More Thoughts on the PawSox Stadium Deal (Including a Compromise Proposal)


Summarizing the appearance of PawSox Chairman Larry Lucchino on Newsmakers, this week, Ted Nesi writes in his weekly bullet-column:

According to Lucchino, the team’s offer to pay for more than half of the $83-million project is believed to be the most generous split taxpayers have ever been offered on a minor-league ballpark, anywhere.

I’ve only managed to watch the first segment of the show, but it appears that the word “generous” is entirely Nesi’s paraphrase.  Even so, it shows how turned around our thinking about using public dollars for projects is that anybody would think to say that it is generous to ask for less money from taxpayers, as if the asker is entitled to more.

As Nesi points out, polling data appears to have helped determine the PawSox’s positioning of this deal, inasmuch as 68% of people support a stadium if it is revenue neutral for taxpayers while 63% oppose “using taxpayers’ money to build a new stadium.”  In that regard, advocates are looking to avoid the word, “subsidy.”  Personally, I’d argue that the dreaded s-word applies no matter how strenuously the baseball team predicts that an increase in tax revenue will cover the government’s annual payment on debt.  Consider:  If the team (a private, for-profit organization) were able to build a stadium with no government aid, the government would still get the revenue, but without having to pay on the debt each year.

That is a subsidy.

This argument does, however, raise a point in the team’s favor.  Lucchino is insistent that this stadium is a good deal for the city and state, while evading a bit the question of why private financiers wouldn’t flock to such a sure thing.  We can infer, from this, that the profit margin is less than the tax burden, because taxes are part of the equation either way.  In that sense, if we’re only looking at projected money in and out, the team is mainly seeking a discount in its taxes by the amount of the debt payments to create profit for the team and its investors.

The first question to follow on this perspective is, as always: How many other businesses the State of Rhode Island is killing because we’ve set taxes so high that doing business makes no economic sense?

The second question has to be whether we should believe that the stadium is really this good a deal and such sure a thing.  As I’ve already written, taxpayers will be bearing the risk.  And on that count, actually owning the stadium is more of a liability than an asset, because it transforms a large chunk of taxable property into a tax-exempt lot with limited use potential.

Lucchino attempts to counterbalance this point by noting that the state risks something by taking no action, because if the team folds or moves, then it will lose the tax revenue it current collects from the PawSox.  But that’s not so much a statement of fact as another assumption.  The unasked question is what people in Rhode Island and the surrounding area will do with their entertainment dollars (and their time) if PawSox games cease to be an option.

I haven’t done the study, but it’s certainly possible that the money and time will be spent in ways that benefit the state more significantly.  This is a point that Michael Farren of Mercatus makes (without, unfortunately, quantifying) in a timely draft of a paper titled, “The Hidden Costs of Stadium Subsidies.”

In light of Farren’s article, the most disconcerting aspect of Lucchino’s Newsmakers appearance may be how closely his points conform with six “distinct patterns” that characterize advocacy for public involvement in sports stadiums:

  1. Claim the old facility is obsolete, sometimes going so far as to neglect maintenance to support this claim
  2. Threaten to move
  3. Claim that without a state-of-the-art stadium, the team will not be competitive in its league
  4. Publish generous, and often unrealistic, economic analysis reports
  5. Create a false crisis using an arbitrary deadline on the deal
  6. Adjust the goal mid-project, often resulting in budget overruns

To be sure, some of these patterns may emerge because they are largely, or at least partially, true.  Old facilities can become obsolete, and moving may be an attractive alternative that’s worth mentioning publicly.

Rhode Island’s elected officials will have to balance the politics of this situation, and Rhode Island voters will have to decide how to hold them accountable, either way.  Still, if we’re talking stages in a negotiation, I’d encourage lawmakers to return to the point about taxes.  If, at the end of the day, the team is ultimately seeking tax relief in the amount of the debt service, why not just give it to them?

Better yet, find some way to make the deal a true community project.  Empower the team to sell “shares,” sort of like the Greenbay Packers, with an added twist that each one entitles the holder to the face value in tax credits, whether corporate or personal income.  That way, the team gets its money (while rightly keeping the risk), the state acknowledges the “civic” benefits that Lucchino talks about, and individual investors get to decide whether they want to support the team, while receiving a little bit of tax relief for themselves.

  • D. S. Crockett

    Unless the stadium draws a significant fan base from nearby Mass., it will not create any economic multipliers that would create, enhance or grow the economy of RI.

  • Mike678

    If this was such a lock, private investors would be all over it. See the 38 Studios debacle.