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Md., Va. Fans Could Make Stadium a Tax Winner

By Peter Whoriskey
Washington Post Staff Writer
Sunday, October 3, 2004; Page A01

The day after D.C. Mayor Anthony A. Williams announced that city negotiators had reached a deal with Major League Baseball, he and his advisers said the publicly financed $440 million stadium package would enrich -- not deplete -- city coffers.

They projected a net gain of more than $12 million annually for the city, based on estimates of increased tax revenue generated by the team and its fans. "I believe it's going to bring new people and tax money to our city," Williams (D) said.

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In this the mayor was following the two-part script that has unfolded almost every time a city has proposed to build a sports stadium with tax money. First, stadium advocates issue rosy economic forecasts showing that the public "investment" will boost businesses, swell tax collections and return a profit to the city. Almost as quickly, a chorus of university economists pronounces those predictions deeply flawed and calls the stadium plan a costly public subsidy to wealthy sports owners and millionaire athletes.

Yet the debate over the economic benefits of baseball in Washington may be taking a somewhat different shape, with some of the most ardent critics of public sports financing moderating their protests. They find the claim that the new D.C. ballpark might benefit the city's tax coffers at least plausible. That is because the fan base of Washington's new team will be spread across Maryland and Virginia, bringing money into the city that spectators would otherwise spend closer to home.

"It's an abnormal situation," said Andrew Zimbalist, a Smith College economics professor and one of the most prominent critics. "There may not be a net drain there."

"It's possible they'll gain revenues," said Dennis C. Coates, an economics professor at the University of Maryland Baltimore County and the author of several papers on public financing for stadiums.

Under the agreement negotiated by the city and Major League Baseball, more than 80 percent of the stadium financing would come from a new tax on big businesses in the District and new and existing taxes on tickets, concessions and merchandise sold at the stadium. The remainder would come from rent paid by the team, which would reap virtually all of the financial benefits of the stadium, including the naming rights and ticket and concessions revenue.

As the D.C. Council prepares to debate the financing plan, one of the key issues is whether the investment of public money will yield benefits to the city.

In arguing that ballparks do not generate significant new state and local tax revenue from spending by fans, economists make the case that the economic boost around the stadium drains revenue from other places.

In the economists' view, the $100 that a Montgomery County family spends going to an Orioles game, for example, is money that it won't be spending at entertainment businesses closer to home. As a result, the increase in sales tax collected in Baltimore is offset by a drop in sales tax in Montgomery, the economists say.

But in the case of the District's ballpark, the surge in sales tax collections in and around the stadium would be offset by a drop in the tax revenues of Maryland and Virginia. D.C. officials estimate that 80 percent of the fans would be coming from those two states.

Their loss would be the District's gain.

"You're cannibalizing revenue from the other tax districts," Zimbalist said.

One of the primary arguments of advocates of the D.C. stadium financing plan is that the increased tax revenue will augment city services.


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