Refinancing Cowboys stadium may cost Arlington up to $28 million

ARLINGTON — Refinancing $164 million in Cowboys stadium bonds to a fixed rate is expected to cost the city an additional $23 million to $28 million.

The biggest expenses include millions for new bond insurance and fees paid to terminate the existing financing agreement. The city has been trying to refinance the bonds since July.

The bonds have a variable interest rate, which has risen drastically the past few months because of uncertainty in the credit market and a downgrade of the bond insurer’s rating. The interest rates, which had ranged from 3 to 4 percent since 2005, spiked to 9 percent this summer, causing city leaders and the City Council to consider other options. Monthly interest-only payments, for example, rose from $500,000 to more than $1 million.

The city chose variable-rate financing back in 2005 because financial advisers estimated that it would save $20 million in interest over the life of the debt. The financing had saved the city about $2 million in interest over the past three years, but those savings are dwindling as interest rates remain high.

On Tuesday, Deputy City Manager Trey Yelverton said Arlington expects to get a 5.31 percent interest rate, but only after paying millions for bond insurance through Berkshire Hathaway, one of the last Triple-A-rated bond insurance companies.

Getting out of the existing bond financing will not be cheap. The city now expects to pay $7 million, or possibly more, in termination fees. In July, city staff estimated that it would cost $3.1 million to get out of the agreement. The city plans to pay the termination fee with sales taxes and other revenue it has already collected to pay down the stadium bonds, Yelverton said.

Under the proposed refinancing plan presented to the council Tuesday, it would cost the city:

$5.3 million for bond insurance, which covers the debt in case the city defaults on payments and also helps it get a good interest rate.

$9.5 million for a reserve fund, which is about double what the current financing structure required. The fund can be used later to pay down the debt.

About $2 million in closing costs.

These costs would be refinanced with the $164 million debt, making the new debt total between $180 million and $185 million, Yelverton said. The city plans to market the bonds next week.

The city has issued $297.9 million in voter-approved bonds since 2005 to help finance construction of the $1.1 billion stadium. Of that, about $134 million is financed at a fixed interest rate below 5 percent.

Portions of the city’s hotel-occupancy, rental-car and sales taxes are collected to pay down the bonds.