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Updated: November 28, 2022 Focus on Law & Accounting

Paying Polar Park’s debt: For the second year, underwhelming tax collections were saved by a public property sale

PHOTO | Matt Wright Polar Park first opened for baseball games in May 2021 and construction on the stadium was fully complete later that year.

In their first two seasons at the Polar Park baseball stadium, the Worcester Red Sox attracted a combined 894,507 fans to their home games in the Canal District, ranking sixth among all minor league teams in both years.

Yet, the number of fans has little to do with the promise of the $160-milion public ballpark paying for itself through new developments and added tax revenue. Former city manager Edward Augustus called this pay-for-itself plan the guiding North Star when making financial decisions on the project that enticed the team’s co-owner and chairman, Larry Lucchino, to move the Boston Red Sox’s top minor league affiliate out of Pawtucket, Rhode Island in 2021. The new City administration echoes Augustus' sentiment.

“It is going to pay for itself,” said Eric Batista, who on Nov. 16 took over as Worcester’s city manager. “That is what the goal is, and that is what we are aiming for. We don't have any fear right now of anything changing.”

In order to cover its $3.9-million annual payment for fiscal 2022 on its 30-year bond, the City needed the special taxing district around the stadium to generate $2 million in revenue. It got $655,374.

Eric Batista, Worcester city manager

However, that number was bolstered by the one-time, $3-million sale of public property along Green Street in November 2021 to the owner of The Cove proposed development. That sale not only made up for the ballpark district’s revenue shortfalls in the last two fiscal years, but it already gives the City about half of the needed $2.7 million for the fiscal 2023 payment.

That will help, too, as the planned commercial and residential developments around Polar Park – on which the stadium repayment plan is largely dependent – are unlikely to contribute significant tax revenues in fiscal 2023, which ends on June 30.

Polar Park debt payments

Bonus developments

When the stadium was first announced in August 2018, the pay-for-itself plan was centered around six proposed buildings from Boston developer Madison Properties. That Madison development was originally planned to start coming online in January 2021, but it has significantly shrunk in size and been delayed. None of the buildings are open yet, and the first – the 228-unit South of Madison apartment complex – is slated for a mid-2023 opening.

Yet, City officials like Batista and Chief Development Officer Peter Dunn remain confident in the pay-for-itself plan because the Madison buildings have been bolstered by two other proposals from separate developers: The Cove, a seven-story apartment-and-retail tower from Worcester developer Churchill James LLC; and a 400-unit housing complex called Table Talk Lofts from Boston Capital Development LLC, on the former site of the Table Talk Pies manufacturing facility.

Image | Courtesy of Worcester Planning Board
Construction on The Cove seven-story development began in November. This is a rendering of the project.

By adding those developments into the projected revenue plan, Dunn said the city’s assessor and chief financial officer have determined the ballpark district will generate more revenue than is needed over the 30 years to cover the stadium debts, even using conservative estimates.

Dunn didn’t provide those calculations or the figures showing the 30-year revenue generation estimates to WBJ.

“We have actually been better off than we were four years ago because [property] values went up,” Dunn said. “But now with interest rates [going up], I think it is good that we have taken a conservative approach to valuations since the beginning.”

Unlike last year, the City now has a method for keeping track of the revenue generated within the ballpark district improvement financing (DIF) area, in order to ensure the stadium does pay for itself. Last year, before the stadium construction was completed and under the purview of the Worcester Redevelopment Authority, the City had to rely on what CFO Timothy McGourthy described as spreadsheet math to see how revenues were stacking up against expenses.

“Now, the asset has been transferred to the City,” the city manager’s office said, “the DIF has been incorporated into the City budget, and all DIF revenues are and will continue to be tracked on a fiscal year [not baseball season] basis.”

Development fits and starts

The pay-for-itself plan includes other ballpark district revenues as well, such as parking fees, taxes on stadium concessions, and the WooSox’s annual lease payments, but the impact of those revenues toward the debt on the $160-million stadium is limited. The real solution to paying off the debt comes in the way of tax revenue through new developments.

The original $125-million development plan from Madison Properties included two hotels, apartments, retail, restaurants, and office space. That has shrunk in scope, including going down to one hotel with the majority of the other buildings now anticipated to have a lower level of investment.

All the buildings have been delayed multiple years; the hotel, for example, was slated for a 2022 opening but is now estimated to open in 2025. In Madison's agreement with the City, which includes property tax breaks and waiving of permitting fees, the developer is required to start making tax payments to the City on certain developments, regardless of when they get built.

Denis Dowdle, the president of Madison Properties, didn’t return requests for comment.

The Cove development, at the former site of The Lucky Dog musical hall, is more on schedule. The project, though, was supposed to cost $110 million and rise 13 stories but was reduced to its now planned seven stories because of permitting and regulations, Dunn said.

“Some of that had to do with cost related but also because with a building of that size. It gets crazier in terms of code requirements and structural steel,” Dunn said.

The Cove is now under construction and expected to open in August 2024, said John Tocco, managing partner and COO for V10 Development in Boston, which is building the project with Churchill James. The Cove will have 16,000 square feet of commercial space and 171 residential units, and Flatbread Pizza and Bowling will operate out of the ground floor.

The third proposed development in the ballpark district – the 400-unit, six-building complex from Boston Capital Development LLC – broke ground in late October on the first phase of Table Talk Lofts. The first phase includes 83 affordable units.

Business turnover in the Canal District

While largely not impacting the pay-for-itself plan, another issue facing the area around Polar Park is the exodus of businesses in the larger Canal District neighborhood. With the closure of Maddi’s Cookery and Taphouse, Buck’s Whiskey & Burger Bar, Smokestack Urban BBQ, The Hangover Pub and Broth, and PreGamers Sports Bar and Grill since August, the district has seen an upheaval of established restaurants.

Batista, though, is convinced the neighborhood surrounding Polar Park will thrive.

Larry Lucchino, chairman of Worcester Red Sox

“I’m not too worried. There are a lot of factors when people make decisions in the market,” Batista said, citing labor shortages and costs as well as supply chain issues about why businesses may have closed.

The larger problems voiced by businesses in the neighborhood, namely parking issues, hasn’t made the area any less enticing for investment, Batista said.

“Some of the folks in the Canal District have sold their business, have sold their properties,” he said. “It's not like the parking and everything else was an issue. It is that they found a value in who they were, or they found value in their brand and they sold it; and they created a sense of value for that neighborhood, which could potentially bring another restaurant or even the same restaurant with the same name and new ownership.

“However, it does not preclude us from having conversations with the district and trying to figure out what we can do as a City to continue to support the neighborhood and make sure that growth continues,” Batista said.

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8 Comments

Anonymous
November 29, 2022

I manage construction projects of this size. The numbers don't add up. Why haven't the business leaders of the city asked for a full accounting? As for Anonymous, Madison Development had planned this project with or without the stadium (city's own words). I think it's great that the area is doing well game day, but the neighborhood was growing organically already. Numbers don't lie. Well, unless their lying.

Anonymous
November 29, 2022

What happens when there's no more properties to sell. History has shown that attendance has gone down after a few seasons. The city has already increased the size of the tax district. That's money that already is being siphoned from schools. Only the delusional think this is good economic development. On the bright side it's not as bad as the soccer stadium in Pawtucket.

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