The Mixed Up Economics of Government Economic Development

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Not to overuse the word, but let’s just say that I’m cynical about the newly proclaimed interest in development around the proposed PawSox stadium in Pawtucket:

Pawtucket leaders Wednesday used the interest in developing Tidewater and inquiries from an unnamed hotel developer to build near a new stadium in support of their push for a state-backed financing deal for the proposed $83-million downtown ballpark.

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But cynicism aside, Rhode Islanders should take Mayor Donald Grebien’s explanation of the economics as a warning sign about government officials’ understanding:

“The Ballpark at Slater Mill is the catalyst that Pawtucket, the Blackstone Valley and Rhode Island need to continue to move forward,” said Mayor Donald R. Grebien. “Pawtucket is a business-friendly city and investors and developers are already expressing support for the ballpark project. However, the private sector cannot wait forever. They will look elsewhere to invest. That is why it is so critical that the General Assembly act prudently and expeditiously to enact the enabling legislation and move our great state forward.”

Anybody who’s ever negotiated the price of a car should know that you never buy under time pressure.  In this case, Grebien’s attempt at pressure undermines his larger argument.

If the stadium really generates economic value then the private sector really will wait or come back.  On the other hand, if these two particular prospects (one anonymous) are critical to the venture, then taxpayers should take that as a warning.  After all, the whole deal relies on ancillary development to pay the debt.  If the “private sector” isn’t clamoring for spots, the deal is too risky.



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