D.C. Short on Baseball Revenue

Fans take advantage of price cuts on merchandise at the Nationals' last home game of the season. Sales tax revenue at the stadium was lower than projected.
Fans take advantage of price cuts on merchandise at the Nationals' last home game of the season. Sales tax revenue at the stadium was lower than projected. (By Preston Keres -- The Washington Post)
By David Nakamura and Thomas Heath
Washington Post Staff Writers
Sunday, October 9, 2005

The District government appears likely to fall short of its goal of earning $10.5 million in tax revenue from sales at Robert F. Kennedy Memorial Stadium for Washington Nationals games, even as the team is on pace to earn larger profits than estimated just four months ago.

The city's potential tax shortfall from revenue generated by sales of tickets, parking, concessions and merchandise could be more than $500,000, according to financial officials, who expect to have final numbers at the end of the month.

Meanwhile, the Nationals, still owned by Major League Baseball, exceeded expectations by selling 2.7 million tickets in their inaugural season and will earn a $25 million profit, about $5 million more than the team projected at midseason, team officials said.

As the city's financial officials examine revenue from the Nationals' first season, they are getting a realistic snapshot of the team's earning potential for the three years it is scheduled to play at RFK. They also realize that the team's impact on the city is broader than tax dollars.

John Ross, a senior financial adviser for the city, said the potential shortfall is due mostly to more no-shows at games than anticipated, meaning less revenue was generated from parking and in-stadium concessions and merchandise sales. Nationals officials said that though an average of 33,728 fans bought tickets to each game, more than 25 percent did not attend. The industry standard is 15 to 20 percent.

"If people aren't coming, they're not buying concessions and merchandise," Ross said.

The Nationals, too, were hurt by the no-shows, because the team also received revenue from the same in-stadium sales that are taxed by the city. But the team also generated profits from television contracts, corporate sponsorships and merchandise sold outside the stadium.

Mayor Anthony A. Williams (D), who promised economic benefits for the city when he helped persuade baseball to relocate the Montreal Expos to Washington last year, noted that the first season brought hundreds of jobs for District residents at home games and attracted thousands of fans from Virginia and Maryland who brought money into the city. In addition, the city's plan to build a stadium for the Nationals in Southeast along the Anacostia River has prompted developers to invest tens of millions of dollars in land near the stadium site.

"In terms of the economic impact, the jobs, the business opportunities, let alone the tremendous outpouring of investment around the Anacostia River underscores the point we made about the multiplier effect," Williams said.

Major League Baseball showed hesitancy to move the team to Washington, largely because of concerns about competition with the Baltimore Orioles. But the Nationals' first season in the city was such a success that baseball officials have set a sale price for the team of at least $450 million, far above the projections last year of $350 million to $400 million.

The city paid for an $18.5 million renovation of RFK last spring and is funding, largely through public dollars, construction of the $535 million stadium project in Southeast. Maintaining a solid revenue stream from sales inside RFK is important because the District will use the money to start construction on the new ballpark, which is scheduled to open in 2008.

The city is close to completing a financing deal with Deutsche Bank, which would receive control of the new ballpark's tax revenue stream along with rent payments by the Nationals in exchange for $246 million up front. The bank has sought guarantees that the tax stream will be reliable.

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