May 12, 2005
Stadium Land Assessment $30 Million Short
Oh jeez.
In a letter dated May 11 and directed to District CFO Natwar Gandhi, pictured at right, Councilmember David Catania (I-At Large) accused Gandhi of shortchanging the land cost assessment for a new Nationals stadium by $30 million -- a number, which if true, would make the Southeast location too expensive for the city.
Under legislation passed by the City Council in December, the cost of land acquisition, environmental assessments, and infrastructure development could not exceed $165 million. Gandhi's estimates, released in late March, came in at $161 million, just short of the cap and leaving little wiggle room in case troubles emerged -- which they have. Less than a week later, members of the City Council were criticizing him for underestimating the cost of buying up the necessary 14 acres (divided into 63 parcels owned by 33 different owners), a charge Gandhi denied.
In his letter, Catania criticizes the methodology of Gandhi's initial estimates, pointing out that the market value of the 63 parcels of land was determined by aggregating the value of 13 recent sales of property in the area -- seven of which occured between 2000 and 2002, and only three in 2004. Catania sharply writes:
In your capacity as the Chief Financial Officer, you have seen the dramatic rise of real property assessments in the District of Columbia over the past five years. Therefore, I am left guessing why you would submit a Report to the Council suggesting that the District should rely on sales information that is on average three years old. Your report is silent as to how years of market forces will be suspended as the District attempts to purchase these 63 parcels in today's environment.According to Catania's research, the cost of the land would exceed $103 million, pushing the total cost of necessary preparations to over $190 million -- a big no-no according to the Council, and an even bigger headache for D.C. Mayor Anthony Williams and other baseball boosters.
Could this be the end of a Nationals stadium in Southeast? If so, would the city have the time to identify and complete necessary preparations on a new site for timely construction to lead to a 2008 opening date? Might RFK become the default Nationals home?
In related news and via Off Wing Opinion, we find that Reason Magazine is predicting the end of taxpayer-financed stadiums.
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Zzzzzzzzzzzzzz....
God, Martin, do you just recycle your posts??? Let us know when something new happens.
God endowed everyone with an opinion, as these comment sections no doubt prove.
I focus on these issues in such fashion because these are important updates. Like it or not (and I know how you feel about Catania!), the fact that he now has numbers to prove that the estimates were too low may very well serve to derail the stadium altogether -- especially since so many members of the Council were skeptical to begin with.
This is an important issue for city residents. If you don't want to read about it, don't.
And Martin's bashing of the Nats continues.
Actually, it seems more like bashing Natwar Gandhi. Which in this situation is perfectly warranted.
Much like Americans who do not support President Bush obviously do not support the troops fighting in Iraq (and may as well be terrorists altogether, right?), residents who do not support the idea of a new and expensive stadium must be Nats haters.
This is some of this least logical logic I have heard in my day. Critics of the baseball stadium are concerned because of the financial health of the city and the many other priorities the government should address -- not because they are blind baseball opponents. Vincent Gray, a member of the Council from Ward 7 and a baseballer himself (he was courted by the minor leagues), has gone on record expressing concern over the stadium cost. Does this make him anti-Nats? No. Does this make him a responsible public servant? Yes.
Martin-
You have a very narrow view of what makes a public servant "responsible." Do I believe a blank check should be written for the stadium? Of course not. Has Gandi provided some poor estimates? Perhaps. But I don't believe a city project should be killed because of quarterly real estate inflation.
As a DC tax-paying resident, I want my city leaders to address all of the city's concerns. And as much as I support public education, public assistance programs, and any other of your big causes, they aren't exactly #1 on my list.
Economic development and increasing the overall quality of life in DC are my biggest concerns. And I want my public servants to address that.
Why you gotta drag Bush into this? You commie Pinko!
Unfortunately, this project may very well be killed by those quarterly real estate inflations. The Council passed this law when they realized what the initial deal would cost the city, and more importantly, what public opinion was to this effect. This is responsible governance.
And I doubt you can complain about economic development and quality of life in this city -- both of which have been on the rise for the more affluent. Interestingly enough, the Post reports today that area homelessness is again on the rise. Until the city can do something to stop that and to stem the wave of real estate increases the threatens to drive out residents that aren't rich, the stadium may just have to wait.
Martin, you're right that this is an important issue, and an important update. It's also a well-written post. But I think some readers are just getting exasperated that so many of your posts 1) criticize the stadium deal and 2) lavish praise on David Catania. Everyone knows MLB is a racket and that it's a shitty deal. Some are optimistic that it will be a catalyst for growth, but that doesn't mean they don't wish MLB hadn't footed the bill themselves. But what's done is done.
I don't think this post would have generated the same reaction if someone else had written it. We all know you like Catania, and we all know you oppose public stadium financing. We got it. Please move on. I like your writing and all, but wish we could get some other perspectives on this issue.
Stem the waves of real estate increases?
You must not be a homeowner. Keep then rising, baby!
ooops - should read "...don't wish MLB HAD footed the bill".
The bottom line is: the DC government wasn't straight with their residents. Yet again.
I'd be really happy with the Nationals staying at RFK. It's great to see sports activity there. It's plenty big enough to accomodate DC's baseball fans. The community revitalization arguments work for that neighborhood as well. And the cost to taxpayers, much, much less.
Fair enough. I do write about the topic a lot, because it is of interest to me. Then again, I don't think I am necessarily injecting my opinion into the posts themselves -- that comes in the comments. I am simply reporting on developments, be they pro- or anti-stadium, from Catania or any other member of the Council. Catania has been most active on this front, so I tend to report on what he does/says. If there are positive developments towards the stadium, I will happily report on those too.
RFK is a dump. The place shakes, vendors dont have enough room for hot dogs, and its dirty as hell.
BRING ON THE NEW STADIUM!
This is not going to kill the SE stadium. The fact that it would all go under based upon a set difference is silly.
A few questions:
1) Is the cap on the estimate or the actual cost?
2) Is Ghandi's use of prior sales costs in accordance with some sort of accounting practice? Seems to me he would have used some national standard. If so, he's in the clear, at least with respect to the estimate.
While I'm at it, here's a question I've always wondered. Every once in a while, the Post reports that lower income people are being squeezed out by the rising cost of housing in DC. My question is how it's possible that there's a housing crunch in a city whose population has halved in 50 years. I know that a lot of empty housing is substandard, but we're hemmoraging people here. Do current surveys indicate that there is an actual lack of housing? I've always suspected that that notion is more a product of middle and upper class gentrification guilt than reality. Please feel free to set me straight.
And buck up, Martin. The QOL is getting better for everyone in DC. The disparities are appalling, but there's enough to be happy about that you shouldn't use a rise in homelessness as proof that things are getting worse. They're not.
You damn skippy the place shakes. Quoth the Redskin: "We want Dallas!"
It could be nicely refurbished and be a fitting home for the Nationals.
Sweet,
1) Fact is, it's not silly, it's the law. The Council set a cap for land acquisition, environmental assessment, and infrastructure at $165 million. A penny more, and the site will not be considered.
2) I'm not an accountant, so I couldn't say. But the original report he issued was honest on one point: "Although this study contains many elements of an appraisal as an interim step of the analysis, this report and study may not be relied upon as an appraisal of the market value (my emphasis). So, in essence, Gandhi admits that his numbers are of no real worth.
I agree that the quality of life is improving, and I am greatful for it. Does that mean there aren't still concerns? No. I never said things were getting worse -- in fact, I know otherwise -- but at the same time, not all boats are being lifted at the same time.
Martin
Uh, Martin. That's the problem. You don't see any positive aspects of the stadium so you just keep repeating your posts over and over and over....
Isn't there ANYTHING else that interests you besides stadiums and Catania? How about a post about life on Capitol Hill every now and then? Or embassy events? Variety is the spice of life!
DV,
I try and be as objective as possible on this point. I've been to many a new stadiums, and have been impressed by them in many ways. Am I convinced that they are magnets for economic development? Nope, and neither are many an economist. Pretty, yes, but should a city make financially unsound decisions for what may turn into a debt-inducing nice view?
And plenty of stuff interests me -- read my other posts. But yes, I am a politics sort of guy. Sorry.
Martin
Hey, life on the Hill is one of my beats! (see: Barracks Row posts, plant theft, new condos, etc.) At least as far as DCist writers have defined beats -- which we kind of do, I guess. But I should do more of that. Been concentrating on food too much, as evidenced by my waistline.
Martin, why is it my responisbility to make sure everyone in this city's "boat is lifted" at the same time?
Martin, I totally disagree with you philosophically on the stadium financing but I'm glad you post on this stuff.
I didn't say the law was silly--it's sensible, and Catania is right to look into the quality of the estimate, even if I dislike the result.
What's silly is the idea that going over the legal limit by 10 or 15 million is going to derail a 500 million dollar scheme. Someone will think of something. I'd like to see the bastards at MLB pony up, but that's less than likely.
It's not your responsibility, but it is in your interest. I lived in Latin America for 18 some-odd years, probably the region most affected by inequality. Economists have found that inequality tends to stunt development. Plus, do you really want a really rich NW and a really poor SE, as a random example? It may not affect you directly, but in the long run it is bad policy for a city to remain so starkly divided.
Martin-
No, we don't want a really poor SE. That's why we put the stadium there to spur development. What alternative suggestions do you have to spark a SE revival?
Shit, if I knew I would run for office myself! And that part of SE is less populated and less poor (I believe) than Wards 7 and 8 across the river. Will the stadium benefit them? If you believe what economists say, no.
Good question, though.
Regarding the statement that stadiums don't drive economic development: I have heard and read those studies, too, but what about all the new development by the MCI Center? All of the new restaurants, bars, apartments galore, movie theatres, etc. etc. Would those have all been built if no arena? Granted, downtown was ripe for development (more ideally situated than SE, clearly) but I think that MCI did drive some development and I believe the new stadium can revive some of the area near the stadium in SE too hopefully. It will brings jobs to the neighborhood, as well as new business that will invariably crop up.
JC,
The MCI Center is different in some respects:
1) Abe Pollin financed most of it himself.
2) The venue is multi use. Baseball stadiums have but one purpose -- baseball, 82 times a year.
Any more details and you would have to talk to the sports economists.
And yeah, I forgot to shout out my fellow DCist's, who write on things I could only hope to understand or write about intelligently. And people who offer comments -- these tend to be entertaining.
Martin
Also...developing the 7th Street corridor was a large overarching project that would have proceeded with or without MCI.
At any rate, going over the estimate is not going to necessarily derail the project. It probably should not, at that--though I'd still prefer RFK get a refurbishment.
But, having laid down the law at $165 million, I think it's more than fair for any cost over that amount be paid for through private financing. At minimum, that's sound policy.
Martin,
It is not my understanding that economists are nearly as unified as you seem to think they are on the issue of whether stadiums induce revitalization of areas. From what I've read of recent projects, it has been a mixed bag. Some projects that were supposed to spur on economic development haven't worked out that way (Seattle is one example of a bust) while others have been very successful (Cleveland and Denver both saw revitalized downtown areas after they built their new ballparks).
Furthermore, I would say that MCI is still a valid example of the type of success we may see with a new ballpark. Yes, Abe Pollin paid for a lot of that himself. That's why this isn't as good of a deal. That doesn't mean it won't lead to growth. And sure, baseball games only happen 82 times a year. But on days where there aren't events at the MCI Center (of which there are plenty) do people suddenly stop going to the stores and restaurants that have opened up there? Of course not. Just because baseball is only played 82 times a year doesn't mean that the development that occurs to take advantage of the people brought in by those games will cease to exist the other 283 days.
As new businesses come in for baseball, the area will be nicer, encouraging people to come to the area for reasons other than baseball, spending money all the while. I agree that this could be a much better deal for DC, but I disagree with the idea that it's not worth it. Do you have any links to these economists saying a stadium won't support economic growth? I'd be curious to see why this would be so, from a common sense level it sounds right to me.
Why does Martin end every one of his Nats posts with a series of questions? Does he get paid per question mark? Or could it be because it allows him bash the stadium and team while claiming he's not being critical? Don't you wish he'd just sack up and offer his opinion outright? Doesn't this style of prose annoy the bejezus out of you? Doesn't it?!
Would changing the site push back the proposed stadium opening date in 2008? Yes. Do they have a shot at making the 2008 opening no matter where they build it? Barely.
I'm not going to point out the obvious irony that using questions to question my use of questions presents. Oh wait, I just did.
Yes, I ask questions. And by the look of it, people are willing to respond. And I'm rolling in it -- these question marks are making me reconsider why I even bothered with college anyhow.
? = New car
?? = New house in a gentifying neighborhood
??? = A Senate seat
???? = A piddly Latin American country
JL37-
The basic arguement is that stadiums divert spending from other forms of discretionary consumer spending on other forms of entertainment. So, at the end of the day there are insufficient "net new" tax receipts from admissions, concessions, player & personnel salaries, sale of luxury suites, etc. to cover additional costs resulting from the project - e.g. road maintenance, police security, etc.
However, as the Orioles record low attendance levels show, the Nats have recaptured a fan base from the District, NoVa, and Maryland that once spent money at Camden Yards.
Right, the Camden Yards example is basically my response--the idea that spending money on one entertainment good vs. another causes no net gain makes a lot more sense for basically anywhere but DC, but since a stadium in DC may be the difference between families in Southern MD and Northern VA spening money in their own states vs. the district, that problem doesn't apply here nearly as much.
In any case while I am a huge baseball fan and have been out to five or six Nats games already and am loving it, I don't mind the complaining about the stadium deal to a point--I think it's very unlikely at this point that anything can happen to cancel the deal. As uncomfortable as it makes me seeing things like estimated spending overruns that could cause the city to try and prevent the stadium from being built, I'm fairly confidant that that will only result in MLB being forced to make concessions. Then again, Selig has proved to be fairly stubborn in the past and not afraid to make unpopular decisions. Oh well, call it faith. And 82 games? You're assuming they don't make the playoffs ;)
I hate getting back into this discussion, but some traditional anti-stadium economists have conceded that paying for a stadium in DC is a unique situation because a lot of the money people will spend at games would otherwise have never made it into the District. To give a counter-example, if Florida refuses to build a stadium and loses the Marlins, Floridians will just pay sales tax on whatever they buy instead of tickets. Around here, however, if a Virginian decides to buy a plasma screen instead of season tickets to the Nats, DC will never see that money. Furthermore, big-time entertainment is the only profitable venture DC can beat out the 'burbs on, b/c it's so central and has a certain...je ne c'est quois, or whatever.
I read Councilmember Catania's letter and supporting document on www.dcwatch.com (I get their email newsletter) and there's no question he's right. It's obvious his office's study totally proves that Gandhi's re-estimate was nowhere near accurate. Relying on real estate sales from more than a year ago, or longer, produces numbers that are WAY too low. What reason does Gandhi have for coming up with these B.S. numbers???
One thing should be said--the value of those properties at the NearSE stadium site will be a LOT less if the stadium *doesn't* go there. I hope that the Catania values aren't being based on the value that neighborhood would have if only there's a stadium there....
Tony makes a good point, let Catania get his way and kill the stadium, that way the land will be worth well under $165 million... then we can build the stadium and reap the benefits.
The bottom line is that this is not public money, it will be derived from taxes on business and concessions (if any is left after the Deutsche Bank deal). Grandstanders like Catania wax their egos by impeding progress for the sole sake of being (falsely) perceived as "public advocate". Their efforts would be appreciated elsewhere.
I'm not an economist, but the values really should be based on what the District will have to pay to get the land, not on what it's worth without stadium, because honey you aren't buying it for its looks. If I own a crappy little shack surrounded by nightclubs and sex shops, it's not worth a whole lot. But if my crappy little shack and its land is needed for part of the third base line, then my asking price just went up.
RFK shakes for the same reason Fenway Park has a huge wall in left field. It's called ambience.
Land values are determined based on the maximum as-of-right developable building area as per existing zoning of the parcels. So, if the highest and best use of the land is a seedy strip club - based on current zoning regs - this use will determine the underlying land value.
However, Catania's arguement is well taken. Regardless of what the highest and best use is for these parcels, market values for all types of land uses in the District have skyrocketed. So, are land sales in 2002 and 2003 really comparable?
I'm not talking about the value of the land based on the fact that a stadium is going to be built there. Catania's report simply talks about recent sales which go for a significantly higher amount than what Gandhi said (btw, did you know we spent $500,000 to produce Gandhi's report, whose numbers, for some reason, ignore recent sales?). I actually like going to Nats games, I'm just saying that Gandhi's numbers cannot be true given current real estate trends. I want the Nats to stay here, but the Council said that if the cost of the SE stadium is too much it will have to be built somewhere else (north of RFK). Why can't it just be built there??? Why is MLB so opposed to any location other than the SE location?