I’m not exactly sure how something called the Worcester Airport Blog ended up closely covering the Worcester Red Sox‘ stadium subsidy controversy, but on Saturday it posted this:
Go to page 21 of the lease, section 4.5(b). It outlines who is responsible for cost overruns. The important sentence begins with “Notwithstanding … exceeds $18,000,000, the parties will work cooperatively to find alternative funding sources.”
This says to us that the City may have to renegotiate with the Team if cost overruns exceed $18,000,000. Exhibit F states the cost overruns are currently $17,304,793 (as of 1/8/21) so the likelihood of there being cost overruns over $18,000,000 are probably high.
Backing up a minute: The new stadium being built to lure the Pawtucket Red Sox Triple-A baseball team to Worcester has been reported to cost a minor-league record $172 million, counting $157 million for actual stadium construction plus $15 million in “infrastructure” (mostly road work). The costs so far are broken down as follows:
- $100.8 million in initial costs from the city of Worcester, of which WooSox owner Larry Lucchino and his partners are repaying $6 million in cash upfront, plus a little over $1 million a year via rent payments for the next 35 years. That’s been portrayed as worth $35 million, but getting $1 million in the year 2056 isn’t the same as getting it now (not just because of inflation, but because of the interest rate on bonds), so really it’s worth only, let’s go to the Present Value Calculator, use a low 3% interest rate because money is cheap right now, and we get $21.5 million. So the other $73.3 million is on the city.
- $35 million for parking garages and other “infrastructure,” plus $3.5 million for a ballpark entryway, from the state of Massachusetts.
- $20 million extra from the city for additional costs of acquiring and preparing the site (in part because the city neglected to account for hills requiring retaining walls so they don’t fall down).
- Another $15 million from the city for that latest batch of road work.
- Lucchino & Co., meanwhile, will be on the hook for the $6 million in cash, that $21.5 million worth of future rent payments, $9.5 million in added construction costs from January 2020, plus $17.3 million in new overruns this past year.
That comes to $146.8 million in public costs, and $54.3 million in team costs, which totals $201.1 million. A sizable chunk of that isn’t technically “stadium costs” — it’s costs for things like roads and garages that are needed by the stadium, but not the stadium proper — but the total cost of the project is now right around the $200 million mark.
Which, finally, brings us to that section 4.5(b) of the WooSox’ lease:
(b) Tenant shall be responsible for all Ballpark Design and Construction Costs that exceed the Cost Estimate (“Additional Ballpark Costs”) except for those that are caused, directly or indirectly, by (i) the delay or negligence of, or failure to act by, Landlord, City, or any of their representatives or contractors, including the failure to comply with the applicable Commonwealth public procurement laws, for which the Landlord shall be solely responsible; (ii) Excusable Tenant Delay; or (iii) Excusable Landlord Delay. Notwithstanding the foregoing, in the event that Additional Ballpark Costs exceed $18,000,000, the Parties will work cooperatively to find other, alternative funding sources. The foregoing cap applies to and includes any Ballpark Design and Construction Costs that are necessary in order for the Ballpark to meet the Comparable Facilities Standard.
I am, as usual, not a lawyer, but that language seems clear as mud: The team is on the hook for all overruns, but notwithstanding that, for any overruns above $18 million the city will help find “alternative funding sources” (knocking over a liquor store?) to cover the rest. If the cost overruns go up by more than that — and as noted at the top, they’re already within $700,000 of the cap — and no alternative funding sources are available, the lease is all ¯_(ツ)_/¯ about what happens then.
That’s bad, but those earlier clauses in 4.5(b) aren’t great either, since they leave open the possibility of the team claiming that overruns are due to “delay” by the city, and there’s certainly been a ton of delays and likely to be more given, you know, everything. So the total public cost of this project is probably best described as “$150 million plus or minus ¯_(ツ)_/¯” — it’s almost certainly the most expensive minor-league baseball stadium in history either way, though, so at least they can start designing the historical plaque now.