Worcester Business Journal

12 Worcester Business Journal | February 4, 2019 | wbjournal.com F O C U S B A N K I N G & F I N A N C E Stadiums, the new tax break BY GRANT WELKER Worcester Business Journal News Editor A New England mill city was looking to attract a baseball team and help cement the city's reputation as a grow- ing economy. So the city made a deal to build a new stadium at an old industrial site near downtown. If the story from Manchester, N.H., sounds familiar to those in or around Worcester, it's because plenty of cities nationally these days see an economic development opportunity in minor league stadiums. If they can redevelop a blighted site as a ballpark, these city officials feel they Minor league ballpark projects oen yield little economic growth, although some have success could help turnaround a neighborhood with new housing or other ancillary growth. And if they can bring in thou- sands of fans for a game, they hope, those fans will eat at nearby restaurants before or aer the game or spend their money elsewhere in the city while there. In Manchester, city officials signed a deal in 2003 to move a baseball team from New Haven, Conn., offering $25 million to build a new stadium. Like Worcester, Manchester had only a few years prior fielded a new hockey team and was looking to sports to help the city make a name for itself. Like in Worcester, city leaders saw a chance to spur new development just south of downtown to help the city recoup costs through additional tax revenue. Manchester's Northeast Delta Dental Stadium, which opened in 2005 on the edge of the Merrimack River, has brought some new development, includ- ing a six-story Hilton Garden Inn just beyond the outfield wall. One new hous- ing development opened just down the road along the river a few years aer the park opened, and a second small cluster of buildings opened at a long vacant lot next to the stadium in 2016. But other than the hotel, not much of the new development can be directly tied to the ballpark, said Doug Blais, a business professor at Southern New Hampshire University in Manchester, reflecting a common refrain among sports economists. SNHU itself opened a new location in a renovated mill building a short walk away. "e hotel had a fairly direct [connec- tion] because it was part of that initial development, but I think aer that – what SNHU has done – there's really no connection" to the ballpark, Blais said. Economic development with sports e Worcester Business Journal has analyzed a dozen stadium construction and financing agreements from the upper levels of minor league baseball to see how other cities – like Worcester with the Pawtucket Red Sox – have bet on minor league sports as linchpins for more jobs and tax revenue growth. Like with tax-increment financing agreements analyzed by the WBJ for the rest of the Tax Breaks: Paying for Growth series, communities are confident they can choose the right projects to spur economic growth. In the process, they're building and owning something – sta- diums for private entities they lease to – they'd otherwise rarely get into. In the process of building stadiums, they give up tax revenue on the sites by owning the properties themselves. Gauging the impact of stadium devel- opments is notoriously tough because how much new construction or visitor spending is attributable to a new stadium can be nearly impossible to pin down. But sports economists have been nearly unanimous in calling public financing for stadiums foolish economically. "I would argue in favor of it as a small piece of a much larger pie," Blais said, comparing Manchester's decision a decade and a half ago to Worcester's. "It's much easier to say it's been successful at a $25-million price point rather than a $100-million price point." In minor league baseball, few cities these days are able to attract new teams without financing most or all of costs related to new stadiums. Gwinnett County, just outside Atlanta, paid $64 million toward a new ballpark to help attract the Atlanta Braves' affiliate from Richmond, Va., in 2008. Pearl, a community of 25,000 just outside the Mississippi capital of Jackson, reached an agreement in 2004 with the Greenville Braves to move from South Carolina. Pearl, too, put up all the costs, borrowing $75 million. at decision ended up costing the city with a $900,000 annual shortfall and a junk bond rating. Even keeping teams has cost cities. In 2013, Nashville borrowed $65 million to build a new stadium for the Nashville Sounds, a team in the city since 1978. In Worcester's case, the city has borrowed $101 million to build a new 10,000-seat ballpark, with roughly one- third of that to be paid back by the team in a lump sum and lease payments. e remainder, city officials said, will be paid back – and then some – through new tax revenue from the ballpark and new development on adjacent streets. While the team is responsible for any construction overruns, Worcester is picking up the risk for any ancillary development that doesn't take place as hoped, or if demand to live in or rent retail space in the surrounding develop- ment doesn't materialize. A new England warning sign Hartford, Conn. covered the roughly $70-million cost for a new ballpark to attract a team from just two towns away, the New Britain Rock Cats. Hartford's new ballpark was expected to anchor a massive new mixed-use neighborhood just north of the city's downtown, re- markably similar to Worcester's plans. Little has gone right in Hartford since, at least aside from the Yard Goats' popu- larity with fans. e park opened a year late, and only aer the initial contractor was fired. at contractor, which was supposed to build the $350 million relat- ed mixed-use project, then sued the city. Four years aer Hartford agreed to build the park, construction has yet to begin for any of the new development once hoped to help pay for the project, and isn't close to taking place. In the meantime, the city is covering bond debt payments by dipping into its general fund at $5 million a year. A developer hopes to break ground this year on a smaller $200-million development to be built over six years. Economic forecasts projecting growth from the ballpark couldn't stand up to any scrutiny, said Fred Carstensen, an Dunkin' Donuts Park in Hartford has brought baseball to the city, but also a financial burden and no new outside development. Worcester's vision (below left) is very simi- lar, with housing, retail and offices. 1st in a 4-story series Tax Breaks Paying for Growth 4th in a 4-story series

• Cover