Victor Matheson loves soccer. He refereed matches for years in the USL, the lower-level professional men’s league in the U.S. But he’s also an economics professor at Holy Cross in Worcester, so he knows a thing or two about stadium financing deals. And he has a straightforward answer when he’s asked what he thinks of Rhode Island’s plans to plow tens of millions of public financing into a USL Championship stadium in Pawtucket.
“This is a terrible idea,” Matheson said. “There’s almost no scenario in which a minor-league stadium generates significant economic impact for the surrounding area.”
Rhode Island leaders, including its governor, Daniel McKee, are betting that Matheson and other critics of public subsidies for sports stadium developments are wrong about the Tidewater Landing project.
On Monday, the board of Commerce Rhode Island, the state’s economic development agency, narrowly voted to shift about $27 million in already-approved state borrowing for the project. The money was originally approved in February 2021 to go toward some of the work around the stadium, but not the stadium itself. The broader mixed-use project would also include housing and commercial space, plus public amenities along the Seekonk River.
But inflation sent the price of the 10,500-seat stadium itself skyrocketing, from $83 million to $124 million, developer Fortuitous Partners said. Commerce Rhode Island balked at adding more state funding, and instead came up with a plan to shift a large chunk of the money it had earmarked for other parts of the development to construction of the stadium itself. McKee likened it to a Disney theme park: First, you had to build the castle. Then you got everything else around it. Though the deal approved Monday doesn’t include more public money for the project, the developer could come back later to ask for more help on later phases, and state officials haven’t rejected the idea.
The deal also includes funding from the city of Pawtucket, and $10 million in state tax credits. The total public financing that will flow to the stadium is now $45.5 million. With borrowing and other costs, though, the true cost of public financing adds up to roughly $60 million as of right now. (It’s like the difference between what you paid for your house, and how much your mortgage will cost with interest over 30 years.)
The stadium would be the most expensive in the history of the USL, which sits below the top-level Major League Soccer in the American men’s soccer system. About 37 percent of the $124 million stadium will be publicly financed. The next closest recent project is a planned stadium in Iowa, at $84 million, according to a presentation by Commerce Rhode Island.
McKee serves as the chair of Commerce Rhode Island, but under state law he doesn’t get a vote unless there’s a tie. After hours of debate over several meetings, the board ended up deadlocked Monday night. Skeptics raised concerns about whether the state could end up paying for a stadium, and not get any of the other development, like much-needed housing. (The developer said it’s fully committed to the whole project.) They also raised concerns about whether attendance projections would come true.
McKee broke the tie by voting yes, saying he’s optimistic the project will work for the people of Pawtucket and Rhode Island while protecting taxpayers.
“Let’s not lose sight of the fact that this is a transformational project for the city of Pawtucket,” McKee told reporters Tuesday. “This is not just about a soccer stadium. It’s about revitalizing an area that quite frankly, we have not paid enough attention to.”
And Brett Johnson, the Brown University graduate who founded Fortuitous Partners, said he’s confident in the plan — so confident he’s poured a lot of his own money into it, too. He cited Louisville and Colorado Springs as places where USL soccer teams have been successful.
“The demographics in this state are primed for Tidewater Landing to pack our stadium with rabid fans that are passionate about supporting Rhode Island’s team,” Johnson told reporters via Zoom Tuesday. “So my confidence level could not be higher relative to our ability to succeed.”
Some economists aren’t sold.
“Everyone knows it’s a joke, but we keep falling for it with stadiums,” said J.C. Bradbury, an economics professor at Kennesaw State University in Georgia who has studied stadium deals.
Defenders of the Tidewater deal often point to the fact that most of the public funding, $36.2 million between city and state, comes through what’s called tax increment financing. That’s when a public body goes out to borrow money for a project, then creates a special district around it. The tax dollars kicked up in the special district will go to pay back the bonds.
But when you build a sports stadium, especially a minor-league stadium, you’re not generating new dollars, Bradbury said. Instead you’re getting mostly locals who would have spent that money in the community elsewhere. Someone may spend their money at a restaurant within a special district. But they might have gone out to eat anyway, and in that case, if they went to one outside the district, their tax money would have gone to public services generally, instead of just a stadium.
Over a decade ago, Gwinnett County, Georgia, lured a minor-league baseball team from Virginia. The county financed a $64 million new ballpark for the Gwinnett Braves, now the Stripers. Officials promised an economic boom that would pay for itself and revitalize the area.
It didn’t work, Bradbury said. The Atlanta Journal-Constitution reported as recently as December 2021 that attendance has been disappointing and much of the promised development around the park hasn’t materialized.
It didn’t work because it never works, Bradbury said. He and other economists looked at 130 different studies examining the effect of stadiums on the local economy. The research, posted in February, concluded that “large subsidies commonly devoted to constructing professional sports venues are not justified as worthwhile public investments.”
There’s no reason that Tidewater Landing will be any different, Bradbury said.
“It’s the same old story,” Bradbury said.
The USL, naturally, disagrees.
Dan Holman, senior vice president of club expansion and real estate for the league, said a soccer team would be an economic boost and a point of community cohesion and pride in Rhode Island. These aren’t soccer teams. They’re soccer clubs, Holman said. Economists tend to look at things in a silo, Holman said, while a soccer fan would be able to see the whole pitch.
“The economic impact is huge,” Holman said, “but it’s the community impact as well.”
Brian Amaral can be reached at email@example.com. Follow him on Twitter @bamaral44.