By Michael Gaffney
Lots of news being pushed out about by the administration about the Worcester ballpark development.
Grant Welker over at the Worcester Business Journal, April 29, 2019, in an article titled: Worcester ballpark costs going for further approval, reported as follows:
“The City Council voted last fall to borrow $101 million for the ballpark, and has already bonded for roughly $30 million. Those two capital-budget requests cover the remainder of the $101 million that hasn’t already been bonded.
Upcoming votes may largely be a formality.”
Of course the votes are a formality, its only $101,000,000.00 of taxpayer secured monies. Had the ballpark proposal been put directly to the voters, we might hear a different tune. But, we live in a representative republic, not a pure democracy. So, be sure to vote this fall.
By history, Worcester loses money on just about every bet they have ever made. After all these decades, the DCU Center is still not profitable. Every year the taxpayers subsidize the DCU Center. In order to try to make it less of a loss, your elected officials continue to hand out tax breaks to investors to build hotels so the DCU Center can host larger events. The DCU Center was supposed to be a draw to the downtown area. It never has been. People just drive in and out of the events. But, it is nice to have the forum.
By history, every single year Worcester loses money on the golf course. In order to try to make it less of a loss, your elected officials decided to clear-cut the tress in Greenhill Park and dump millions of taxpayer dollars into a driving range. They also tried to play fast and loose with the accounting for the golf course costs by trying to eliminate the cost of the road to the golf course as part of the expense of the golf course. But, it is nice to have a golf course.
By history, Union Station is a complete financial disaster and will continue to be a financial disaster. It simply will never be profitable. Tax breaks are being handed out like candy at Halloween for hotels and housing just to claim some form of benefit from the station. They even did an intersection redesign with the roundabout using taxpayer monies. But, it is nice to have the rehabilitated building.
By history, the last huge land-grab by eminent domain was the St. Vincent’s Hospital project. It was supposed to become a draw to the downtown area and Worcester would become “Medical City”. It is the good news project as it finally came out of the red a few years ago. Never, ever calculate the actual rate of return on the St. Vincent Hospital project as it is likely below the inflation rate. But, it is nice to have the hospital.
By history, your elected officials (led by Timothy Murray, the President of the Worcester Chamber of Commerce), took out bonds at a rather high rate of interest for the purpose of investing them into the stock market to fund the pension plan. In other words, they borrowed money in the taxpayer’s name to play the stock market. The market promptly crashed. The investment tanked. However, as the economy has improved out of the “new normal” of 1% growth of the Obama administration to the 3%+ growth of the Trump administration, the City will hopefully recover from the initial losses on the pension funds, but will never realize the projected benefits of the gamble.
(Many of you might get upset over the comparison of the growth between the two presidential administrations. It’s not a gratuitous attack or rampant support for either, it is just a fact that, should we return to 1% growth, all the projections on a project with a payback period of decades, will be seriously affected. If the economy slows down, so does spending, particularly for things such as going to a ballgame. It also means business closures and layoffs that result in less tax revenue coming in. In other words, if the economy stalls, the effects on the ballpark project’s revenues on the city will be compounded.)
All of the above financial decisions sounded great at the time and have merit to them (except borrowing funds to play the stock market – that was just stupid). But, they cost the taxpayers so much and limit so many other more prudent financial opportunities.
Right now, your elected officials are seeking additional ways to raise taxes to fix the city roads, while spending money on projects that are arguably outside of the function of government.
But, let’s return to Mr. Welker’s article to bring this all together:
“Construction of the 10,000-seat ballpark is slated to start this summer, with a planned opening of April 2021. A few pieces need to fall into place before construction starts in earnest, including buying businesses that stand in the way and demolishing buildings. The city initially said it would have ownership of those sites by April 1.
No final plans have been presented for approval for the ballpark.”
So, the project is already behind and doesn’t actually have a final plan. That’s not good. It might be time to remember back when the City took the land by eminent domain for the St. Vincent’s Hospital project. The City’s projected costs to obtain the property where blown out of the water in court. Simply put, they seriously underestimated the values of the properties which is why it took so long for the recoupment of the City’s investment.
More from Mr. Welker:
“In addition to Worcester’s $101 million borrowing for the ballpark, the city is also giving tax breaks to two new hotels that are planned for the mixed-use development and waiving permitting costs that it would normally charge applicants.
City and state officials have said public costs are leveraging what will be greater amounts of public investment.”
Tax breaks for hotels. That sounds oddly familiar. It’s almost as if the City has done this with the DCU Center and Union Station with little success. History repeats itself yet again.
A ballpark, as with any entertainment complex or golf course, is a great asset. However, is it a prudent use of taxpayer monies to leverage pubic investment, particularly where the taxpayers will be on the hook for the next generation if it fails?
And finally, Mr. Welker reports on the most important part of the ballpark project:
“Worcester officials have also said the bonds will be repaid through parking revenue, advertising and other sources. By 2022, the first year the city must begin repaying those bonds, the city has said those revenues will come to $3.7 million, giving the city a surplus in the first year of more than $740,000.”
It is the last paragraph of the article, but the most important.
Worcester is investing $101,000,000.00 into a ballpark with a return in 2022 of allegedly $740,000.00 in revenues to the taxpayers. Yes, it will allegedly grow and be continuous stream of revenue, but right now that is a rate of return that might keep up with inflation and not much else.
Let’s just say you win the lottery tomorrow for $101 million. The City Manager walks up to you and says “if you give me that $101 million, I’ll get you $740,000 in the next three years and maybe more thereafter…” How hard do you laugh?
Yes, there is an EXPECTATION that the revenues will grow. But, history shows the city’s gambles have rarely been correct. Worse, as with the golf course, if the project loses money, your elected officials will try to change the accounting costs to cover up the loss.
Considering how quickly the economy can change, project costs can increase, people’s interest in baseball can decrease, etc., it is equally as likely that the revenues will decrease and the city taxpayers will be on the hook. This isn’t a golf course costing a couple million, this is a $101 million gamble for a laughable rate of return. But, ballparks are really nice to have.