January 22, 2008
Stadium Costs Keep Rising
Remember the days when then-Mayor Anthony Williams claimed that a new stadium for the Washington Nationals would only cost $400 million? Yeah, so do we. Unfortunately, those days are long gone.
According to the Examiner, higher-than-expected costs for land acquisition around the new stadium along South Capitol Street have pushed overall costs up by $43.2 million, meaning that by opening day the new stadium may end up costing closer to $700 million. The increased costs are being attributed to lowball estimates for land acquisition reported by the District's Chief Financial Officer, Natwar Gandhi. Of course, this shouldn't be news to any of us -- in 2005, Council member David Catania (I-At Large) raised the issue with Gandhi, noting that land costs were likely to be higher than Gandhi was claiming at the time.
The increases, though, won't technically bust the stadium's $611 million cost cap, because land costs never figured into the construction budget:
Land acquisition was not included in the stadium’s $611 million price cap, meaning the sports commission can bridge the budget gap with excess revenues from the ballpark fund — composed mainly of stadium sales taxes and a 1 percent tax on D.C. businesses. It also means that while the project is technically over budget, it has not breached the statutory cap.It's always encouraging when a cost cap on a publicly funded project -- especially one with a cost equal to almost 10 percent of the city's entire budget -- isn't actually much of a cap at all.“The cap was never a real number,” said at-large Councilman Phil Mendelson, a stadium critic.
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You were expecting the price to go down?
As soon as they announced that $400 mil pricetag, I knew they'd be out $800 mil before opening day. Looks like they're right on schedule.
"Publicly funded project"
Technically true, but misleading at best. And comparing the total figure to DC's total operating budget is not only misleading, it's stupid.
The baseball stadium is being funded NOT from general funds but rather it's from a special baseball stadium tax assessed only on very large DC businesses, primarily things like large law firms, lobbying offices, etc. There is NO tax on individual taxpayers, and unless your business is really huge there's no tax on your business.
Is there a trickle-down effect? Maybe, but it'd be so small as to be ridiculously insignificant, unless you use lobbying firms a whole lot.
Could we have gotten a better deal? Probably. Will the DC taxpayer still make out like a bandit over the long haul, due to massive development prompted in large part by the stadium? Probably.
So, please, let's show a little honesty on the 'publicly funded' rhetoric.
I expect more from DCist than comments like this, "It's always encouraging when a cost cap on a publicly funded project -- especially one with a cost equal to almost 10 percent of the city's entire budget..."
How is $611 million 10% of a $9.9 billion budget? That's more like 6%, in addition, the stadium isn't being paid for in one year, rather over the life of the bonds, which is 20 years. That works out to about $30.5 million a year, or about .3% of the District's annual budget. Please double-check my math and correct me if I'm wrong.
give us back our strip clubs!
Hillman,
"Publicly funded" is not misleading. True, individual taxpayers are not paying directly for the stadium, but the city has taken out $611 million in onds to pay for it. If all goes to shit with the team and/or economy, the District may well have to draw funds from city coffers to cover the debt financing. And since those $611 million in bunds has increased the city's already high per capita debt, it will be harder to finance other big projects if the need ever arises. So you're right -- we're not putting our money into the stadium. But collectively the District -- and by extension its residents -- are on the line here.
DCVoterBoy,
The FY 2008 budget was $5.6 billion, plus $3.3 billion in capital expenses. So yeah, my claim is a bit of an exaggeration, but not completely.
The $611 million was never sold as a total-cost cap. You've been writing about this for years and if you didn't know that already, it shows a complete lack of attention to detail. Council was well aware the cap did not cover land, and any claims by council members to the contrary are demonstrations of complete ignorance, or outright lies. To their credit, Catania and Mendelson both voted against the lease.
"Under the council's legislation, all costs in excess of $611 million, aside from overruns related to buying stadium land, must be paid by the Washington Nationals' owner, the federal government or private sources."
Emphasis mine. http://www.washingtonpost.com/wp-dyn/content/article/2006/02/13/AR2006021301624.html
Don't forget the lease payments from the Nationals or the increased tax revenues coming from the sales of tickets, concessions, parking, etc...as well as from the operation of all of the businesses that weren't there before (once they get there). Some of that revenue will go toward paying the stadium costs. So, again, not entirely publicly funded. I mean, it's not something that the city is doing from scratch from existing dollars/revenue streams.
And there's gotta be money from other events going on at the stadium, right?
The Pope-a, he is a-coming! And you're wearing-a your nice-a white-a suit.
Martin:
That's a lot of 'if's, and you don't seem to factor in all the extra tax revenue we should be getting for decades because of the baseball stadium. That tax revenue will almost certainly dwarf any speculative additional borrowing costs.
A better description would be 'publicly guaranteed', if that's even a term of art. There's a long history of people misrepresenting, both willfully and through ignorance, the specifics of the ballpark deal. Given that long history, it'd be better to avoid terms like 'publicly funded', especially when coupled with a misleading comparison of ballpark costs with city budget overall.
An even better term would be "publicly financed." The mechanisms employed to finance the project are open to debate, but DC government is a public entiry and it is ultimately responsible for managing this project, including coordinating required payments, and eventually, collecting stadium driven revenues.
Well, the fact remains (on either side of the argument) that money exists to be spent. The question is, could it have been better spent some place else? Or, will the District end up benefiting? If it benefits then the risk of spending was worth it. Whether what was risked came from what funding is quibbling at this point. In short, will it 'float'? If yes, then the stadium adds to the city's net worth.
I mean, I get it. The article can be summed up as "huh, this keeps costing more" plus a little noodge in the direction of embattled CFO Gandhi. The big "IF" thought, in my book is the Nats, not the Natwar. If the Nats suck (or continue sucking) then the spiffiest stadium in the world means bupkiss. ...right, FedEx Field?
If the Nats suck (or continue sucking) then the spiffiest stadium in the world means bupkiss. ...right, FedEx Field?
I dunno about that, the ForeSkins are one of the most profitable franchises in all of professional sports and they've had a losing record four out of the last six years.
Bottom line calculation: Will the development around the stadium bring in more money over the next decade than DC has paid out in construction costs?
If yes, then the increased costs are still worth it since they will be paid by an overall increased property tax assessments in what had been a dead zone (in addition to the increased sales taxes on tickets and concessions, and (hopefully) increase in some income taxes from stadium employees who actually live in DC).
If no, then we call a whoopsies on the deal and keep on paying.
I think there's also an intangibles aspect to the calculation: DC showed that in a major project like this it can (knock on wood) build the project on time and without any scandal. Granted our negotiating teams aren't as good as our building oversight teams, but it's still an impressive undertaking.
But an offsetting intangible is the parking debacle that will likely occur because the Lerners wanted above-ground parking ASAP, rather than the slower (and costlier) below-ground parking.
So for the economists keeping score at home, on the one hand it's good, but on the other hand it may be bad, but on the other hand it's good, unless, on the other hand, it's bad.
How I read these comments:
blah blah taxes blah blah public funding
THE STATE REFERENCE ABOUT The Pope-ah!
blah blah more stuff about taxes
Nicely done, DE. I'm going to go celebrate by heading down to the zoo to watch the monkeys do it.
Not sure whether the stadium is a good idea or not, but there are reasons why the costs of publicly financed stadiums end up higher than benefits in dollar terms.
First, a tax on large corporations does have an impact individual taxpayers. A quick google search for 'corporate tax incidence':
"most orthodox economists agree that corporations pass on about 50 percent of their tax to consumers in the form of higher prices (and possibly to workers in the form of lower wages)."
Also don't forget about costs like police and ambulance services for public events. Infrastructure improvements, such as highway interchanges, new roads and water and sewer lines.
And the extra tax revenues are a bit of a mirage, because tourists/residents who buy tickets to the games or events are simply redirecting the money they would have spent elsewhere, such as concerts or movies (or RFK stadium).
DiscoStu:
That money didn't really exist to be spent in the sense that it wasn't just lying around waiting for a use, any use. This was a special tax that the business community strongly supported, as they saw it as a wise investment. There's very little chance they would have consented to a similar tax for, say, more billions flushed down the DC public school system, etc.
I think the real tax income involved here won't be from the stadium itself. It will be in the massive development around the stadium. Yes, some of that would have come regardless, due in part to NAVSEA and other agencies relocating to the Navy Yard area, but the stadium gives the area it's identity, it makes it a destination neighborhood, and it showed real committment from the city. It is of course very hard to measure, but I'd say a good percentage of the new construction in the 'ballpark district' is because of the ballpark.
A lot of the big developers (and that's really the only folks that have the $$ to develop there) have said that they wouldn't have considered making the investment if the city hadn't committed to the stadium.
That's where the real tax revenue comes in. All those people living in those new condos will have to pay DC income tax, plus real estate tax, etc. That $$ probably dwarfs any $$ the city gets from hot dog sales taxes, ticket sale taxes, etc.
I think we quickly forget what a shitbox that area was. It was a massive drain on DC coffers. Theoretically it will now be a massive plus, at least from a tax perspective.
And let's not forget that the taxes on the stadium itelsf are a bit of a commuter tax. Many of those coming to a Nats game won't set foot in DC for any reason other than to see a Nats game. It's not like they were going to either go to a Nats game or go to a show at the 930 Club.
It's not like they were going to either go to a Nats game or go to a show at the 930 Club.
You might be surprised. Suburbanite friendly bands like Yo La Tengo play the 9:30 pretty regularly. Once the little ones get older than 5 or 6 the decision to get a babysitter and ditch the kids gets a little tougher, or so I hear anyway.
There's plenty of credible research that says there is no benefit for local economies in building stadiums for pro sports teams.
Who gives a shit, I will be there opening day how about you?
pass
Hillman, ah. You're right I was thinking back to the original outcry of "$400 million stadium? Why not money on schools?!" that came up around ot-four and ot-five. Yes, I'm still trying for "ot" to make a centenial comeback.
So, I guess it isn't like there was money for the poor wait to be applied that instead went to the rich... right, Robin Hood?? ...Robin? You there? ...how 'bout ol' V?
Well, as long as I can get a Ben's Chilli Bowl Half-Smoke at the game we'll call it a populist draw, eh?
Who gives a shit, I will be there opening day how about you?
Obviously not the people who make these decisions and that's exactly why cities keep building stadiums for people who have enough disposable income to spend hundreds of millions of dollars on a pro sports franchise.
Rat:
You are right. There is research saying that many or even most stadiums do not provide tax benefits in and of themselves above their cost.
But I'd argue that this stadium is a bit of an anomoly, primarily because of what was there before.
Again, it's not the revenue from the stadium itself - it's the surrounding neighborhood. We had a massive tax revenue drain there before the stadium. Let's not be overly polite - the area was a violent slum before the baseball stadium - highly unsafe public housing and empty lots were the norm, not the exception.
With the stadium, we'll have essentially a brand new city there, complete with office jobs and new residents paying bigtime DC taxes on their expensive granite-crusted condos.
It's extremely hard to quantify those types of benefits, spread out over a 20 block radius, as the ballpark district develops.
I'd also suggest that the timing of the ballpark was in this case unusually beneficial. Now that the condo market and real estate markets in DC have slowed down, I think the argument can be made that very little that has already been committed to in the ballpark district would have ended up being built without the ballpark. Maybe eventually some would, but the ballpark is the anchor, and it being pushed when it was committed builders to building when perhaps if they'd waited three years they would have changed their minds.
But I'd argue that this stadium is a bit of an anomoly, primarily because of what was there before.
That's actually a pretty reasonable argument because this was a large section of the city that was basically lying fallow, but I'm not sure that argument couldn't be made for many other stadium sites all over the country. And at least some of my objection to this stadium is me being a selfish prick, if the city had re-built at the RFK site it would be raising my property value!!!
Rat:
I think other cities argued that they'd use stadiums to rejuvenate a crappy part of town, then counted the two crappy Burger King's that came along as 'economic development'. But in our instance it's actually happening. It could have just as easily have not happened - we built a stadium and then nothing really followed. It was a gamble. But it looks like it paid off.