't vote to override a veto, so the question is whether a couple other alders would behave likewise.

Now, I couldn't tell you whether the Overture trust will clear its rate-of-return hurdle even if I knew the details of its investments. As was seen in the Social Security privatization battle, predicting forward-looking returns is unavoidably contentious, and even if you could reliably predict expected returns, the realized returns' deviations from expectations matter — as Mayor Cieslewicz and the council's fiscal hawks emphasized. (And, echoing a point I made yesterday, he had stressed results from the city's fiscal efficiency auditor that the city bears especially large risks from poor near-term returns.)

What's basically incontrovertible is that the trust is undercapitalized. I'm inclined to agree with David White of AFSCME, who according to the Cap Times:
Reject[ed] claims that it would be easier to raise money for the facility if it were not part of the city as nothing more than "a talking point," White also said he did not trust markets in the next few years to deliver returns consistently above 8 percent.
Assuming the plan goes forward, the ball is in the foundation's court to put some action behind the assertion that the existing structure can do more for Overture than city ownership, raise some money, and thereby reduce the taxpayer's risk the old fashioned way.
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