The money is finally in the bank. With months of lawsuits and delays now behind it, Allentown now has all the money it needs to build its multi-million dollar downtown hockey and concert arena. The city raised the entire amount -- about a quarter billion dollars -- in just four hours.
The news means it's now full steam ahead for the arena.
Mayor Ed Pawlowski (D - Allentown) believes it will remake a downtown that's been in decline for decades. The project also includes a hotel and eight-story office building and parking garages. Lehigh Valley Health Network has already committed to placing a sports medicine center in the building. Private developers have also committed to other projects around the arena at Seventh and Hamilton streets.
"This is really an historic moment for the city of Allentown," Pawlowski said in a conference call Tuesday afternoon, just hours after the deal closed. "We really now have all the necessary funding to move full steam ahead on this arena project."
You might think of the deal like your own 30-year mortgage. Investors lent the project $224 million by buying bonds. The arena authority has to pay that back at 4.77% interest. That brings the grand total to more than $444 million over the 30-year loan.
While that may sound like a lot, it's actually less interest than the city expected. It got a better deal because so many investors wanted in.
"There were more investors than actual bonds available, and that allowed us to lower the interest rates even further," said Scott Shearer with Public Financial Management Group, who is advising the city and its arena authority on the deal.
In fact, demand was so high, the project got an extra $8.5 million for free -- a premium investors paid to get on board.
"Other buyers had be turned away, because there was so much demand for these," said Pawlowski.
So why such high demand? Many projects like this only pay around two percent interest, or less. Major investors likely jumped at the chance for a higher return with not much risk, since tax revenue generated around the arena zone will pay back the bonds. As more businesses move in, more tax revenue will be generated to pay the loans back.
So now that the money is in place, when will see the building go up? Pawlowski said contracts are now being finalized, and there's still plenty of foundation work left to do at the site.
"It probably will be at least several months before you'll actually seeing steel," he said.