Voters Got Zero Say on the $132M Soccer Stadium Debt - Ken Block

Thursday, February 22, 2024

Ken Block, Guest MINDSETTER™

 

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The Rhode Island Commerce Corporation is again at the center of a dubious taxpayer-funded deal. History has already repeated itself – the deal for the Pawtucket soccer stadium should never have been done, just like the 38 Studios deal should never have been done. Both of these projects had the strong backing of the governor. But the similarities don’t end there.

Both projects represented Hail Mary attempts to juice up a stagnant economy. 38 Studios was an attempt to rejuvenate Providence, and the soccer stadium was an effort to repair the economic and spiritual damage done to Pawtucket by the departure of the Pawsox. But here is the thing – something that sounds too good to be true all too often is.

Plenty of informed dissent existed before both deals got done. It was known in the industry that the model 38 Studios used for its game was the wrong one and that the leader of the effort knew a lot about baseball but little about managing a large technical business, let alone one that built video games. Remember that the Massachusetts legislature took a hard pass on 38 Studios. Experts nationwide have proven that expensive stadium deals like the one in Pawtucket seldom deliver the promised economic benefits. And yet, the Rhode Island Commerce Corporation plowed ahead with a deal.

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Notice that I said the Commerce Corporation plowed ahead and not Rhode Island. That is because the Commerce Corporation, for both bad deals, committed Rhode Island taxpayers to pay for these deals if they went bad. They did so without asking voters for approval to issue the bonds. This is because moral obligation bonds were issued for both deals, and that type of bond is exempt from voter approval. We learned with 38 Studios that our leaders have no appetite to walk away from a moral obligation bond – even though they have every right to do so. So, in effect, a moral obligation bond is no different than one approved by Rhode Island voters, like those issued to build school buildings. Both bonds, in effect, are guaranteed by the full faith and credit of Rhode Island taxpayers.

Rhode Island’s constitution provides a crucial protection for taxpayers – the taxpayers must approve any borrowing by the state. That is why we see bond approval questions on most general election ballots. It is time to close the unfortunate moral obligation bond loophole and require taxpayer approval of ALL borrowing – including moral obligation bonds. If our elected and appointed leaders continue to fail in their fiduciary duties, taxpayers must be able to reject a bad deal.

While moral obligation bonds provide the mechanism by which Rhode Island’s taxpayers take it on the chin, the real problem is that the state remains a place that businesses perceive as hostile. The land reclaimed by the 195 Project over a decade ago has not led to an influx of new companies flocking to build a new home in the heart of our capital city.

There are many reasons for this. The General Assembly represents a persistent risk of passing legislation that could be crippling to businesses. And then there are Providence’s outrageously bad finances that mayor after mayor has failed to improve. And Warwick’s. And Johnston’s. Is there a better example of our governmental dysfunction and amateurishness than the failed 195 West bridge? At the risk of perhaps being too blunt, we come across as a clown show to outsiders. Screw it – we are a clown show.

Cutting the Commerce Corporation a tiny bit of slack, they are trying to sell ice to Eskimos. Companies just aren’t likely to look at Rhode Island with its current set of problems and think, “That is where we want to be!”  The Commerce Corporation, the governor, and the legislature must come together and coordinate to deal with the many problems that make our state an economic also-ran.

There is no magic bullet. Going for the home run by committing hundreds of millions of dollars on projects that the experts know are bad deals moves us farther away from our goal of convincing the outside world that we have our act together. When we squander huge sums on pipe dreams, we deny funding for the things we really need.

Ken Block is a two-time gubernatorial candidate, good government advocate, business owner, database expert, and author. He desperately wants Rhode Island to do better. He is the author of Disproven.

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