Tracey Moody: Ark Encounter $62 Million in Debt

Tracey Moody, writing in Patheos in November of last year, suggests that, behind the grand opening of the Ark Encounter, there are financial concerns that Ham is not being upfront about. As she notes, the Ark 'n Park is being funded by a $62.5 million TIF. What is a TIF?

TIF stands for “Tax Increment Financing” and they’re usually issued in urban areas that are considered “blighted.” For example, suppose there was an abandoned shopping mall in a deteriorating community. A TIF can be set up to attract developers whose businesses may revitalize the area. The district officials could, for example, give the developers interest-free loans to build their project based on what they expect they can retrieve in property taxes over the next 30 years. That’s it. The developers don’t have to do anything differently from if they hadn’t been issued the TIFs at all. But now, rather than the property taxes going back to the community, the tax revenue is diverted to pay off the loan.

This can be a great help to the local economy if the development is a long-term success — it’s money well invested. The downside is, if the new developments fall short of projections (or fail entirely), the developers aren’t held liable for repayment and the burden of debt falls on the investors and taxpayers.

TIFs are controversial for a number of reasons and they’ve been discontinued in California, the first U.S. state to implement their use, because of the numerous lawsuits they led to (not to mention other unintended consequences).

So, at least on the surface, it seems as if Ham and his backers are hedging their bets, just in case the whole operation goes south. There are other incentives that the backers of the Ark Encounter managed to get out of the city of Williamstown, Kentucky (who's city planners plainly want this project to succeed at all costs):

According to Section VIII of the Memorandum of Agreement, in addition to the $62 million, the city and county agreed to other incentives (courtesy of local taxpayers):

$175,000 would be given to Ark Encounter to reimburse the amount they felt the property was overvalued.

$19,000 would go to Ark Encounter’s real estate agent, representing 2% of the total purchase price of the land.

98 acres of Grant County land would be sold to Ark Encounter for $1 (yes, one dollar).

As Moody notes, “These are perfect examples of public funding, regardless of Ken Ham saying again and again that, “No money will be taken out of the state’s budget to fund the Ark.””

There is additional funny business going on.  When Ham states that “No unwilling taxpayer will subsidize the Ark,” he is technically correct. The catch is that the Ark, itself, is the only non-profit portion of the park. Moody elaborates:

Crosswater Canyon, controlled by Answers in Genesis, is a non-profit that owns and operates two for-profit companies, Creation Museum, LLC and Ark Encounter, LLC. All donations for the project come in through the non-profit Crosswater Canyon, but all the tax incentives are applied to the for-profit Ark Encounter, LLC.

The literal Ark itself is the only non-profit portion of the attraction. So all the tax deductible donations people make are applied to the construction of the Ark, which qualifies as non-profit because it is an “educational tool.”

What about the land surrounding the Ark? That’s not technically part of the non-profit part of the park, so your donations wouldn’t apply there… but that’s why visitors will have to pay to park their cars (800 acres of land, and Ken Ham wants to charge people to park) and then pay admission to satisfy the business portion of the attraction.

Moody notes that she is a humanist and, while not antagonistic to Christian concerns, clearly does not share them. The report is fairly dispassionate, however, and her concerns are genuine. She notes that the Park would never survive in the real world because it needed tax-payer funding to succeed. This is, perhaps, true and, perhaps, not. Typically, large, for-profit sports teams get a municipality to pay for their stadiums and arenas because such edifices are, often, massive undertakings that can cost upwards of $100 million to build. For example, the Delta Center, in Salt Lake City (a much less euphonious appellation than ‘The Salt Palace,’ the arena it replaced) cost $93 million to construct, in 1991, which is $162 million in 2016 dollars.  Here in Knoxville, one of the sticking points in getting large, popular bands to come to the city is that, in order to finance the Thompson-Boling arena, on the University of Tennessee campus, a punitive ‘entertainment tax’ was levied on all entertainment in the city, adding up to 20% to ticket prices and to local hotel prices.

All eyes are on Ham and his new wonder attraction.  It will be interesting to see what attendance numbers are and whether it declines in the same pattern that the Creation Museum's has.  

Ark Encounter Hiring Update

Yahoo News is running a story that the state of Kentucky has contacted the organizers of the Ark Encounter in connexion with its CAD designer position.  Chief arkhead Mike Zovath has responded.  Steve Bittenbender writes:

The developer of a Noah's Ark-based theme park in Kentucky said on Wednesday he would fight for his religious rights after state officials warned he could lose millions in potential tax credits if he hires only people who believe in the biblical flood.

Ark Encounter, which is slated to open in 2016 in Williamston, Kentucky, is not hiring anyone yet, but its parent company Answers in Genesis asks employees to sign a faith statement including a belief in creationism and the flood.

It still isn't clear what the job ad actually says. The one I saw did not have a requirement of a statement of faith. This seems to be a case of the state preventing any possible future violations of the law. Absolutely none of this would be an issue, however, if Ham and co. had actually managed to get all of the funding privately. The fact that they are now issuing junk bonds to achieve the necessary funding is an indication that it will be a struggle to get it finished.

Hat tip to Panda's Thumb.

Ark Encounter Sinking, Ham Blames "Spiritual Battle"

As has been reported here and elsewhere, the Ark-n-Park is in danger of not being built because of lack of funding. Recently, The city of Williamstown released some junk bonds to be bought that would provide funding for the amusement park.   Now it seems that the bonds are not selling. Morgan Lee of the Christian Post has an update on the problem:

In a recent fundraising letter, Answers in Genesis (AiG) President Ken Ham claimed that the organization's theme park's current financial woes were "an indication of the immense spiritual battle we are in."

To open the Kentucky attraction, which would include a full-scale, 510-foot-long model of Noah's Ark, AiG must sell $29 million in unrated municipal bonds by Feb. 6 to avoid triggering the redemption of the $26.5 million of bonds that have already been sold.

  As for the reason this might be, Ham suggests it isn't just the money:

Without specifically mentioning any names or reports, Ham also suggested AiG's bond selling process had been sabotaged by atheists and that inaccurate media coverage had in turn led to some of its financial obstacles.

"From atheists attempting to register for the bond offering and disrupting it, to secular bloggers and reporters writing very misleading and inaccurate articles about the bonds, to brokerage firms saying 'yes,' but after reading these incorrect reports saying 'no' in allowing the Ark bonds into their client accounts—the obstacles were numerous and disruptive," wrote Ham. "Frankly, it has been an extremely stressful and frustrating time for all of us."

Ham does not say who these people are.  Nor does he say what the misleading information that is being published is but it is possible he is referring to the Slate article.   The answer may be a bit more mundane than that.  As Mark Chappatta of Bloomberg wrote:

Industrial-development bonds are considered the riskiest municipal debt because they account for the largest proportion of defaults in the $3.7 trillion municipal market. Williamstown issued the bonds without a rating, making the prospect of repayment even less clear.

Mark Stern of Slate elaborates:

As Answers in Genesis readily admits, the bonds “are not expected to have any substantial secondary market” and are “not an obligation of AiG.” Somewhat alarmingly, the bonds are unrated, an indication that they’re extremely risky—and almost impossible to resell. High risk, higher yield: These, in essence, are creationist junk bonds.

Would you buy them? I wouldn't, even if I thought the cause was a worthy one (which I don't).  The funding issues may also be simply be that God is fed up with the Disney-ization of fundamental evangelical Christianity.  Maybe it isn't a war against principalities.  Maybe the park just shouldn't be built.  Maybe God looked at the "Ten Plagues of Egypt Fun Ride" and thought "enough is enough."   Maybe.  

Creation Museum Not Charging Admission For Children Under 13 in 2014

The AP is reporting that the Creation Museum in Petersburgh, KY, run by Ken Ham, is not going to be charging admission for children the entire 2014 calendar year.  From the story:

The free admission to the Creation Museum is for children 12 and under and lasts the entire year.

In an online posting, museum co-founder Ken Ham says the offer is part of the museum's "Standing Our Ground — Rescuing Our Kids" theme.

Since it opened in 2007, the museum has drawn criticism for exhibits that scientists say contradict evolution science.

Ham says the museum has collected about $225,000 in child ticket admissions in 2013, so the offer "is going to significantly impact our bottom line." But Ham said he is hopeful that private donations would fill the gap.

Children must be accompanied by one paying adult.

The somewhat more jaded among us also note that the museum has had flagging attendance the last few years and that this may be a means of trying to boost that. This sort of thing is a common way to get people in the door—restaurants often have "kids eat free" days—and often will bring up profits and raise visibility despite the loss of revenue from the move.  Revenue for the museum was 5.1 million dollars in 2012, in a year in which they actually took a loss for the first time.  Assuming a status quo in revenue, $225, 000 represents 4.4% of the take, so it is not an insignificant amount.  Private donations have been drying up, which is why the construction of the Ark-n-Park is in jeopardy. The issuance of junk bonds for it and this move for the museum, itself, are risky. 

I would like to ascribe the lofty motives that Mr. Ham to the fee waiver and I hope they are purer than they look on the surface.  On the surface, it looks like they are trying to stop the bleeding. 

Slate Opines on Ken Ham, The Ark Encounter and Junk Bonds

Mark Joseph Stern has a piece in Slate that examines the new financing plan that Ken Ham and the Ark Encounter (Ark-n-Park) are enacting to raise money for the endeavor.  He writes:

Before Ham can usher in a new era of mass destruction “to separate and to purify those who believe in Him from those who don’t,” as he wrote in his newsletter to supporters, he’ll need to actually build his ark—and three years after first announcing the project, he hasn’t even broken ground. The project’s first phase will require $73 million in total, and $24 million just to commence construction. (The state of Kentucky generously offered to toss in $37.5 million worth of tax breaks, though those will expire in 2014.) The next phases will require $52.6 million. Thus far, Answers in Genesis has raised $13.6 million—just 10 percent of an optimistic estimate of the total cost. For a while, Ham maintained public silence on the delay.

Then he hatched a plan. As Josh Rosenau reported here, Ham came up with the idea of selling bonds to investors to finance the remainder of the project.  Why is this a problem? 

As Answers in Genesis readily admits, the bonds “are not expected to have any substantial secondary market” and are “not an obligation of AiG.” Somewhat alarmingly, the bonds are unrated, an indication that they’re extremely risky—and almost impossible to resell. High risk, higher yield: These, in essence, are creationist junk bonds.

It is difficult for me to believe, in the current financial climate, that a large number of investors are going to go for this.  Further, as Stern reports, the way the bonds are structured, if the enterprise never gets off the ground, investors will lose everything they invested.  This is a disaster waiting to happen.  If it were me, and I had money to invest, I would certainly steer clear.