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New estimates show funding gap for Tidewater Landing soccer stadium

Tidewater Landing is now the most expensive USL Championship soccer stadium in history, at $124 million.

Rhode Island Governor Daniel McKee addresses the crowd at the site that will eventually become the Tidewater Landing soccer stadium during a groundbreaking for the stadium project in Pawtucket, Rhode Island on Aug. 12.Matthew Healey for The Boston Globe

PROVIDENCE — The Tidewater Landing minor-league soccer stadium in Pawtucket will directly generate less than $7 million in new state tax revenue in the area over the first 20 years of operation, a newly released estimate shows.

Over those same 20 years, the state will make an estimated $59 million in payments to pay back bonds it issues to support building the privately-owned stadium, according to current projections. Year over year for two decades, the stadium itself would directly generate about 10 cents in new tax revenue to help pay off every dollar the state spends to pay back the bonds, the analysis says.

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The state Commerce Corporation released the analysis on Wednesday in response to the Globe’s Access to Public Records Act request. The report, done in July by a public finance consultant called MuniCap, looked at how much Rhode Island will get per year within the project’s special taxing district in state sales, use, income, and corporation taxes by helping build a USL Championship stadium along the Seekonk River.

The estimate was submitted to the Commerce Corporation before its board members voted on a new financing package for the deal. After controversy and criticism, the board’s vote was a tie, which Gov. Dan McKee broke with his “yes” vote. Later stages of the project include housing, retail, and other amenities.

Defenders of the deal said the MuniCap projections were limited in scope: The analysis looked at the state taxes the stadium alone would generate directly as it attracted people to the area for events, not the indirect economic effect the venue would have as money circulated in the area because of it.

“We are very confident there will be far more economic activity generated at the stadium than the conservative projections under which we’re operating,” said Dylan Zelazo, Pawtucket’s director of administration.

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From left, Justin Papadakis of United Soccer League, Larry Monastesse of the Pawtucket Redevelopment Agency, Pawtucket Mayor Donald Grebien, Brett Johnson, the founder of Fortuitous Partners, Rhode Island Governor Daniel McKee and Rhode Island Lieutenant Governor Sabina Matos, shovel sand during a groundbreaking ceremony for the Tidewater Landing soccer stadium on Aug. 12.Matthew Healey for The Boston Globe

A different projection by a company called CSL, a stadium-specific consultant, presented a slightly more optimistic picture, but one that would still be well short of the amount of money needed to actually pay back the bonds.

Over 30 years, the stadium would generate about $14.8 million in direct tax revenue in the area around the stadium, the CSL projection said. The CSL report also looked more expansively at construction-related taxes, plus indirect and induced tax revenues in the area of the stadium, and all around Rhode Island. The highest number in CSL’s report: $37 million in overall new state tax revenue over 30 years around Rhode Island, directly and indirectly because of building and operating the stadium.

Yet even that is still less than will be needed to pay off the state’s bonds. The state is also providing tax credits worth up to $14 million on top of that $59 million in bond payments, and Pawtucket has pledged a total of $19.2 million in financing, about half for the stadium and half for later work.

In a recent WPRI poll, 44 percent of likely Democratic primary voters said they opposed the stadium financing plan, while 35 percent supported it. And critics continued to hammer away as the deal underwent more scrutiny.

“If (the) Pawtucket soccer stadium won’t bring in tax revenue needed to cover debt, who would invest their money in this project?” Gary Sasse, a former director of the Rhode Island Public Expenditure Council and Rhode Island Department of Administration, said in a tweet last week. “Can voters have confidence in those running for state office who green lighted this project?”

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“Just more evidence that this was a horrible deal for the citizens of Rhode Island,” said Michael McNally, a Commerce Corporation board member who’s an outspoken critic of the new financing deal.

Supporters of the Tidewater Landing deal — which at this point include the state Commerce Corporation, Gov. Dan McKee, the city of Pawtucket and developer Fortuitous Partners — are quick to point out that the stadium is not the end of the proposed project. The broader development includes housing, retail space, a riverwalk, a pedestrian bridge, and other amenities in an economically distressed area of Pawtucket.

But the stadium alone is where the state has now plowed the vast majority of its public support. The state was originally going to help pay for later parts of the project, but shifted that money to the stadium to help make sure the project kept going in the face of cost inflation. Tidewater Landing is now the most expensive USL Championship soccer stadium in history, at $124 million, around 50 percent more than the earlier budget.

When the Tidewater Landing project was one big bundle, back before the cost explosions, supporters said it would pay for itself. They now acknowledge that the public’s financing for the stadium alone isn’t expected to recoup enough tax revenue to pay back the bonds for the stadium. But they also say the project won’t stop there.

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“No one ever said the stadium (alone) was going to pay for itself,” Zelazo, of the city of Pawtucket, said. “No one’s hiding that. We remain confident the stadium will help drive the rest of the development, which will provide tens of millions of dollars of new taxpayer revenue, which will make the entire project ultimately pay for itself and then some.”

Zelazo also pointed to non-financial benefits, like reopening a once-blighted area of the Seekonk River and providing an entertainment option for families. The Commerce Corporation echoed that sentiment in a written statement.

Brett Johnson, founder of Fortuitous Partners, addresses the crowd at the site that will eventually become the Tidewater Landing soccer stadium.Matthew Healey for The Boston Globe

Fortuitous Partners, meanwhile, says it’s committed to building the entire project, including the housing, retail and other amenities. That’s where it makes its money.

“Tidewater Landing has and continues to be the sum of all of its parts — the entire project,” Dan Kroeber, director of development for Fortuitous Partners, said in a written statement. “No one piece can carry the private and public investment on its own. In its entirety, Tidewater Landing will transform the riverfront and generate tax revenues for the city and the state that currently do not exist and would not exist but for this project.”

What’s unclear, though, is how much the public will be asked to support those future phases. That makes it impossible to calculate the return on investment for the whole project at this point, and to see if it truly will pay for itself. The only estimates available now: How much the stadium will generate in return for the public’s investment in it.

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McKee, meanwhile, has defended the deal, saying repeatedly that he would not leave Pawtucket behind, memorably remarking that critics who fear it’ll be a boondoggle need to “wake up.”

The stadium, under the analysis’ assumptions, will continue generating tax revenue into the future, beyond the estimated 20 years it will take to pay off the bonds. The yet unnamed soccer team has pledged to stay in Rhode Island for 30 years. Over that 30-year span, the MuniCap estimate says the stadium will directly generate $11.5 million in new state tax revenue.

The bulk of the state and city’s support for the project will come through what’s called tax increment financing. Under tax increment financing, a public body issues bonds, then pays them back from the “incremental” — in other words, additional — tax revenue from a special district surrounding the project.

The special district in Pawtucket stretches not just the stadium but a swath of downtown; the old McCoy Stadium area; and the area around the new train station. Under current law, the state can’t pay back the bonds with tax revenues from outside of the district. And its goal is to use only the new money that the project brings in within the district. But the state could dip into existing tax money within the district to pay back the bonds, and supporters point out there’s enough in the area already to do so, even if they don’t want to resort to that.

The MuniCap projection from July provides the most direct comparison yet between new tax money from the stadium and bond payments for the public’s financing. (The stadium is within the tax increment financing district, so these revenues will be able to pay back the bonds.) The analysis has a year-to-year breakdown of how much the state will shell out to pay off the bonds, and how much it’s estimated to get back in tax revenue directly from the stadium to do it.

In the first year of annual payments on the bonds, 2025, the stadium project alone will directly generate about $272,000 in new state tax revenues that it will be able to use to pay back the bonds, the MuniCap estimate says. But it will cost an estimated $2.9 million in debt service that year to pay them back. By 2042, the report estimates the state will get about $374,000 in new tax revenues directly from the stadium to pay back the bonds, with a bond payment that year of $3.7 million.

The bonds haven’t been issued, so these are estimates on both sides of the ledger, and the exact terms of the bonds — which will be issued by the Pawtucket Redevelopment Agency — haven’t been established.

Soccer players at William E. Tolman Senior High School, 17-year-old Anderson Cardosa, from left, of Pawtucket, and Darius Davis, 16, of Pawtucket, chat with their coach Dan Silva while looking at the future soccer stadium site.Matthew Healey for The Boston Globe

Meanwhile the city of Pawtucket is also pledging $19.2 million to the project, $10 million of which will help fix the funding gap for the stadium and the rest for later stages. It will also use tax increment financing. Financing its $10 million portion of the stadium would require about $800,000 in debt service payments per year for 30 years, the city says. The city says it will help recoup some of that money by taxing the stadium, which previously had a tax-free deal.

The financing deal initially passed in February 2021 without much controversy, but the Commerce Corporation’s board approved the new financing arrangement in July only with the help of McKee’s tie-breaking vote.

Since then, the board has released some, but not all, of the documents that media outlets have requested about how board members were informed about the deal before they voted. That now includes the MuniCap analysis. But the agency redacted an analysis of Fortuitous’ own estimates, and declined to turn over answers Fortuitous gave to particular questions board members had. The agency cited various exceptions to the APRA law to argue it could withhold the records, like exceptions for draft documents and trade secrets or confidential financial information.


Brian Amaral can be reached at brian.amaral@globe.com. Follow him @bamaral44.