Bishop: Transformation – So Far it’s All Talk in Providence

Thursday, April 30, 2015

 

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Twenty years ago, if some guy had thrown a dozen woks in the river and said he needed a million bucks for some firewood, we would have run him out of town on a rail for trying to raid the public treasury. But last year you actually voted to shower Waterfire with public money.

Politicians bridle at how difficult it is to come up with economic development ideas that people will actually vote to support. OSTPA maintains this is less of a conundrum than it seems since it is not government’s job to decide what economic development to fund. There is no question that Waterfire has ‘arrived’, but it was an unlikely contender at is inception for public endorsement as a transformative investment. And the investments touted as transformative in that era have fallen short.

In the same era, a few alternative news hounds in Austin started a music festival SxSW, and defied all expectations to get 700 people to attend. 25 years later this has become a festival about festivals, registering almost 100,000 attendees. Focusing as much on the business of music as on musical performance (with a film and tech track as well) has uniquely positioned the event to have an outsized influence. It isn’t just the outlaw status of music in Texas embraced by well known artist and cannabis connoisseur Willie Nelson and lesser known Texas troubadours that fuels interest. The festival has cemented Austin’s reputation as the live music capital of the world, charting the future of a business that has only live performance left to sell.

This is a transformative environment that has caught Mayor Elorza’s attention leading him to propose copying the undertaking with a NxNE festival. Forgetting that Toronto took that moniker years ago, this deserves the same kind of warnings as any speculative financial project, past performance does not guarantee future results. SxSW is a product of its time and place.

Waterfire is rooted in Providence and has burnished the city’s credentials. But it doesn’t really have the firepower of transformative, especially as the term is used by James Skeffington, champion of the new minor league stadium and longtime exponent of raiding the public purse for economic adventurism. It is more than putting butts in the seats – it’s about putting Providence on the map. Little wonder Skeffington refers to some kind of magic beans factor, because even filling his proposed ballpark doesn’t generate economic activity that offsets the gross subsidies he has sought.

What happened to all our previous investment in ‘transformation’

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James Skeffington

As it turns 20, has Waterfire, along with the far more expensive contemporaneous efforts embodied in the $450 million public ‘investment’ in the convention center authority, $100 million in subsidies for the Providence Place Mall (both at Skeffington’s urging), and hundreds of millions more in historic tax credits and property tax subsidies for downtown residential development transformed Providence yet?

OSTPA proposes this simple test. If there really was a transformation from previously touted public ‘investment’, folks would be begging to develop in downtown Providence without giveaways, wouldn’t they? 

Not only does virtually every new project in Providence beg for subsidies, all the existing projects beg to have their subsides extended. Some are on their third round of public assistance. If these were welfare recipients, economists would wonder if their incentive to work had been undermined!

But now we’re told the only thing that stands between us and success is another couple hundred million for a minor league ballpark (the tax subsidies asked from Providence would bring the pricetag that high!). Like the toys we already have, it would certainly be nice, but transformative?

We’re told this is negotiating. It took the Governor two weeks to figure out that giving the land, paying for the stadium and a 30 year property tax giveaway were too much.  Not sure we’re negotiating, unless it is surrender. That proposal didn’t deserve two hours of consideration.

Sitting athwart history yelling “think”.

Despite the cynicism that this project has properly engendered, we intend to take a calm look at whether there is any appropriate public role here. To eschew any public involvement without considering the proposal ignores the reality that our elected officials have consistently seen themselves as serving taxpayers by entering public private partnerships. That is not a behavior we expect to change, we can only hope to encourage better analysis.

Even in this new corporatist economy, there can be benchmarks. The first signal the state should send is, forget the magic beans factor. What new jobs and revenue could reliably be generated from this development? What costs of services and infrastructure must be borne?

It is fair enough to assume that the team plans to move, so it isn’t so much a question of balancing those against jobs and revenue lost in Pawtucket. But, as with gaming, any comprehensive economic model recognizes spending for baseball outings is money consumers divert from other activities. This doesn’t automatically mean the stadium produces nothing, as those other activities could be attending a Pawsox game in Worcester.

Instead of making euphemistic pronouncements about requiring a deal that is good for the state, politicians should define that concept using this comprehensive cost-benefit approach. This still leaves a heck of a lot of wiggle room for more or less optimistic scenarios. But the public will benefit by not having politicians commit us to fund a stadium using purely imaginary money.

Make no mistake, with public awareness high following the 38 Studios debacle, these capital lease plans are moral obligation bonds by another name. Skeffington is, above all else, a public finance architect expert at bypassing the constitutional requirement for a public vote on taxpayer guarantees. Although the state can’t obligate future politicians to appropriate the funds for such leases, if they fail to do so, the state’s access to credit will come under scrutiny and politicians are loath to cut up their credit cards.

William Buckley saw his role as sitting athwart history yelling “Stop”. If there is actually a realistic proposal for a stadium in Providence, our role will continue to be to yell “Think”. We intend to consider the parking, traffic, infrastructure, construction cost and financing concerns soberly, recognizing that Providence’s difficulties don’t arise from a single proposal, nor will they be solved by it. 

Much as we wish Rhode Island would set an example and stick to fixing the roads and let private businesses fend for themselves, the next best thing would be for the state to acknowledge that it’s role is not as an agent of transformation. It’s role is to serve the RI taxpayer. That means it needs to take a careful look at any business seeking subsidies to determine the expected cost relative to what these ventures would generate in taxes. That alone would be transformative in RI.  

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Brian Bishop is on the board of OSTPA and has spent twenty years of activism protecting property rights, fighting overregulation and perverse incentives in tax policy.

 

Related Slideshow: Leaders React to PawSox Owners’ Providence Stadium Proposal

The new owners of the Pawtucket Red Sox presented their vision for a new $85 million stadium in Providence -- including a lease agreement from the state that would require the owners be paid $4 million a year for the thirty year duration.

Now, elected officials and business leaders are weighing in on the initial proposal by the ownership group -- see below.  

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Gary Sasse

Former Rhode Island Director of Administration, Executive Director of the Rhode Island Public Expenditure Council, and Founding Director of the Hassenfeld Institute for Public Leadership at Bryant University

"A minor league ballpark may not be an economic game changer. Thus it's cost and benefits must evaluate environmental, cultural, social and economic factors. The key point is any stadium should be consistent with the overall strategic development of Providence. This story has not been told yet."

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Edward Mazze

University of Rhode Island Distinguished Professor of Business

"I would like to see the PawSox stay in Rhode Island. I do not think Rhode Islanders should pay for a new stadium for the next several decades or see Providence not collect taxes that could make it to a better city.....with better schools, lower property taxes and a lower automobile tax. To support the current proposal, there has to be tax payments to Providence, a financial deal with Pawtucket by the owners or the state to deal with the empty stadium and the owners paying for the new stadium with little in the way of state government assistance.

If there is state government financing assistance, there must be a guarantee that the team would not leave the state for the length of time of the financing. It would be interesting if the owners would consider selling "seat licenses" as a way of raising funds to build the stadium. This would be a real market test as to whether or not there is a need for a new stadium."

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Monique Chartier

Spokesperson, RI Taxpayers

"The Paw Sox owners have asked the City of Providence for a waiver of property taxes.  But the last thing that Providence needs is to remove yet another property from tax rolls.  City Council President Luis Aponte's request that state taxpayers make up lost property taxes is understandable but out of the question, especially in light of the state's own very serious budget deficits.

Governor Raimondo has correctly pointed out that the state has very limited resources to invest in economic growth.  These limited resources cannot go to develop prime public land into a very seasonal use that will have minimal impact on the economy at a substantial cost to local and state taxpayers.  Our state leaders must say no to this project and return to the vitally important work of helping ALL businesses, not just one, by improving the state's tax and regulatory climate.  We as a state can consider whether to participate in the luxury of a sports stadium as soon as our economy is healthy again."

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Pam Gencarella

Spokesperson, OSTPA

"If Skeffington and his very wealthy partners want the PawSox in Providence then they should put an offer on the table that covers all of the costs to make it happen. They must provide revenue to the state for the land that they want to develop, and property tax revenue on its full value to the capitol city."

Pictured: James Skeffington

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Mike Stenhouse

CEO, RI Center for Freedom and Prosperity

If the team is seeking taxpayer dollars, then taxpayers should get something in return, whether a share of equity or a slice of team revenues. For example, the federal government received equity for its investment in GM, while the Green Bay Packers are owned by citizen shareholders. It's not beyond possibility; let's find a way to make it happen."

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Terrence Hassett

Senior Deputy Majority Leader, Providence City Council

"I believe the stadium is beneficial to Providence and the state. The parking capacity must be resolved in favor of the stadiums' fans that is fair and reasonable. What events and other uses are not being presented which I find troublesome. A stadium is a great venue for families, colleagues and generally, baseball fans to enjoy. A $120 million commitment from state taxpayers is a large role asked of them wherein the return on the participation is not convincing to date."

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Aaron Regunberg

Rhode Island State Representative, (D-Dist 4, Providence)

"For me to support a deal, that $120 million figure needs to come down dramatically, and a strong community benefits agreement needs to be reached. I also think it would be reasonable - if the state is making a significant public investment in the project - to see the state receive a portion of the profits from the stadium."

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Laurie White

President, Greater Providence Chamber of Commerce

"It is still in the early innings. The chamber was briefed on the proposal on Friday and we expect that it is subject to change. Conceptually, it is very exciting. Awaiting further details."

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Gina Raimondo

Rhode Island Governor

"The PawSox are an important institution in Rhode Island and our goal is to keep them in the state," said Raimondo. "The idea of a stadium in downtown Providence that can be used for multiple purposes is exciting. That said, my top priority is getting Rhode Islanders back to work, and we have very limited resources to invest in economic growth - especially in the face of a large structural deficit. I am committed to working with Mayor Elorza, the Speaker, and the Senate President to evaluate whether this project is in the best interest of Rhode Island, and whether we can afford it."

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Stefan Pryor

Rhode Island Commerce Secretary

"We hope and aim to keep this treasured team in Rhode Island. The project has the potential to enhance the vitality of a key district within our capital city. At the same time, this proposal involves a significant request for public resources. In collaboration with the City of Providence and the General Assembly, we will review this proposal in order to determine whether it makes financial sense and whether it will help catalyze the I-195 corridor." 

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Nicholas Mattiello

Rhode Island Speaker of the House of Representatives

"We have not received a written legislative proposal yet, but when we do, it will be thoroughly analyzed.  I will be talking to my House colleagues and I will gauge public opinion before making any assessment on the direction the state should move in."

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Teresa Paiva Weed

Rhode Island Senate President

"The proposal that has been presented by the new owners of the Paw Sox to build a professional ballpark in Providence potentially represents a significant investment in Rhode Island. The proposal will be fully analyzed by the full Senate in a thorough and transparent process.”

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Jorge Elorza

Mayor, City of Providence

“The prospect of keeping the Red Sox’ Triple A team in Rhode Island represents a significant and exciting development opportunity for our city and state. We have coordinated to develop guidelines that ensure a thorough analysis of the stadium proposal.  As Mayor, I am committed to continue working in close coordination with Governor Raimondo, Council President Aponte, our leaders in the General Assembly and the I-195 Commission as we move forward to make Providence and Rhode Island a better place to work, live and do business in the long term."

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Luis Aponte

Providence City Council President

“The stadium has the potential to be catalytic and transformative in the way residents and visitors experience Downtown Providence. With the promise of drawing hundreds of thousands of spectators annually to the city, the stadium could help spur development of the nearby I-195 parcels, and generate additional revenue for the city and the state. We are committed to working with the Governor, the General Assembly, and the developers to ensure the project aligns with our goals and vision for the city, and that it is a good investment of our resources.”

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Donald Grebien

Mayor of Pawtucket 

"Perhaps the state should consider buying the franchise and reinvest in Pawtucket. It would be more cost effective and the state would have ownership at the end of the deal," said Grebien Communications Officer Rico Vota.  "The Mayor has received many calls, emails and postings from fans throughout the state that do not support this current proposal. He is very careful to make sure that his decision is not solely based on the fact that he represents Pawtucket who would loose this valuable, historic ballpark. As someone who comes from the private sector, this deal only makes sense for the new business group and not the state of Rhode Island in its current structure."

 
 

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