Righting America

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Investment Consultants: Ark Encounter a Very Bad Bet | Righting America

by William Trollinger

Ken Ham, CEO of Answers in Genesis (AiG), loves to blast critics of Ark Encounter – the fundamentalist tourist site that literalizes Noah’s Flood and the divine drowning of (according to AiG) perhaps 20 billion people – as atheists, secularists, and liberals determined to silence the Ark’s biblical message. But what about those critics who are sober and credentialed financial analysts?  

First, let’s recap.

Ark Encounter opened in July 2016, thanks in good part to the fact that in 2013 the nearby town of Williamstown issued $62m worth of bonds and loaned the proceeds to Ark Encounter to get the project off the ground. This sweet deal, made especially sweet by the provision that over the next thirty years 75% of what Ark Encounter would have paid in property taxes will actually go toward paying back the loan. And if the Ark goes under, it is taxpayers and investors who are left holding that 62 million dollar bag.

Over the past eight months it has become increasingly apparent that things are not going swimmingly for the Ark. While AiG provides little in the way of attendance figures, the numbers that have been provided suggest that it is unlikely that it will attract Ken Ham’s projected 1.4m-2.2m visitors in the first year. Given that once-touted large-scale improvements have been swapped (at least for now) for relatively minor additions to the park, scheduled for 2017, the promise of annual attendance increases – promised in the bond issue prospectus – seems even more unlikely. Perhaps most important, the projected burst in local development that was supposed to accompany the opening of Ark Encounter has simply not materialized.

All this is very bad news for the taxpayers of Williamstown and the investors who bought the bonds. Interestingly, the perils of betting on Ark Encounter were detailed in a prescient August 2016 report released by Gurtin Municipal Bond Management, which is “a registered investment adviser with the U. S. Securities and Exchange Commission.” In this report, entitled “Municipal Credit Update: Williamstown, KY’s Ark Encounter May End Up Sinking Investors,” AiG’s big “boat” is held up as Exhibit A of what dangers lurk “in the deepest corners of the municipal [bond] market,” i.e., “projects that push the boundaries of risk and suitability for a municipal bond portfolio.”  

This three-page report is brutally frank, and very much worth reading in its entirety. What is important to keep in mind when reading their analysis is that these folks are not Ham’s culture war adversaries, but, instead, financial consultants who simply worry that investors do not understand that “not all municipal bonds are truly municipal,” not all municipal bonds are “a safe haven.” We will let Gurtin have the last word, as his analogy seems quite instructive:

As just one example of a project that we believe bears similarities to the Ark Encounter, we would present the case of Marineland of Florida. The harsh reality of the “if you build it, they will come” mentality was felt by investors in the defaulted aquatic park located in St. Augustine, Florida. The expectation was that bond-financed restoration of one of the nation’s oldest aquariums and aquatic theme parks would . . . help Marineland compete with other attractions in Florida. . . . Marineland’s similarly weak economic and tourism characteristics as Williamstown, Kentucky and a debt repayment structure that also relied on ticket sales and concessions . . . ultimately resulted in a bond default and subsequent bankruptcy filing . . . Ultimately, bondholders received $245 for every $1,000 invested.