Two things jumped out at me from Kate Bramson’s Providence Journal summary of the Rhode Island Senate Finance Committee’s second hearing on the PawSox stadium proposal. First:
During the city’s hour-long presentation, Pawtucket Director of Administration Tony Pires responded to an earlier comment from a senator that the city has a $5-million budget deficit.
“That can’t be further from the truth,” Pires said.
When Grebien took office in 2011, the city had a $12-million operating deficit, Pires said, in part due to the Great Recession’s broader effects in Rhode Island, leaving the city “critically behind the eight ball.”
“But now we have rebuilt our budget to where we have a $12-million surplus,” Pires said. ” … The city is on a strong financial footing.”
A $12 million surplus? To my experience, people generally think of a “surplus” as the amount of money left over at the end of the year. Judging from the city’s latest audit, however, it appears that Pires means the unassigned general fund balance — which is often seen more as a reserve fund than a “surplus.” That $12.7 million is misleading, though, because the city has other fund balances that are negative on the “unassigned” line, leaving the city with $7.3 million. Treating primary government expenses as the city’s budget, that means the reserve is 2.4% of expenses, which is actually rather low, although philosophies differ on how much government agencies should keep in reserve, rather than allowing the community’s wealth to remain with the people.
Accounting for a new school capital plan, Pawtucket’s reserves were almost exactly the same at the end of the 2016 fiscal year as the year before, which suggests neither a worrisome deficit nor over-taxation. However, it also doesn’t suggest a city flush with cash.
The second notable item from Bramson’s article is this:
[PawSox executive Dan] Rea said the real-estate development group created by the team owners has committed to 50,000 square feet of development near the stadium — either in conjunction with another developer or as the developer of “last resort.”
In my appearance with John DePetro last week, I noted a curious statement from the Commerce Corp.’s Stefan Pryor at the first PawSox hearing, in which the Commerce director advertised (vaguely) that the state had “a commitment that at least 50,000 square feet of the ancillary development will be done without state tax incentives.” Is this what he meant? That the team itself had promised to develop 50,000 square feet if nobody else wanted it?
That doesn’t sound like a very hopeful sign. The whole reason one might want ancillary development is that it would be an indication of economic revitalization as businesses seek to capture new opportunities. If this “commitment” is just the team promising to do something with land around the stadium if the revitalization is a complete dud, it’s almost worthless to taxpayers — a potential one-time boon to some property owners and contractors building development for development’s sake.