State of RI Has No Financial Protection If Pawtucket Soccer Team Folds
GoLocalProv News Team
State of RI Has No Financial Protection If Pawtucket Soccer Team Folds
The state and city would continue to be obligated to make bond payments for decades.
This fall, American soccer icon Landon Donovan’s team folded.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTThe San Diego Loyal, coached by Donovan, ceased operations after its fourth season in the United Soccer League (USL) — the same league in which the Pawtucket team is scheduled to play.
Brett Johnson, the owner of the minor league soccer team and the lead developer of the Pawtucket stadium, gave up the ownership of another USL franchise — that team then dropped out of the league and became an amateur team — which now plays in a community recreation area.
Johnson had promised to make that team into an economic powerhouse just like he has with Pawtucket - Listen to Interview Below.
McKee Administration
Rhode Island Governor Dan McKee's administration could not provide any proof that there is any financial guarantee that owners of the team or the stadium have provided any guarantee.
First, RI Commerce Corporation’s spokesperson told GoLocal, "The provisions are laid out in the agreement presented to the Board on 07/25/22. It’s online for you to view and read through, but I attached them to this email for you.”
But that 86-page document provides for the authorization of the state’s funding. It does not bind Johnson to provide any personal guarantee, place any money in escrow, or provide any other financial protection for the team.
The funding approved by Commerce holds protections that the stadium must be completed before the state releases dollars -- including millions of dollars in "Rebuild RI" monies, but there are no protections if the team folds.
Then, when GoLocal pressed Touchette, he issued a statement on behalf of the state and the city of Pawtucket stating:
The incentive agreement entered into by RI Commerce Corporation includes provisions aimed at keeping Rhode Island FC in the state for the long-term. The project Sponsors under that agreement committed to having a USL Championship Division team utilize the stadium as its primary playing venue each year for a period of thirty (30) years. Additionally, it is our understanding that the franchise agreement between the team owner and the USL mandates that the team owner may not relocate to a new or substitute home stadium while the Series 2023A Bonds or any bonds issued to refinance the Series 2023A Bonds are outstanding.
While the agreement between the USL and Johnson may, as presently drafted, restrict Johnson from moving the team, nothing protects that state or Pawtucket if the team folds like the San Diego team.
A review of the final 334-page bond documents outlines protections for the stadium, but no protections if the team ceases operation.
Of course, Pawtucket already has one vacant stadium. McCoy Stadium is poised for demolition after the Pawtucket Red Sox owners struck a deal with Worcester and, moved the team north. Now, that ownership group is set to sell the franchise to a minor league baseball corporation owned by the private equity firm.
Johnson made big promises about the minor league Tuscon soccer club. He took a controlling interest in the FC Tucson team in 2021.
On the Jay Young Show, another podcast he recorded in the summer of 2021, Johnson discussed his vast array of investments and, specifically, his soccer clubs. He highlighted the Tuscon FC team.
“FC Tucson, so it's officially in the third division and it's called League One. So it's probably a million plus [population], you know, market. So it's a fairly sizable market. It's in the southwest part of the United States, which is growing rapidly, so I love the demographic drivers behind Tucson, and I'm working on a downtown stadium which would be transformative. So in a market like that, I bring a 10,000 to 15,000 seat stadium,” said Johnson.
“I put my Tucson franchise in that stadium. It’ll transform the equity valuation inherent in the club, but it also transforms Tucson. It's going to give it a significant sports team to get behind, and then I'll feed a lot more sports into that stadium and I'll develop a bunch of real estate around it — a multi-family. I'll kind of do an economic analysis at the highest and best, food hall, hotel, multi-family,” said Johnson.
GoLocal published a report last summer on Johnson and the Tuscon club. It played in a small public park facility often in front of hundreds, not thousands of fans.
The Tuscon team appears to have been a bust for Johnson, and less than a year after Johnson's pronouncements about the market opportunity in Tuscon, he turned over the club to the team manager and a local owner. Now, neither Johnson nor Benevolent nor Fortuitous have any interest in the team. According to The Sentinel, "The soccer side will drop back a level, returning to their roots as an amateur squad, but has the option to move back up to be a League One pro team again."
The San Diego team's co-founder and present president Warren Smith and Johnson had a legal battle in recent years.
GoLocalProv secured a court filing in the Superior Court of the County of San Diego in which Johnson and his Fortuitous Partners agreed to a settlement in September of 2019 with the San Diego Loyal team owners.
Efforts to contact Vassiliadis were unsuccessful.
The failure of the San Diego team raises more questions about the financial viability of this level of minor-league soccer.
But just weeks after Johnson Fortuitous submitted documents to Rhode Island, the owner and club filed a settlement agreement with the San Diego soccer team in San Diego courts. This came almost days after a "term sheet" was signed.
The settlement states: “This Release and Settlement Agreement ("Agreement') is entered into this 18th day of September 2019, by and between USL San Diego, LLC, a Delaware limited liability company ("USLSD") and Fortuitous Partners, LLC, a Delaware limited liability company ("Fortuitous"). USLSD and Fortuitous shall be collectively referred to herein as the "Parties/ in reference to the following: “
The Parties previously entered into that certain Fortuitous Partners - USL San Diego Term Sheet, effective July 20, 2019, as supplemented by that certain Consent of Fortuitous Partners executed by Fortuitous on·or about August 9, 2019 (as supplemented, the "Term Sheet") setting forth the Parties' intent to explore creation of a joint venture for ownership of a United Soccer League franchise ("Franchise").
The Term Sheet contains a· provision relating to a so-called "Fortuitous Exclusivity Period," which the Parties intend by this Agreement to terminate.
Disagreements have arisen between the Parties [sic] arising out of the nature and extent of the Parties' obligations, if any, under the Term Sheet.
Subject to the provisions below, this Agreement is intended to settle and resolve any and all disputes, disagreements, claims and demands in any way relating to or arising out of the Term Sheet, and any and· all other claims, whether known or unknown, which either of the Parties might have against the other."
There is no indication that Fortuitous and Johnson notified Rhode Island officials about the dispute.
The agreement establishes a series of payments by the San Diego team to Johnson and Fortuitous to remove them from the ownership and the market.
According to the agreement, the San Diego club would make a series of payments to Johnson and Fortuitious to separate.