PAWTUCKET, R.I. (WPRI) – The Pawtucket minor league soccer stadium will not pay for itself on its own, raising the stakes for future phases of a development project that has become shrouded in financial and political uncertainty.
A Target 12 review of economic and financial estimates from state officials and consultants shows the 10,000-seat stadium is projected to generate $565,000 of new state revenue in 2024, when developer Fortuitous Partners now expects the stadium to have its first year of operations.
That newly generated revenue would cover only about 27% of the first annual payment — estimated at $2.1 million — on the debt that taxpayers are issuing to help fund the stadium.
The debt, which will be borrowed through a $36 million bond, is now slated to be put entirely toward the $124 million projected cost of the stadium facility. The price tag has increased by roughly 50% versus initial estimates, which Fortuitous has blamed on inflation and supply-chain issues.
The funding gap already has drawn criticism from stadium skeptics, including a former R.I. Department of Administration director, Gary Sasse, who questioned whether R.I. Commerce Corp. board members fully understood the deal before recently approving $60 million in overall public support for just the stadium.
In addition to the $36 million bond, the state has approved another $14 million in Rebuild RI tax credits, while Pawtucket has committed to paying $10 million — although the city has yet to disclose where its share of the money will come from.
“It’s a deal that appears to have been made without having all the pieces together,” Sasse said. “The economics of the situation have changed significantly since the deal was first announced.”
‘How can I make an informed decision?’
Commerce has been vetting the stadium proposal since before it was unveiled publicly in 2019. But the original financing plan fell apart this spring when Fortuitous sought bids from contractors and they came in far higher than expected.
As a result, Fortuitous developer Brett Johnson and Pawtucket Mayor Donald Grebien came back to the state in June, asking for an additional $30 million to cover the inflated cost. Proponents argued the extra money would have addressed the higher price tag while keeping funding in place for the next part of the overall project — dubbed Tidewater — focused on housing.
But Commerce members and Gov. Dan McKee responded coolly, and pushed off making any decisions.
Fast forward to late last month, when newly appointed Commerce Secretary Liz Tanner announced the board would reconvene to consider a revamped financing proposal. The new plan shifted the state’s existing funding for Tidewater from helping to pay for housing development to the stadium itself.
But multiple board members told Target 12 the details of that proposal weren’t shared with them until late on Saturday, July 23, just two days before they were asked to vote on it. When they arrived at the July 25 meeting, members said they were met with several pages of redlined edits – a common indication of last-minute changes.
The lack of time and the late edits spurred board member Karl Wadensten – a self-described proponent of the broader Tidewater project – to abstain from voting on the new stadium financing plan. The measure still passed, with McKee stepping in as a tie-breaking vote in favor of the idea.
“How can I make an informed decision?” Wadensten told Target 12, expressing frustration with how little time he was given to examine the details of the stadium financing plan. The businessman has served on the board for more than a decade, and was famously the sole board member to vote against granting $75 million to Curt Schilling’s ill-fated video game company 38 Studios.
“It wouldn’t have been fair to anyone,” Wadensten added.
Stadium revenue doesn’t cover debt payment
State officials have struggled since the vote to provide clear information about the deal and how it will work.
Commerce has said it expects to spend $59 million over 20 years repaying the stadium bond, but the agency has refused to release a schedule of debt-service payments without a formal review of whether the Access to Public Records Act requires it.
Initially, Commerce also said an economic and financial report put together by a sports stadium consulting firm, CLS, wouldn’t be released without an Access to Public Records Act review. But amid growing criticism last week, state officials reversed course and released the document, which among other details showed for the first time how much state revenue the stadium is projected to generate. (Year one will net $565,000; year 30 will net $1.4 million).
Yet even the CLS analysis has caused some confusion among public officials. The report makes reference to a separate financial analysis conducted by MuniCap, a consulting company that was hired by Pawtucket to estimate sales-tax and income-tax revenue in the area surrounding the stadium.
When Target 12 asked for the MuniCap report, a Commerce spokesperson again said the information wouldn’t be released without an Access to Public Records Act review. When Target 12 requested the same report from Pawtucket, city officials said they weren’t sure what data CSL was referencing in its report.
What has become clear, however, is that the projected $565,000 in new revenue from the stadium will not be enough to cover the state’s initial $2.1 million bond payment. And because CLS failed to provide a clear breakdown of where the $565,000 would come from geographically, it appears unlikely that all $565,000 in projected revenue could even be spent on the bond payments.
The reason: Public officials are only allowed to use tax revenue generated from within Pawtucket’s so-called “tax-increment financing” district to pay back the bond.
In other words, if a fan from Boston comes to Pawtucket for a game and buys a hot dog at the stadium – which is inside the special tax area, also known as a “TIF” district – Rhode Island could use the tax revenue to pay for the bond. But if that same fan lodges at a Providence hotel – outside the TIF district – the taxes paid for the overnight stay could not go toward the bond.
The shortfall in stadium-specific revenue means officials will need to use existing tax revenue generated in the TIF district to cover the rest of the bond payment for the project. Consultants for Pawtucket officials say that shouldn’t be a problem, since the TIF district currently generates about $6 million in state revenue each year without the stadium.
But shifting existing revenue generated by Pawtucket restaurants, hotels and other businesses to cover the cost of the stadium bond means the project will siphon money from the state budget that would otherwise go toward other uses, from roads and bridges to K-12 schools.
It also calls into question state officials’ repeated claims that the stadium will “pay for itself.” The phrase has been repeated several times ever since Tidewater Landing was first pitched in 2019, touted as the “largest economic development project in Pawtucket’s history.”
Will Tidewater pay for itself?
Former Commerce Secretary Stefan Pryor and others said in 2019 that Tidewater “will pay for itself.”
Pryor, who led negotiations with Fortuitous until he left state government in June, stood by the statement in a televised debate on WPRI 12 last week.
He argued Tidewater could still pay for itself once future phases are developed. And while he defended the decision to shift millions of dollars away from future housing to the stadium instead, Pryor acknowledged it means Fortuitous likely will seek more public funding in the future. He said he would support the extra money “if it’s merited.”
Pryor and Johnson remain bullish about the future housing development happening, along with some new commercial and retail space.
“It’s really, really important for people to understand that Tidewater Landing is not just a stadium — it’s an anchor,” Johnson told reporters last month. “I’m confident the economics of this project are going to be appropriate.”
Still, there’s no guarantee there will be an appetite among lawmakers and the public at large to steer more taxpayer funding toward a project that is already costing far more than expected. And even Grebien acknowledged there are no guarantees — although he’s adamant the next phases of the project need to happen.
“While we can’t guarantee it, I can tell you everyone including the governor, the Commerce board and the city, as well as the Fortuitous team, are committed to making those phases happen,” Grebien said. “Time will tell, but every successful city or state has multiple venues and multiple investments and all of that development will come because it’s already built in and we need to get that done.”
The future of the Tidewater project could also hinge on the outcome of this year’s election. McKee is being challenged in the Democratic gubernatorial primary by four opponents — Matt Brown, Nellie Gorbea, Helena Foulkes and Luis Daniel Muñoz — as well as by Republican Ashley Kalus.
Democratic candidates have had a mix of reactions to Tidewater. Muñoz said he is “highly concerned” so much public money is going into the stadium amid growing talk about a potential recession. Brown has also taken aim at McKee for accepting campaign donations from individuals linked to Fortuitous, saying he shouldn’t be “handing tens of millions of dollars to for-profit developers for a stadium when people are struggling to afford their basic needs.”
Foulkes has said she would have voted in favor of the Fortuitous project, but argued McKee didn’t explore all his options for the financing plan. (Her brother, who serves on the Commerce board, voted no.) Gorbea has said she would have voted against the new financing plan, but emphasized she still supports the overall Tidewater project.
Kalus has slammed the public subsidies, saying the McKee administration “seems more concerned with doling out taxpayer dollars to insiders” than providing relief to “families in need.”
McKee has remained steadfast in his support of the project, saying he’s willing to champion the project moving forward to ensure it gets the support needed to succeed.
“I made it very clear as governor that I’m not walking away from a community like Pawtucket,” he said. “We’re going to make the investments.”
‘They don’t know how much it will cost’
Fortuitous has refused to provide estimates for how much they think the housing and commercial space will cost to build, saying only a review and design process won’t be completed for another nine months.
Fortuitous managing partner Dan Kroeber said the developer will then put the project out to bid, “and that’s when you really know what things cost.”
Fortuitous is likely to develop cost estimates for the housing phase before that, however. Target 12 obtained a master development agreement between public officials and Tidewater that shows cost estimates for the stadium project dated Nov. 21, 2021 — several months before the project was put out to bid and Fortuitous discovered they had vastly underestimated costs.
The lack of financial estimates for the next phase of Tidewater makes it impossible to know how much more money might be needed, how much future revenue the project might generate for the state, or whether that will be enough to “pay for itself.”
“The rest of the development, which is important to the economic development of Pawtucket, is in limbo,” tweeted Commerce board member Mike McNally, who voted against the deal. “They don’t know how much it will cost.”
Another question is whether Fortuitous can raise the private capital necessary to fund its share of the project. The developer’s leaders have insisted they have the ability to bring in the necessary private funds, but so far they haven’t disclosed their investors or fundraising benchmarks either publicly or privately to Commerce leaders.
“It is not uncommon for Commerce to approve money to an applicant for tax credits without knowing their financiers beforehand,” said Commerce spokesperson Adam Isaacs-Falbel, pointing to a Residence Inn as an example of another business interest that didn’t provide a list of investors before receiving similar tax credits.
Still, the lack of disclosure has been another cause for doubt among stadium opponents, including McNally, who has been highly critical about how the deal came together.
“Who are they?” he asked of Fortuitous’s investors. “State should know who it is investing with.”
One potential boost for Fortuitous as the company continues seeking outside investors: the east side of the Seekonk River, where the developer plans to build the new housing, falls inside one of the state’s so-called “Opportunity Zones.”
The zones allow private investors to shelter capital gains in development projects and make more money before the gains get taxed — a potentially enticing business opportunity not currently available on the west side of the river where the stadium is slated to go up.
In the end, much of the success of the soccer stadium and broader Tidewater Landing project could come down to timing.
When the development was pitched in 2019, nobody predicted a global pandemic or rapid inflation. Now, the United States is facing an economic slowdown — with many top economists and banks predicting a recession over the next year — and there’s little certainty about where Rhode Island will stand economically or politically in another six to nine months.
‘When we build it, they will come’
There’s also a question of popularity.
Fortuitous initially hoped to start soccer games this year. But that has been delayed until at least 2024. And whether the team — which doesn’t exist and hasn’t been named yet — will be able to fill the 10,000-seat stadium has become a point of some contention.
As The Providence Journal first reported last month, Commerce officials are assuming the stadium will bring in an average of 7,600 attendees, which is far more than the 2022 average of 4,757 attendees across the league, according to the industry publication Soccer Stadium Digest.
Johnson recently visited new minor-league stadiums in other parts of the country, including in Colorado Springs, where he said they are drawing upward of 8,000 fans to a stadium with an 8,000-seat capacity. Soccer Stadium Digest pegs average attendance at 6,892.
“When we build it, they will come,” he said, echoing the famous line from “Field of Dreams.”
McKee argues the deal is necessary in part because Pawtucket has been let down by state leaders before.
In 2017, the Pawtucket Red Sox ownership group tried to convince prior state leaders to pay $44 million to build a new minor league baseball stadium in the same area. State leaders — notably former House Speaker Nicholas Mattiello — balked at the proposal and the team relocated to Worcester.
When asked if he was worried the stadium wouldn’t draw fans and or ever end up paying for itself, McKee brushed off the premise. “I’m not thinking about that,” he told reporters after the Commerce vote. “I’m not walking away from Pawtucket.”
The ongoing lack of specifics about Tidewater as a whole has left Sasse, among others, fearing officials are engaged in short-term thinking.
“When something like that happens, it’s fair to conclude that the deal is not a judgement about the merits of building a stadium or developing the area — God knows it’s needed,” Sasse said. “It’s about making a decision without having all the T’s crossed and I’s dotted.”
Ted Nesi contributed to this report.