Why some are calling Tidewater stadium deal ‘pure insanity’
PAWTUCKET, R.I. — Holy Cross economics professor Victor Matheson is skeptical of taxpayer subsidies for stadiums. They’re a poor way to drive new economic growth, jobs, or tax revenue, he says. But some are worse than others. Take the Tidewater Landing soccer stadium deal in Pawtucket.
“The sort of money being talked about for a minor-league soccer stadium is pure insanity,” Matheson said.
For years, Matheson has analyzed the impact of public funding for stadiums, like Polar Park, home of the Worcester Red Sox, since the team headed up Route 146 from Pawtucket a few years ago. He also loves soccer. He’s been a referee in the league in which Rhode Island FC will soon debut. He’ll probably go out to some Rhode Island FC games when the stadium opens in 2025.
He just doesn’t think it’s a good investment for taxpayers to subsidize it.
The extent of that subsidization and the full financial picture of Tidewater Landing came into focus last week when the taxpayers’ bankers closed on public borrowing for the deal. It has gotten significantly more expensive for Rhode Islanders to pay off. And in more subtle ways, the latest version of the deal also undermines financial protections for the state.
At roughly $130 million, it is by far the most expensive minorleague soccer stadium in the country and one of the most expensive minor-league stadiums of any kind, Matheson said. It is in the ballpark — no pun intended — of the most expensive minor-league baseball stadium, Polar Park’s more than $150 million, Matheson said. By total cost, it even rivals some stadiums that are twice the capacity and built for Major League Soccer, the league above Rhode Island FC’s USL Championship, Matheson said.
Rhode Island taxpayers will help private developer Fortuitous Partners pick up over a third of the upfront cost of construction.
The state Commerce Corporation, with Governor Dan McKee serving as the decisive vote, agreed in 2022 to sell bonds to put $27 million into the project. Those bonds are supposed to be paid back with state tax revenue raised in a broad swath of Pawtucket over 30 years. After significant hikes in interest rates and other costs in the year and a half since the state first approved public borrowing on the deal, the state will have to borrow more, at a higher interest rate, than originally assumed — some $54 million in bonds just to net the same $27 million. Unlike other stadium bonds, one of the investors in the deal told Bloomberg, no money from the stadium, like a rent or a ticket fee or a cut of the concessions, is directly dedicated to paying them back.
The state is also putting $14 million in tax credits into the project, and the city of Pawtucket put up $10 million in COVID relief money.
The stadium will be privately owned when it’s built, but the city also agreed to a tax treaty that will save the developer some $37 million in property taxes over 20 years.
Taken together, with direct support paying for more than a third of the stadium’s construction cost and longer-term property tax savings, that adds up to more than $100 million in public support.
Or, as Matheson would call it: insanity.
“This appears to be a terrible deal for Rhode Island taxpayers,” Matheson said.
Proponents say otherwise, of course.
“Once complete, the stadium at Tidewater Landing is a oncein-a-lifetime opportunity for Pawtucket and the state to create this spectacular public space. It will be home to Rhode Island FC and will also host concerts, community activities, festivals, and collegiate and professional sports (including soccer, football, lacrosse, rugby, and other sports),” Pawtucket spokeswoman Grace Voll said in an email.
The deal is getting national scrutiny now. The financial publication Bloomberg recently described the yield for the bonds as “eye-popping.”
Those are the new numbers. The latest version of the deal also has some new words. In subtle ways, they undermine taxpayer protections.
For instance, the state Commerce Corporation has long said that only tax revenues raised in a special district in Pawtucket will go toward paying back the bonds. That’s important because if there are not enough taxes in that district to cover the costs of the bond, it’s the bondholders who would take on the risk.
But the state’s bankers told investors something slightly different: If there’s not enough money to pay back the bonds, the General Assembly could decide to use any “legally available funds,” according to bond documents. The governor has agreed to request money in his budget proposals for paying annual debt service on the bonds, and in the event the money isn’t appropriated, has agreed to submit a supplemental request.
There should be enough state tax revenue in the district to pay back the bonds annually, but depending on the direction of the economy, things could get tighter. In the 2023 fiscal year, there was about $6.3 million in baseline taxes in the district. By 2028, the state will have to pay $4.5 million to pay back the bonds. In 2052, it will be $5.8 million to retire the bonds.
Suggesting that the General Assembly could pay them is a difference at least in emphasis from what the Commerce Corporation has long maintained.
Matt Touchette, a spokesman for the Commerce Corporation, noted in an email: “Payment of any amounts from the State is subject to annual appropriation by the General Assembly and such appropriations are not guaranteed.”
Gary Sasse, a former director of administration under Republican Governor Donald Carcieri and a critic of the deal, said the bond repayments may depend on General Assembly votes, but the state may have a moral obligation to pay them back one way or the other. Investors wouldn’t look kindly on Rhode Island if the bonds defaulted, Sasse said.
“There’s no free lunch in this thing,” Sasse said.
Also, although the state still maintains that no state funds will go into the project until the stadium is complete, the bond is actually a little more nuanced. In fact, if the stadium isn’t built by 2027 — say it faces more delays or challenges — the state would start putting millions in debt service money into what’s called an accumulation fund. Once the stadium does get built, that money will go to investors. If it isn’t built in 10 years, it will go back to the state. That provision was added to the bonds a month after the project’s bankers started trying to sell them, indicating that they were a way of making them more attractive to investors.
Though the state would eventually get that money back in the event that the stadium faces more delays or obstacles, it would mean a decade of the state’s money being tied up. The project’s supporters say they’re confident this won’t be an issue because the stadium’s construction is underway and on track for completion in spring 2025.