New PawSox Deal - Owners Continue to Refuse to Take on Risk
Wednesday, May 30, 2018
The new proposal was introduced by Mattiello to members of the House Democratic Caucus on Tuesday.
Mattiello refused to produce copies of the legislation, but by description seems to put a greater burden on the City of Pawtucket. In the past year, Pawtucket has been hit by the departure of the Gamm theater which moved to Warwick, the closure of Memorial Hospital and the corresponding layoff of 800 employees by the financially troubled Care New England, and the potential that the global headquarters of Hasbro will be moving out of the city.
“This alternative envisions segregating revenues generated in a new Tax Increment Financing District to ensure that revenues from the project will be directly tied to the debt payments, and the project will stand or fall on its own,” said Mattiello in a statement.
His office refused to answer specific questions about the new financing scheme and specifically why the ownership group continues to backstop the financing of the project. The PawSox owners are some of the most successful businessmen in America and have a collective net worth in the range of $6 to $8 billion.
This newest deal comes amidst strong opposition for public financing of the project and questions about critical data emerging from the PawSox about their attendance.
Mattiello claims that a tax incremental financing structure will provide added stability to a revenue stream -- it is believed that the deal is counting on new revenue from an adjacent development in Pawtucket that will include retail. “This alternative envisions segregating revenues generated in a new Tax Increment Financing District to ensure that revenues from the project will be directly tied to the debt payments, and the project will stand or fall on its own,” said Mattiello.
PawSox refused to comment on the new financing structure.
University of Rhode Island economist Len Lardaro says this deal may be marginally better but raises red flags at two levels on the proposal.
"The real issue to me in all of this is the economic viability of the City of Pawtucket. Even if this deal moves forward, as it inevitably will in an election year, it will not be decisive in determining the longer-term economic viability of Pawtucket, whether or not all of the ‘mystery projects’ that this project will supposedly cause to occur come to fruition," said Lardaro, who since 1995 has authored the RI Current Conditions Index.
"In a worst or very bad case scenario for Pawtucket, will Rhode Island really be able to remain totally on the sidelines in all of this? I seriously doubt it, especially since a faltering Pawtucket would directly and negatively affect Rhode Island's overall bond rating. This proposed funding, although improved from earlier plan versions, should be voted on, since there is likely to be a greater state liability than what is currently perceived to be the case,” said Lardaro.
Mattiello claims in his statement, “But importantly, the state will not ultimately be responsible for these bonds if the deal doesn’t pay for itself. The debt will be more expensive without the state’s backing, but that is the trade-off to remove taxpayer risk.”
But his office refused to answer questions about who backstops the Pawtucket Redevelopment Agency Bonds if the revenue does not materialize and the bonds default.
Lardaro also raises concerns about the ability of Pawtucket to repay the bonds.
"If the speculation by many that the national economy will falter in 2020 proves to be correct, then Rhode Island will see substantial weakening next year -- 2019 (based on our ‘first in last out’ status). Should this prove to be correct, or even close to accurate, Rhode Island must be extremely careful with the debt obligations it assumes at this point in time," said Lardaro. "We have already taken the unfortunate action of saying ‘charge it’ concerning school infrastructure to the sum of $250 million. So, the question of whether PawSox funding is a wise use of our borrowing capacity at this time should be front and center in this debate."
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