Bishop: Transformation – So Far it’s All Talk in Providence
Thursday, April 30, 2015
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.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTThis 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’
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.
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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