PAWTUCKET, R.I. (WPRI) – The massive Pawtucket soccer stadium development known as Tidewater Landing has new money problems.
Target 12 has confirmed city officials are hitting the pause button on issuing $27 million in public bonds to help fund the 10,000-seat stadium, saying uncertain financial conditions have so far prevented them from pulling the trigger.
There is currently no timeline for when the deal will close, city officials said.
“The city’s top priority has always been protecting taxpayers,” Pawtucket spokesperson Grace Voll said in a statement, confirming the initial goal was to issue the bonds by February.
“Given the market challenges of the last year, including a global pandemic, rising interest rates, tighter market conditions, and a looming banking crisis, the state financing and private debt components of the capital stack have not made fiscal sense to close to the date,” she added.
Voll said city and state officials have been meeting in recent days to discuss next steps. The decision comes at the same time the Federal Reserve announced Wednesday another 25-basis-point increase to short-term interest rates in an ongoing attempt to curb rising inflation, despite a recent banking crisis that has rattled the economy.
“Cities and states across the country are experiencing similar development challenges,” state Commerce Secretary Liz Tanner said in a statement. “Governor McKee has been clear that taxpayer protections in this deal are a top priority, so in this current market, it is not ideal timing for the city to issue public bonds at this time. We are working with both the city and the developer to continuing moving the project forward.”
Tidewater Landing, a development project anchored by a minor-league soccer stadium slated to host games played by Rhode Island FC, has already broken ground and construction is underway alongside the Seekonk River just south of Interstate 95.
The project’s private developer, Fortuitous Partners, has already put down nearly $25 million in private capital to help fund the effort and that money is being used to fund the construction so far.
“Work on the stadium is advancing and Rhode Island FC continues to hire and create jobs in Rhode Island,” Fortuitous spokesperson Mike Raia said. “Like other developers across the world, we are managing through a global banking crisis and hope to close on final financing in the near future. Apart from the development, the Rhode Island FC team is focused on building a winning soccer club from the pitch up for the 2024 season.”
In order for Pawtucket and the state to close on the public financing part of the deal, Fortuitous must also close on its debt financing. Emails shared with Target 12 show managing partner Brett Johnson was still pitching private investors to raise equity as recently as February.
“Fortuitous Partners (Brett’s ownership entity) is raising a total of $50M (only $2M remaining, closing by the end of February), with half for the professional soccer team and half for the stadium,” the company wrote to potential investors. “The bulk of the capital has been committed by several billionaire family offices, partners from leading private equity firms, and prominent athletes and musicians.”
City officials remain optimistic the developer will hit its goal of having the project ready for soccer by 2024. But it’s uncertain if that money will dry up before the bonds can be issued, and the developer has said the public financing is necessary to complete construction of the stadium.
The project has been clouded by financial and political uncertainty since it was first unveiled under the administration of former Gov. Gina Raimondo in 2019. And the project hit a similar problem last year.
An initial financing plan fell apart last spring and Pawtucket and Fortuitous came to the state in July seeking tens of millions of dollars in additional public financing for the soccer stadium, saying costs had soared amid growing inflation.
Gov. Dan McKee served as the tie-breaking vote to approve a controversial proposal that shifted existing funding from a future part of the development project that would create much-needed housing to cover the higher-than-expected costs of the soccer stadium.
At the time, developers said they would come back in less than a year with plans for the housing phase of the project. Yet those plans have yet to materialize and the General Assembly hasn’t received any proposals for additional funding from McKee or Pawtucket Mayor Donald Grebien.
“The administration’s top priority has always been protecting taxpayers while at the same time providing much needed economic revitalization to downtown Pawtucket,” McKee spokesperson Matt Sheaff said in a statement Wednesday.
“This project contains important taxpayer protections including that no state funding will go to the project until it reaches a certificate of occupancy,” he added. “While there currently are market challenges impacting projects across the nation, our team continues to meet regularly with the city and the developer to continue advancing this project and navigate those challenges.“
Asked about the latest hiccup, House Speaker Joe Shekarchi said, “I have full confidence and trust that Mayor Grebien will do what is best to protect the taxpayers of the city of Pawtucket.”
The rising cost of the project over the past year has challenged promises made years ago by state leaders, including Stefan Pryor, who as commerce secretary said the development would pay for itself because of the tax revenue generated from economic activity. (Pryor was recently brought back by McKee to serve as housing secretary.)
As Target 12 first reported last fall, the stadium itself will not generate nearly enough money to cover the projected costs of the bonds, and tax revenue from the surrounding area will be required to make up the difference because of state law that created a special tax district in that area.
In addition to the bond financing and private funding from Fortuitous, Rhode Island has promised $10 million (plus $4 million in associated costs) in Rebuild RI tax incentives for the project. Pawtucket has also committed $10 million in federal American Rescue Plan Act funds to help fund the project, which they’re counting as cash in hand.
“The good news, relative to the timeline, is that work is happening, it’s being funded by the private developer — not by taxpayers — at the developer’s risk, and the city has cash in hand waiting for the simultaneous closing of everything else,” Pawtucket director of administration Dylan Zelazo said.
Eli Sherman (firstname.lastname@example.org) is a Target 12 investigative reporter for 12 News. Connect with him on Twitter and on Facebook.
Ted Nesi contributed to this report.