LOS ANGELES -- This week's disclosure that a $50 million funding shortfall could delay the opening of the Walt Disney Concert Hall is not expected to have a credit impact on the project's parking garage, which was financed with Los Angeles County-issued lease-backed obligations, market participants said yesterday.
Characterizing the concert hall funding shortfall as "a bump in the road," county assistant administrative officer Sharon Yonashiro said "it is of concern [but] not unusual for this type of project."
The concert hall is to be built on top of a subterranean 2,500-space parking garage financed with a portion of $116 million of certificates of participation issued by the county in January 1993.
The garage, for which ground was broken in late 1992, is under construction on county-owned land in the Bunker Hill section of downtown Los Angeles, across from the landmark music center.
Construction of the 2,350-seat concert hall, designed by architect Frank O. Gehry, was scheduled to begin in mid-1995 and be completed in 1997. Originally projected to cost $130 million, the concert hall will now cost $180 million, it was revealed this Continued from front page week.
The higher price tag was attributed to rising material costs, tougher building codes for steel-frame buildings following last January's southern California earthquake, and a drop in competitive bids from construction firms because they are busy with quake repair jobs.
Press reports said Los Angeles County Music Center officials, who are overseeing the concert hail project, are scrambling to find an additional $50 million in private donations, and they expect a maximum six-month delay in opening the concert hall. The project was inaugurated in 1987 when Disney widow Lillian B. Disney pledged a $50 million gift, which she and her family subsequently have expanded to $93 million.
The parking garage is being financed with certificates in a transaction unrelated to concert hall funding efforts. Proceeds from the certificates funded the $81.5 million parking garage, street improvements, $13.7 million of capitalized interest, an $11 million debt service reserve fund, and costs of issuance.
Four years of capitalized interest, which extends to February 1997, were structured into the COPs so that the revenue stream from parking fees would begin "about the time the concert hall would open," Yonashiro said. But, she said, the garage "can function while the concert hall is under construction."
The garage is expected to open and begin collecting parking revenues as early as 1996, while symphony hallrelated construction takes place above it.
"Revenues from the garage are a source of income to the county to offset our costs of debt service on the certificates," Yonashiro said. "But the certificate holders can look to the county for their payment, not the garage revenues."
From Fitch Investors Service's perspective, the certificates' security stems from the county's covenant to budget and appropriate funds to repay the certificates during the 30 years they are outstanding, "regardless of whether the parking garage is generating enough revenue," Fitch senior vice president Amy S. Doppelt said yesterday.
"We would never look to a parking facility to be self-supporting," said Doppelt, who said Fitch rates the certificates A-plus. "Parking revenues tend to be pretty volatile."
Referring to the concert hall, she said, "A project like this, with privatepublic involvement, is subject to all sorts of delays and legal snags."
"Nobody is worked up" about the possibility of a concert hall delay, said Richard M. Jones, a partner with O'Melveny & Myers, which served as co-bond counsel on the certificates transaction. "The county has not called and said, 'We better have a meeting.'"