Questions are swirling around who would "backstop" $71 million worth of bonds that the city of Pawtucket, the state of Rhode Island and the Pawtucket Red Sox would sell to finance a new baseball stadium in Pawtucket.
- Would Rhode Islanders be on the hook to pay back principal and interest owed on the state's portion of the bonds if anticipated revenue falls short?
- Would residents from Woonsocket to Westerly have to step in to support the city of Pawtucket's portion of the bonds if the city can't generate enough revenue to pay off the debts?
The answers lie in the details that negotiators must hammer out this summer in preparation for House and Senate finance committee hearings in the fall.
City and state political leaders say they expect that the revenue generated by the stadium and nearby development would cover their debt-service costs on $38 million in bonds. More on that in a minute.
But when it comes to backstopping the $33-million bond that would raise cash for the team's portion of the stadium costs, baseball's International League President Randy Mobley confirmed what Pawtucket Director of Administration Antonio Pires has said recently -- if the team can't pay, "the league would step in," Mobley told The Providence Journal.
That's because, while the PawSox ownership group owns the rights to operate the team, the International League retains ownership of the Pawtucket Red Sox franchise, as with all of its teams.
The league's constitution requires its teams to pay their debts, Mobley said. And if a team doesn't pay up, he said, "the league would step in, would possibly and probably revoke the franchise -- so the league, quote-unquote, would 'repossess' the franchise, and the league would turn around and operate it or sell it to somebody else."
Mobley said he hasn't seen an International League team failed financially in the 37 years he has been with the league.
"It's very simple, and I'm sure simple is good in this case" -- the league carries the ultimate responsibility, Mobley said.
"On the surface, it looks like there might be vulnerability, but there truly isn't," he said.
PawSox Chairman Larry Lucchino has consistently refused to say what he and his late business partner, Providence lawyer James J. Skeffington, and eight other investors paid in early 2015 to buy the PawSox franchise from Madeleine Mondor, the widow of longtime owner Ben Mondor, and her partners Michael Tamburro and Lou Schwechheimer.
But Mobley offered some insight into the team's value. If the International League needed to take back the PawSox, Mobley said it would value the franchise between $20 million and $30 million -- and would operate the PawSox or sell it to someone willing to pay more.
But those would be dire circumstances, he said.
"I can't imagine we're ever going to see that day, but should they, the league has that obligation," Mobley said.
The last time a minor league franchise went "belly up," requiring the league to step in, was probably between the 1950s and the early 1970s, when the rights to operate a franchise weren't so expensive, Mobley said.
But now, with only 30 Triple-A franchises, Mobley said they wouldn't have any trouble finding someone else to operate the PawSox.
When Lucchino and Pawtucket Mayor Donald Grebien announced in May how they hope to finance a new ballpark, they didn't talk about how the International League would backstop the team's debt.
But PawSox senior vice president and general manager Dan Rea III said the team's debt would be paid off with the lease payments the team would make to the state -- about $1 million annually, and rising about 2 percent each year -- and $500,000 a year from what the team would get for stadium-naming rights.
When pressed about what would happen if team revenues fall short, Rea's response centered on the economic strength of the minor-league baseball industry.
Minor League Baseball has 160 teams -- from Triple-A down to rookie ball -- that are affiliated with major-league teams, as the PawSox are affiliated with the Boston Red Sox.
"You're talking a pretty stable industry," Rea said. "You're talking about a team here that has a 45-year track record .... Of course there's been ups and downs ... but a team that's been a pretty stable entity here."
The backstop for the city and state bonds requires more analysis. That's the sort of work legislators expect to do this fall, said Sen. William J. Conley Jr., the chairman of the Senate Finance Committee and lead sponsor of the legislation introduced last week to authorize the bond issuance.
To address concerns over whether state taxpayers could end up saddled with the city's portion of the bonds, the city and state have agreed that Pawtucket would backstop its own portion. If revenues fall short, the city would cover them with municipal -- not school -- state aid, Conley said.
Before dipping into that state aid, though, Grebien said he's still examining other ways he could raise the $900,000 a year in debt service. He's even considering charitable donations from people interested in the city's efforts to revitalize its downtown.
