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Bishop: Keeping the Pawtucket Red Sox Without Seeing More Red in Providence

Thursday, March 05, 2015

 

We Had Lofty Goals

So what ever happened to ‘Meds and Eds’, to the notion that Providence could grow an even more cohesive version of the Massachusetts 128 circle within its own city limits? The first round of proposals to develop new business on the I-195 land was pathetic, and one obviously can’t wish such an economy into being. But the focus has been dropped in a New York minute for plan B, the ‘Med’ Sox district.

The Speaker of the House seems to have rushed to judgment, favoring the move of the Pawtucket Red Sox to Providence and decrying critics as unduly pessimistic and unwilling to see us invest in ourselves. Easy for him to say when, reading the tea leaves of the new Pawsox owners statements, it appears that the ask is a nice big juicy tax giveaway from Providence. Even if the venture is successful, it is the state that benefits from this project in sales and income taxes, not necessarily the City of Providence.

Exactly how much can a beleaguered city be expected to invest in its ‘je ne sais qua’?

We share a guarded optimism the new City Council signals something other than the business as usual model in Providence. That would be the ‘winner picker’ model in which any signature project gets eternal tax breaks while the city acts as the state’s beggar going tin cup in hand to the legislature.

You Can’t Keep Giving the Store Away and Expect to Stay Open for Business

The Council can insert a degree of sobriety into a process that has doled out breaks at drunken sailor pace without much to show for it in the way of improving Providence’s tax base. Providence should not give the Red Sox, or any other seemingly glamorous project, property tax breaks that exceed 5 years. That is the typical period that it takes to construct, occupy and stabilize a development and move it to permanent financing.

The blight of Providence neighborhoods full of vacant, foreclosed three-deckers is currently fueling interest in a plan to limit property taxes if they are restored. But even that incentive would be limited to 5 years. 

This is a reasonable plan to stabilize Providence neighborhoods but, as can be seen by tracking the progress at Quonset, the short term model is equally effective for large commercial projects. There, the state and the town of North Kingstown have struck a balance when it comes to incentivizing development. The town abates property taxes for the first 5 years for any new construction.  It begins with a full abatement the first year and the assessment increasing 20% per year from there until full taxes are due in year 6.

Some will rightfully scoff that such a bid from Providence, where commercial property tax rates are $36.75 per thousand when North Kingstown’s full rate is  $18.91, simply can’t be as effective as tax stabilization deals that last 10, 15 or more years! That’s true as far as it goes, but the fact is, every time Providence gives longer term tax abatement to any project, it exacerbates the imbalance that has contributed to the high rate in the first place. This is a vicious cycle that has resulted in Providence charging one of the highest commercial tax rates in the country.

We Should All Be In This Together

What’s worse is that these long term tax giveaways often undermine the incentive that their high profile recipients would have had for civic participation aimed at correcting the structural imbalance in Providence’s finances. Wouldn’t it be wonderful to see someone like Mssr. Skeffington, the new PawSox president, apply his considerable lobbying skills to advocating generally lower taxes in Providence? 

Certainly any urban center has to look itself in the mirror and concede that such high tax rates are not solely a product of an eroded tax base, but may represent all form of “chicken in every pot” politics.  If Brown University paid taxes on dormitories and food service that compete with local housing and restaurants, the University administration would at least have to balance the tendency of academia to constantly call for ‘justice’, often a euphemism for taxes and regulation, with the reality that the cost of doing business is an important component of justice. It’s all fine and good to support Jobs with Justice but, by extension, No Jobs is No Justice.

Yet, we have seen developers assert that a lack of subsidized private residential developments will simply lead the schools to build fully tax free dormitories. For years we have mistakenly pursued the notion that the solution is tax breaks for virtually all major residential projects -- rather than confront the political elephant in the kitchen. The state legislature should fix this non-profit virus that infects Providence. Commercial activities to feed and house people should be taxed, whether those are well to do students or the working class.

Some Are More Equal Than Others

For some reason, the legislature found the enlightened will to tax Bryant University in Smithfield, but the signature institutions in Providence continue to escape accountability. And the unintended but traceable result of that failure to act is residential projects in Providence continue to be built out paying a pittance of what other Providence owners pay in taxes. These may serve as faux dormitories, filled with students, or they may simply be dormitories for yuppies. 

Despite his forever young persona, it probably wouldn’t hold to call Buddy Cianci a yuppie. But the dormitory where he lives, “the 903”, has had what is now an 80% tax abatement for 15 years. The owners have just submitted a request for it to be extended, if at modestly less advantageous terms. But on what basis do we give an excessive 15 year break to ‘grow the tax base’ and then entertain a request to extend it just when our tax base is supposed to grow? This is the Providence that existed before the recent election. One hopes that the new council ends the go along to get along attitude toward these overly generous stabilizations and extensions.

A Full Impact Study Is Needed . . . Can we get there from here?

If the city should limit itself to short term incentives, should the state make up the difference for the ‘Med’ Sox or other projects? The state can look at what taxes would actually be augmented by a new stadium without draining state coffers by lowering receipts from other businesses, and offer to rebate those that reflect the increased contribution to RI’s economy. But from that it must subtract at least a pro-rata portion of the immense infrastructure expense that would be triggered by the project.

State ‘planners’ have already ruined the secondary road system in Providence that, unlike the I-way itself, is a mess. No stadium is going to be located anywhere near downtown Providence without having to add literally an additional Point Street Bridge and extend access ramps to eliminate excessive lights and turns impeding entrances to I-195 east and I-95 North and South.  

Economics 101

Asking to take a sober look at a stadium proposal is not a knock on the project, it’s an invitation to get it right. We don’t fail to recognize the tangential value and pride that sports franchises can bring. But, officials must be clearly focused on the absolute need for real economic development in the Capitol City and state.

We wouldn’t be very cosmopolitan if we didn’t at least acknowledge the changing character of minor league stadiums and their yearround commercial integration in urban settings. The new Durham Bulls stadium in North Carolina is a notable model (and subsidized at about the level of McCoy] that sits near an establishment that might be recognizable to Rhode Islanders, the Cuban Revolution restaurant.  The reason the Cuban Revolution is in Durham these days and not Providence, where it started, is that the owner realized his utilities, taxes and permits were literally half as much in North Carolina. But he can sell a Cuban sandwich for the same price or more because North Carolina has an economy and people have money to buy sandwiches. Just subsidizing a stadium doesn’t create the economy to go with it.

Speaker Mattiello speaks about investing in ourselves. But stadiums are discretionary spending. It’s a game of picking winners and losers. Fixing our roads and bridges is an investment in ourselves and that’s why government exists. It would have been better if they got city streets right to begin with, but DOT planners were faced with limited resources – and the situation is not helped by the continuing push for ‘apprenticeship’ legislation to drive out small and non-union contracting. To even consider such policy ignores the reality that the state would be better served by both more aggressive and cost efficient investment in our roads -- amenities consistently embraced by our citizens who foot the bill. States that demonstrate that commitment without punishing taxes have a better chance to attract business without giving away the store. 

As veterans of the long fight against tolls on the Sakonnet we don’t think the sky is falling because Governor Raimondo mentioned tolls again. The state needs not only to fix broken bridges but mitigate congestion on highways and important secondary arteries. . . not to mention its time that our state university could be reached by a highway besides the information highway and that 95 gets connected to the Newport Bridge. What about a ‘138 circle’ with meds and engineers , privately constructed and funded by tolls? But if tolls are instead to become a resource for feather bedding, you can put us down as adamantly opposed.

Likewise, if a per ticket fee can pay Providence the taxes it needs from a new stadium, that is what negotiation is about. But we cannot insulate the Red Sox, or anyone else, from property tax rates in Providence or they will have no incentive to participate in making and keeping them low.

Brian Bishop is on the board of OSTPA and has managed economic intervention at the Public Utilities Commission in opposition to Deepwater Wind for the fmr. Ocean State Policy Research Institute and presently monitors energy policy with the Stephen Hopkins Center for Civil Rights. 

 

Related Slideshow: The Ten Biggest Questions Facing the PawSox Coming to Providence

If the new ownership of the Pawtucket Red Sox want to build a new stadium in Providence, a number of questions need to be answered.  The potential for a major contruction project in the state's capitial city touches upon a number of issues, from money, to politics, to jobs, and development.  

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Owner interests?

What are the owners looking for from the state?

It's been one week since the new ownership group of the Pawtucket Red Sox was announced -- and their intention to look at Providence as a potential new location for the Red Sox AAA affiliate.  How long this has been their plan is unclear but what is more certain is the new owners are considering the pursuit of some public funding to be on the table.  What will they be seeking from the city and state, and how much?  As the state still reels from the failed 38 Studios deal, look to see what might be proposed -- and how the public reacts.  

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Public funding?

How much is the city -- and state -- willing to give?

While the new ownership has indicated that Providence is tops on their list for a new location for the PawSox, there are other cities and towns that could vie for attention. "I said to Mr. Skeffington, if Pawtucket could pull it out, would they be interested, but he said basically if it's not Providence, it would be a broader catch area," said City Council President Louis Aponte, of his conversation with the new ownership.  As the state and its capital city deliberate the best use of downtown real estate -- and the news 195 land -- how much will they be willing to make the new owners happy, especially if they starting pitting Providence against other locales?

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Economic impact?

What is the potential economic impact on Providence?

If Providence is the new home of the PawSox, it gets a ball club that has seen attendance at McCoy top 500,000 for 16 straight years -- only Louisville, Columbus, Buffalo, and Indianapolis have longer streaks.  "Anytime you can draw in on average 7500 people for games, it brings brings value to the state," John Gibbons, Executive Director of the Rhode Island Sports Commission, told GoLocal in January.  "That type of business doesn't necessarily draw in hotel use, but I know those facilities nearby do well when the PawSox play, and I know they bring in tax dollars every night with the sales at the park."  Jobs aside, watch to see who conducts economic impact studies -- and what that means in terms of any negotiations between owners and the city. 

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Jobs retained?

How many jobs will be retained?

Pawtucket's loss is Providence's gain, and the questions is does that go for jobs as well as economic impact.  How many of the existing PawSox job holders will see an opportunity in Providence?  Will the new ownership bring in new vendors, new office staff, new grounds crew? Will there be any downsizing in an attempt to streamline operations?   

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Jobs created?

How many jobs will be created?

One of the bigger questions is will a new Sox stadium create any new jobs in a state that certainly needs them.  Construction of a new stadium would no doubt provide short-term labor opportunities for the buildings and construction trades, but what about long term opportunities?  The development of the 195 land is beginning to take shape after addressing infrastructure needs, and now the city and state are looking to capitalize on the potential to foster high job growth industries.  Does a new baseball stadium fit that bill?  

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New business?

What will get built around it?

The potential location for a baseball stadium that is currently being discussed is the land just to the north of the South Street Landing project, the mixed-use multi-million dollar project will be a new home to a Rhode Island nursing education Center, Brown University offices and graduate student housing as well as a parking garage.  There are multiple 195 parcels on the land west of the river.  Will addition parking options be needed?  The PawSox play approximately 70 home games a year.  Who will step up as potential new neighbors?

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195 Plan?

How does it fit into 195 development?

Governor Gina Raimondo during her campaign called for the 195 land to be used as a manufacturing hub.  “In order to rebuild our economy, we have to start making things in Rhode Island again,” said Raimondo during the campaign. “My strategy will be to take the good ideas coming out of our universities and colleges and turn them into products we manufacture here. We have a historic opportunity with this I-195 land and we have to get it right." There are over eighteen acres available for development -- and Raimondo shook up the 195 commission last month with her own set of appointees, who have yet to make any major moves - as of yet.  

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Transparency?

What level of transparency will be disclosed?

The announcement of the sale of the PawSox to its new ownership group was followed by a press conference led by new owner James Skeffington.  While Skeffington offered ballpark figures for how much a new stadium might cost -- he cited $60-$70 million for other stadiums of its size -- what's unclear is how much the owners paid for the ball club.  If the ownership (whose personal wealth combined totals over $1 billion) seeks public funding, how much will they be willing -- and required -- to disclose about personal financial interests?

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Big picture?

Should Raimondo focus on larger issues?

Rhode Island's new Governor is entering her third month in office, set to introduce her first budget proposal in two weeks, and is facing tackling a projected $200 million budget deficit.  Having recently announced a working group to overhaul Medicaid, following identification of the state's most pressing fiscal issues, can the Governor afford to spend time brokering a deal for a minor league sports stadium?  Raimondo spoke of a state Innovation Institute being the cornerstone of her 195 vision -- will subsidizing a minor league ballpark be a focus of the administration?  

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Track record?

How have other deals performed – Convention Center, Airport, 38 Studios, Produce Market, Providence Place?

Providence hasn't seen major capital projects since Waterplace Towers changed the city skyline following the completion of the Providence Place Mall and the new Convention Center.  Since then, the failed 38 Studios deal has brought into scrutiny private companies being underwritten with moral obligation bonds -- and tax stabilization agreements in the city have similarly undergone scrutiny by the city council and taxpaying public.   Will a look a past projects play a role in the development of a stadium?

 
 

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