October 23, 2018

Moody's: Ballpark bonds increase pressure on Worcester's growth

A rendering of a new stadium for the soon-to-be Worcester Red Sox and a related mixed-use development. The total $240 million project is expected to open starting in 2021.

The credit rating agency Moody's Investors Service has assigned a high quality rating to $27.5 million in bonds the city of Worcester plans to issue to pay for costs associated with a new city-owned baseball park for the AAA affiliate of the Boston Red Sox.

The Pawtucket Red Sox have agreed to lease the Worcester ballpark and begin playing there in 2021. The $27.5 million bond sale, according to Moody's, is the first installment of a $101 million bond issuance to finance the ballpark, and part of a $240 million redevelopment effort in Worcester.

"We project the new ballpark and other capital funding will increase Worcester's already large amount of debt outstanding by an average of 6 percent annually over the next three years. The increase, however, comes as the city's economy and tax base continue to grow — factors that contributed to the Red Sox affiliate's decision to move to Worcester from Rhode Island," Moody's senior analyst Nick Lehman said in a statement.

"Assuming tax base growth continues at or near the current rate, the city's leverage will remain manageable and the ballpark issuance will not strain its credit profile," he said.

Moody's said maintaining a strong economy will help keep city debt manageable, and concluded the ballpark borrowing adds risks to the city's credit profile, "including a diminished capacity to issue debt for other infrastructure projects and potential need to divert general fund revenues to repay debt."

Moody's cited the city's success in public infrastructure funding for the DCU Center and City Square, a mixed use development where the Galleria mall once, but also warned against "inherent risks to public financing of sport venues."

Worcester officials have said that the ballpark and related development will repay — and then some — the city's upfront investment through new tax revenue. The city will set up a special taxing district in which tax revenue will be diverted to paying off much of the $101 million bond.

The Sox will pay $6 million upfront and roughly $1 million a year in rent for the ballpark.

The debt issuance, planned for Oct. 31, will boost the city's outstanding debt by an average of 6 percent annually over the next three years, Moody's said. That debt will make up 12 percent of all of the city's outstanding debt, according to Moody's.

Total debt, including pension costs, will rise to what Moody's said is a "significant" 14 percent of the city's tax base and three times greater than its operating revenues.


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