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Hockey arena: Expert offers grim prediction if lawsuits not settled

By John Craven, Reporter, JCraven@wfmz.com
Published On: Apr 24 2012 04:09:55 PM CDT
Updated On: Apr 24 2012 11:27:47 PM CDT
ALLENTOWN, Pa. -

A national expert is warning that if two lawsuits threatening Allentown's downtown hockey arena are not resolved soon, it could cost everyone millions of dollars extra. Or worse, leave the city with a giant hole in the middle of center city.

For now, Allentown's hockey arena site is just a pit in the ground, but if the lawsuits against it aren't settled soon, it could become a giant money pit.

"It will slow things down for sure," said Matt Fabian with Municipal Market Advisors, a 20-year expert on such projects who regularly appears on national business news programs.

With lawsuits over the project's financing looming, Fabian said it will be nearly impossible for Allentown to sell the $220 million in bonds it needs to finish the project.

"People are worried about the city no longer being able to repay them, based on this lawsuit," he said.

Think of it like a home or car loan. Before the bank will give you money, you have to prove you can pay it back.

It's the same with the arena. With the project's whole financing stream under attack, Fabian said, even if investors do lend Allentown money, the interest rates could be substantially higher -- raising the cost for all of us by millions.

69 News asked Fabian: "If the lawsuits are not resolved, is the project sunk?"

"Well, from the bond market, the odds become much longer," he replied.

According to Fabian, the "Doomsday Scenario" is the whole Neighborhood Improvement Zone -- designed to pay for the arena -- getting struck down by the courts. That zone funnels all state and local taxes, except property taxes, back into the project. The money will not only pay back arena loans, but also help developers who build near the arena pay down their own construction loans.

Fabian said contractors could also sue the city for significant delays. The city of Allentown cited nearly $197 million in contracts that are already executed in a counter-suit filed Monday against developer Abe Atiyeh, who has filed a legal challenge alleging the NIZ is unconstitutional. Two suburban townships have filed an identical challenge, and several more municipalities have voted to join that suit.

The townships that are suing have said they don't want to destroy the project or raise the costs for everyone. They simply want to negotiate a better deal for their taxpayers.

"Everyone wishes this project much success," South Whitehall Twp. manager Jon Hammer said last week. "I think we need to get at a table get at a table soon and start hammering out these details."

Allentown Mayor Ed Pawlowski has spent the past few weeks attempting to negotiate a settlement with the suburbs. A vote on that offer was expected at the Hanover Twp. (Northampton Co.) Supervisors' meeting Tuesday night, but that group's chairman told 69 News a vote is unlikely at that meeting because supervisors have not had enough time to review the mayor's latest offer.