In 2008, the bond-rating agency Moody's warned the city that the national recession was causing a shortfall in state meals and rooms revenues and that other steps would need to be taken to meet the Verizon Wireless Arena's bond payments.
In the December 2008 Moody's report, the agency states the City of Manchester represented it would provide "the interim funding needed to cure any deficiency." The city relies on meals and rooms tax revenues to pay off the bonds.
Communities receive rooms and meals money from the state based on the prior year's revenues. In 2009, rooms and meals revenues dropped - but the state held Manchester and other communities harmless, giving the same amount they received the prior year.
"In the last gasp of Frank Guinta's Administration I find it sad, yet not surprising that the city finds itself in this financial mess thanks to this lame duck. Frank Guinta has had a year to address this issue, but instead of talking with his finance department he is choosing to point fingers. He is again failing to take responsibility for his failures," said State Democratic Party Chairman Ray Buckley.
"And just who told the bond rating agency that the city would cover any shortfall in revenues? And why is Guinta breaking that promise to the bond agencies? Frank Guinta knew a year ago that the arena's bonds were in jeopardy and his only action has been to blame the legislature?" said Buckley.
A reserve account (MADS - Maximum Annual Debt Service fund) was created as a requirement for issuance of the bonds to cover any deficiency between the debt service payment due and the revenue received.
"Why not make up the shortfall from the reserve account? That is why the account was established in the first place," said Buckley.
In downgrading of the arena's bonds, Moody's notes the City of Manchester does not use the entire portion of the meals and rooms distribution to pay its debt service. Of the $4.85 million, the city only allocates $4.39 million to this debt payment. In other words, there is $454,000 going somewhere else that could be allocated to this payment.
"The taxpayers of Manchester deserve answers," said Buckley.
A state law passed in the 1990s mandates that municipalities will not receive an increase in meals and rooms distributions if receipts are below the previous year (RSA 78-A:26). The state shares meals and rooms revenues it collects with the cities and towns. In its 2008 report, Moody's warns that meals and rooms revenues for Fiscal Year 2009 will be below Fiscal Year 2008, therefore the city cannot expect an increase in meals and rooms distribution.
The bond authorization from 2000 also points out the use of meals and rooms revenues "may be inadequate" to meet the city's bond payment obligations.
"The taxpayers of Manchester and the State of New Hampshire have been paying for this arena for the last 10 years through meals and rooms taxes. Now, Frank Guinta wants the taxpayers to foot more of the bill," Buckley said. "The people deserve some answers and the taxpayers deserve a real leader, and not an absent one like Frank Guinta."
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