Wednesday, January 08, 2014

The Ark and the Intersection of Faith, Politics, and Finance

After engaging in a quick bit of schadenfreude over the probable failure of the fundamentalist Answers in Genesis (AiG) ministry's - yes, they're the same organization who gave us the Creation Museum - to keep its very-behind-schedule "Ark Encounter" theme park from sinking, the more settled side of me started thinking. The constitutionality of using public financing to promote religious dogma aside, how does something like this get such strong support on little more than overly optimistic promises of future benefits? Kentucky Governor Steve Beshear announced the kickoff of the project back in 2010, providing the following estimates of what it means for tiny Williamstown and the rest of Kentucky:
The project is expected to create more than 900 full- and part-time jobs after its completion and attract 1.6 million visitors in the first year, with the number increasing after five years. Beshear said the park could have a $214 million economic impact in the first year and bring $250 million into the state by the fifth year.
Looks good, right? Here's why those estimates were probably too optimistic. Since it hasn't been built yet, it's tough for anyone to say exactly how attendance will pan out, but there's a couple of more recent examples indicating the numbers Governor Beshear used in 2010 are overblown. First up are the attendance numbers for the Kentucky Kingdom amusement park, which at its peak in 1998-99 never got over 1.4 million visitors. Second are the not-so-strong attendance numbers from AiG's aforementioned Creation Museum; reported attendance in 2012 was 254,074, lowest in four years of steady decline, despite additions to the museum, with a corresponding drop in revenue.
On its 2011 federal income tax return, Answers in Genesis reported a 5 percent drop in museum revenue to $5.1 million. Worse, AIG slumped to its first-ever financial loss -” $540,218. As of deadline for CityBeat's print edition, AIG hadn't provided financial results for fiscal 2012, which ended June 30.
But...900 jobs when completed, right? Given its three-year delay, the finished park is only concept drawings at this time, accessed by clicking "Future Phases" link from the Ark Encounter's home page. Of the namesake Ark attraction itself,
It was originally slated for completion this spring, when $37 million worth of tax breaks offered by the state are set to expire. Now, with construction still not started on Ark Encounter, the earliest it could be finished is 2016, AIG says.
If the planned expansion materializes, it won't be until some unknown point in the future and employment will be mainly low-wage menial service jobs consistent with other theme parks. Given this, the estimation of economic impact is suspect. Admittedly, some of this is hindsight given Beshear's announcement was in 2010, but enough information was there to raise some warning flags. Probably the most telling flag was ignored:
If the Ark Park is such a good deal, why didn'™t any other state want it? Tennessee, Indiana and Ohio already turned down versions of the park, but not Kentucky.
It's at this point that the political environment comes into play. Despite its substantial representation of Democratic politicians, Kentucky is at best purple in its overall complexion. If Democrats want to maintain their representation (even improve upon it, given the upcoming Senate race between Alison Lundergan Grimes and probably Mitch McConnell) they need to win outside of Louisville. This means courting more conservative voters in smaller districts.
Beshear doesn'™t care about the numbers or Louisville. He cares how the Ark Experience plays in Owensboro, Somerset, Corbin, Covington and Pikeville. Beshear is using the Ark deal to drive a wedge between David Williams'™ religious base in eastern, northern and western Kentucky. We can hear the governor now: "œYeah, I know I have a big-city Jewish mayor (sort of) running with me, but I want to show you all with this Ark Park how I'™m one of you." (Wink, wink.) As far as politics goes, it'™s a pretty interesting development, one that could turn Beshear into a two-term governor. Louisville'™s a gimme, so we'™re not getting squat. By appealing to the religious preferences of ultra-conservative voters outside the big metros, Beshear is vying to block any attempt by Williams to take those voters for granted. That forces Williams to put resources into courting voters who should already be firmly planted in his camp, and that wastes Williams'™ time and money.
This sort of gamesmanship wastes money budgeted for infrastructure that could be spent elsewhere and explains why the Ark Encounter project received more favorable consideration from the state than the once-successful Kentucky Kingdom theme park. From 2011:
A few months ago, Ed Hart, Kentucky Kingdom entrepreneur and the park'™s original "œbaby daddy," went to the state with a plan to reopen the regional amusement park, which Dallas-based Six Flags Inc. abandoned in a 2009 bankruptcy. The ambitious plan included a little matter of the state guaranteeing $50 million in bond issues Hart says it will take to reopen Kentucky Kingdom. What Hart got from legislators including Rep. Larry Clark, (Dem., Louisville), wasn'™t just "œno," but "œhell no." The governor never weighed in publicly. So, Hart is negotiating with Metro Mayor Greg Fischer on a more modest $20 million proposal. Yet, last week, the Kentucky Tourism Development Finance Authority voted unanimously to grant œArk Encounter more than $40 million in tax rebates.
But again, that's all pretty much in the past; Kentucky Kingdom is set to be opened back up this year while Ark Encounter is...still seeking funding. To that effect, AiG partnered with the town of Williamstown to generate a $62 million dollar bond offering intended to keep the project afloat.
The town is offering the securities on behalf of Answers in Genesis, a Christian nonprofit that operates the Creation Museum 48 miles away in Petersburg. Bond documents project the Williamstown venue will attract at least 1.2 million visitors in its first year. Investors who buy $100,000 of the securities, which are not tax-exempt, will get a lifetime family pass to the park, bond documents show.
A poor history of repayment for unrated municipal bonds in general combined with offering documents that are less than encouraging and biblically-inspired has caused would-be investors to shy away; reportedly, no institutional investors have purchased the bonds. At the start of the new year, AiG and Williamstown are still around $29 million dollars away from what's necessary:
Even though $26.5 million of securities have been sold, the project needs to sell at least $55 million in total to avoid triggering a redemption of all the bonds, Ken Ham, the nonprofit'™s president, said in an e-mail to supporters yesterday. Without the proceeds, construction funding will fall short, he said.
This bond offering is in addition to other forms of financial incentives provided by the city and state:
The state also agreed to an $11 million interchange upgrade at the KY-36 Williamstown exit off I-75; about $200,000 has been spent on design so far, according to Transportation Department officials. The city of Williamstown agreed to give the project a property tax discount of 75 percent over the next 30 years, and the Grant County Industrial Development Authority gave them almost $200,000 to keep the project located there, along with 100 acres of reduced-price land.
The project's founder and AiG president is apparently in panic mode.
"œWe still need those Ark supporters who weren'™t able to purchase the Ark bonds at closing to prayerfully consider participating in a secondary bond delivery at the level they had indicated to us," Ham said. "œWill you please step out in faith with us?" [...] "œThe associated complications and struggles have been beyond our control," said Ham, who cited impediments such as atheists registering for the offering and disrupting it. "œI urge you to please prayerfully consider the options and help us get this bond offering completed."
There is time for someone to come in and purchase those unrated bonds offered by the small town of Williamstown and its taxpayers to allow the Ark Encounter theme park to be built. It's not unimaginable that some wealthy interests with a Christian predisposition will take on this debt at the last minute as a demonstration of devotion. There is such a thing as faith. There's also such a thing as a sucker being born every minute.