Mar 3, 2014

Creationists sell enough junk bonds to build an ark

Against formidable odds and with dubious financials, Ark Encounter LLC has raised sufficient funds to start building a 510-foot replica of the most famous boat in the Bible.

Ken Ham, the young earth creationist behind the project, made the announcement last week, in an online video presentation. After more than three years of planning and some delays, the construction of the ark is about to begin. Groundbreaking is scheduled for May and the new museum and 800-acre park in Williamstown, Kentucky, 50 miles south of Cincinnati, could have its grand opening as soon as 2016.

"Other than the cross, I believe the ark of Noah is the greatest message, the greatest reminder of the message of salvation," Ham said in the announcement. "The funding is in place for Phase 1 to begin, the construction of the Ark Encounter project."

Details about the funding are still vague, however.

It is unclear how much money has been raised for the project, which is estimated to cost over $120 million before completion. Neither Ham nor the vice president of advancement, Joe Boone, nor anyone else at Answers in Genesis mentioned specific dollar amounts. In addition to the usual fundraising strategies, the Ark Encounter, which is organized as a for-profit corporation, is being funded in some unorthodox ways. In cooperation with the city that will be the site of the future museum, the corporation has offered $62 million of junk bonds to potential investors.

One unanswered question is how much money was brought in by the sale of junk bonds.

Designs for the first floor of the reconstructed ark, "signed" by Noah.
At the beginning of the year, Ham was pleading with creationist supporters to buy up unrated, unsecured municipal bonds that had been offered, but not guaranteed with any collateral, by the city of Willamstown.

Junk bonds are a very risky financial investment with only limited earning potential. There is a $3.7 trillion market of municipal junk bonds in the US, but they have a bad history according to investment experts. The risk is generally considered disproportionate to the possible reward. Municipal junk bonds financing industrial development such as the Ark Encounter project are the most likely to default, making them a risky investment even for a risky investment.

The official investment guide for the ark-museum bond offering listed 39 risks to investors. If the project failed or failed to turn a profit, investors would see no return. Neither the city offering the bonds nor the creationist non-profit behind the project, Answers in Genesis, would be liable for losses.

If the project is successful, in 15 years, investors are projected to see a yield of only six percent, according to Bloomberg News, which would be reduced by taxes to less than four percent. That is significantly lower than other, similar investments.

Nonetheless, Ark Encounter LLC raised $26 million in an initial bond offering. Supporters of the project also donated an additional $13 million, give or take, by the beginning of 2014. Phase 1 of the building was priced at $73, however, and without an infusion of more capital, the project was expected to fail by February.

A second offering of $29 million of junk bonds was offered in an attempt to save the ark.

Ham, selling that second batch of bonds in early January, was asking supports to "step out in faith" and "prayerfully consider participating."

Enough of them did that the project was saved and is going forward. Representatives for Ham's creationist organization did not answer questions, however, about how many stepped forward, or with how much capital.

The Associated Press reported that the total bond offering came to $62 million, but, according to a vice president of Answers in Genesis, all the bonds were not sold. "The figure is less than $62 million," the wire service reported last week, but "the minimum funding requirement was achieved."

The minimum requirement may have been $55 million.

Bloomberg News reported in January that the two ark bond offerings had to bring in a combined total of $55 million or else a redemption would be triggered, returning money to investors. If that's correct, then the announcement the project is going forward signals that all $29 million of the second batch of junk bonds were sold by the February deadline, in addition to the $26 million sold previously. It would seem from the announcement, that when supporters decided to step out and contribute capital to the ark reconstruction "in faith," they bought at least $55 million ark bonds.

Neither Ham nor Boone specifically gave any numbers, though.

Boone did say, in the announcement at the non-profit creation museum affiliated with the ark project, that it's "always a challenge working through the (fundraising) process, you know particularly with the ark bond offering that was in place."

He said that atheists and secularists -- journalists and bloggers -- attempted to disrupt the process, both by deceptively registering to buy bonds under false names and by putting out false information, specifically about the tax rebates the project is slated to get from the state of Kentucky. "It's quite amazing what we had to deal with," Boone said in the online announcement.

Ham said the opposition was motived by an anti-Christian bias.

"It's amazing the intolerance they have for us, because we're Christian," he said. "God is a God of miracles, and He provided anyway, and in miraculous ways."

The infusion of capital into this project would certainly appear incredible. Ark Encounter LLC seems to have sold $55 million of very questionable investments, including $29 million in one month. Additionally, more than $1 million has been donated to the ark replica since the beginning of the year. This brings the donations total to nearly $15 million, and the capitalization of the Ark Encounter project to an estimated $68, only about $5 million short of the original Phase 1 goal.

The widely publicized debate between Ham and science popularizer Bill Nye, known as "The Science Guy," may have had a role in bringing in the last-minute rush of funding. In a statement, Ham said the attention to the project came at a critical moment. On his blog, however, Ham downplayed the importance of the debate, noting that the bond offering closed before his confrontation with Nye.

The people behind Ark Encounter expect that up to 2 million people will visit the museum and park in its first year. In a study commissioned by the group, two-thirds of Americans said they would be interested in visiting the site.

At the affiliated creation museum, however, receipts have dropped off by nearly $1 million since the grand opening in 2007. Ham has protested that this is still "way above projections," but the creationist organization's tax records show that in a good year, financially, the museum still operated at a loss of about $3 million.