I Will Vote Against Current PawSox Deal: Guest MINDSETTER™ Sheehan
Monday, November 06, 2017
The cost is estimated at $71 million, which will be raised through the sale of revenue or moral obligation bonds. Three parties would share the expense to be paid off over 30 years. The state would pay $23 million, the city of Pawtucket $15 million and the team owners $33 million, in addition to a one-time equity contribution of $12 million.
In this recent proposal, Rhode Island would shoulder the lion’s share of the risk. While proponents argue that there is no legal requirement to repay moral obligation bonds, we have learned through the painful 38 Studio’s experience that public agencies are essentially too big or important to fail. Therefore, the state would serve as the ultimate backstop should Pawtucket, the team or the league fail to meet their obligations. Given the declining attendance at McCoy Stadium, this could be a realistic prospect over 30 years. Even in the medium term, it is difficult to predict if the team will continue to have sufficient operating income and cash flow capacity to support its portions of the projected debt service.
Much has been said about how Pawtucket stands to gain in economic development. The city predicts that the bulk of this revenue would derive from taxes generated from the stadium and business development. However, the most reliable research on publicly-backed stadiums has concluded that new sports facilities have an extremely small effect on overall economic activity and employment. That is why reputable economists have concluded that the public return on investment in sports facilities is minimal at best.
Should Pawtucket not realize additional tax revenues, the city could be in serious financial trouble. To ensure that it may make its debt payments, Pawtucket has pledged its state-based financial aid (minus money for education). I worry that this is an imprudent gamble which could seriously harm the health and welfare of the residents of Pawtucket. I am also skeptical that this pledge would shield the state from additional financial exposure, since I do not believe the state would sit idly by while the people of Pawtucket suffer. In this instance, the state likely would assume the city’s share of the debt payments.
Another unknown variable is how much it will cost to acquire the old Apex property. As a hedge against a high asking price by the current owner, proponents have proposed a very troubling change to the eminent domain law. Under current law, a property must be deemed “substandard” or “blighted” in order for a redevelopment agency to seize it by eminent domain. However, since the old Apex property is neither blighted nor substandard, the change to the law is designed to permit the Pawtucket Redevelopment Agency to seize the old Apex land to push the PawSox stadium forward should the asking price of the Apex property rise too high. This would open a Pandora’s Box for the unjust taking of people’s homes or businesses around the state.
Lastly, monies raised through bonds and used for the benefit of well-to-do business people translates into money that could be used for a higher purpose, such as for economic incentives that would yield better paying jobs. We hear a lot about the jobs that will be generated by the building of a new baseball stadium. However, many of the better-paying jobs would be in construction and, as such, be short-lived. The jobs generated at the ball park are seasonal and most often low-paying. Even Minor league baseball players are among the worst paid professional athletes in America. The pay is so low that a bill was introduced in Congress in 2016, ostensibly at the behest of wealthy team owners, to say 7,500 minor league players are not entitled to either minimum wage guarantees or overtime pay, even though most are working 60 to 70 hours a week!
Unless substantive changes are made to the current Pawtucket Red Sox stadium legislation, I will be voting against it.
The author, James Sheehan of North Kingstown, is a state senator representing both North Kingstown and Narragansett.
Related Slideshow: 7 Questions the PawSox Need to Answer in Hearings
Who is responsible for the environmental clean-up costs?
As GoLocal exclusively reported in May, the owners of the Apex site in Pawtucket and the previous owners are battling in Superior Court over indemnification provisions from more than $6.4 million in environmental clean-up costs tied to the land being eyed for the new PawSox Stadium.
The two parties include Andrew Gates of Apex Development Company who purchased the property for $24 million and a number of members of the prominent Fain family, who previously had ownership interest in the property.
Gates’ entity purchased the property in December of 1998 according to city tax records and the property is now assessed at just under $4.3 million — a drop of nearly $20 million in value.
Who is on the hook for the public subsidy (and the entire Stadium cost)?
Critical to the proposal gaining approval by legislators and building public support is that financing costs are not backstopped by taxpayers. Presently, that is in question.
Seth Magaziner, RI's General Treasurer, has raised the red flag about the proposed legislation, “The debt study that we did, no surprise, the liabilities of the City of Pawtucket are pretty high. That being said, the legislation as introduced does suggest that there’s a state backstop.”
He made the comments in an interview with WPRI.
Why should a group of billionaires receive a public subsidy for their sports team?
The owners of the PawSox have a combined personal wealth that makes them among the most wealthy ownership groups in all of professional sports.
Their fortunes are linked to CVS, Providence Equity, Fleet Bank, TJX, and the Boston Red Sox. Unlike the previous owner, the late Ben Mondor, this group has refused to meet the public or speak to the media.
Can Pawtucket support the debt obligation?
While bond rating agency Moody's ranks Pawtucket's future outlook as stable. Moody's flags factors:
Large unfunded pension liability
High fixed costs (combined pension, OPEB costs and debt service)
Low wealth and income indicators
Weak tax base growth
They Have Political Support - Will Raimondo Flip Again?
Proponents, including the ownership group, must feel that Rhode Island is moving quicksand. Governor Gina Raimondo supported the Providence stadium plan until she didn't.
She supported the initial financing structure for the Pawtucket location, negotiated by her Secretary of Commerce Stefan Pryor, then flipped on that proposal and announced her opposition.
Now, she is supportive of the pending stadium deal. Is she willing to bet her re-election on it?
38 Studios, St. Joseph Pension Fund Bankruptcy, and Wrong Track RI
There may only be one Rhode Islander who loves RI's inability to properly review critical financial deals -- Attorney Max Wistow who sued to recover 38 Studios assets and now has been engaged to investigate the largest pension fund (St. Joseph Health Services) collapse -- just three years after the RI Attorney General Peter Kilmartin gave the sale of St. Joseph's assets the green light.
The 38 Studios deal under minded confidence and now the recent failure of St. Joseph's bankruptcy has only fueled the concern that RI cannot properly review financial deals.
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