Another Beanball for the Taxpayers

Has Rhode Island learned anything from the last economic-development shellacking it took?
June 18, 2015
By Charles Chieppo  |  Contributor
Principal of Chieppo Strategies and former policy director for Massachusetts’s Executive Office for Administration and Finance

As long as governments are made up of human beings, we can't expect them to be perfect. But they should learn from their mistakes, such as the whopper Rhode Island state officials made in 2010 when they plowed $75 million into 38 Studios, a now-defunct video-game company started by former Boston Red Sox pitcher Curt Schilling.

Fast-forward five years, and another proposal that combines baseball, business and politics is on the table in Rhode Island. The owners of the Pawtucket Red Sox, Boston's top farm team, are asking for millions of dollars in taxpayer subsidies as part of a plan to build a downtown ballpark in neighboring Providence.

Under the proposal, the owners would spend $85 million to build the stadium and a parking garage. The state would take out a 30-year lease on the stadium land, for which taxpayers would pay $5 million annually in rent. The team would lease the stadium back from the state for $1 million per year, leaving state taxpayers on the hook for $4 million a year, or $120 million over the 30-year lease term.

The team is also asking city taxpayers for help. They want Providence to sign an agreement that would exempt the land from property taxes for 30 years.

The owners are following what has become a well-worn script for teams looking for stadium subsidies, warning that they will likely leave Rhode Island if the deal isn't approved. They've also commissioned the requisite economic-impact study, which estimates that the stadium would generate $12.3 million a year in direct spending for the local economy and about $2 million annually in state tax revenue. As usual with such studies, the owners call the projections "conservative."

Perhaps Holy Cross College economist Victor Matheson said it best when he told The Atlantic that, when it comes to these impact studies, "take whatever number the sports promoter says, take it and move the decimal one place to the left. Divide it by ten, and that's a pretty good estimate of the actual economic impact."

Building a minor-league baseball stadium in Providence would add little net new money to the local economy. The majority of fans would come from close by, meaning they would likely spend their entertainment dollars at an area movie theater or restaurant if they weren't going to a game

.

As for benefits to businesses around the stadium, they tend to be limited to just a few blocks. And with 72 home games, what happens during the other 80 percent of the year?

The last time Rhode Island leaders dabbled at the intersection of baseball, business and politics, it cost their constituents $90 million (the $75 million in principle invested in 38 Studios plus $15 million in interest). Some may conclude that non-economic benefits such as local pride or entertainment value would make a Providence stadium worth the investment, but they should know better than to view the proposal as genuine economic development.