Quote:
Originally Posted by Strange Brew
If the City has a lower cost of borrowing than the Flames then why shouldn't the benefit of the spread accrue to the City instead of the Flames?
If the City gets in the middle of that transaction, where is the benefit to them? If you are starting a business and need a $1 million to start and you come to me for the money saying " hey the bank will give you a lower rate than me, so why don't you borrow the money and I'll pay you back". Why would I incur the credit risk in that transaction without a benefit?
This seems like a minor issue in the whole scheme of things so I hope no one calls me small minded for asking this question. But to say there is no impact of the City essentially guaranteeing this debt, well that is wrong. In addition to credit risk it could well increase their future costs of borrowing.
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Your comments aren't exactly 'wrong' but they are at least misleading, if not inaccurate.
No one said there is
no impact, but the impact is (under normal circumstances) negligible to non-existent.
It would not affect their credit rating, and it would not increase their future cost of borrowing
UNLESS
they are already near their credit limits and/or have already saturated their name in the markets. And here's the thing, if that were the case, then they would simply not be willing to discuss the issue.
Why would they do it? As a bargaining chip. It would reduce one cost of the project and if they had a brain, they could agree to that in exchange for other considerations.