Baseball Stadium Still Shows Up in the 'Win' Column

By Steven Pearlstein
Friday, January 6, 2006

Okay, let's take a deep breath, put emotions aside and think about this baseball stadium thing in a businesslike manner.

Contrary to what you hear from stadium opponents, our choice is not between pouring unknown sums of taxpayer money into a baseball stadium and spending nothing at all.

If the District walks away now, it will have already committed or spent $62 million on the proposed Anacostia waterfront site, according to an analysis by the city's straight-shooting chief financial officer, Nat Gandhi. Add to that $19 million in penalties the city would probably incur for not delivering a stadium, as called for in the legally binding agreement with Major League Baseball.

Harder to calculate, but no less real, is the risk premium the city would have to pay in dealing with other business entities in the future as a result of the District's reputation as an unreliable development partner. And while renewal of the Anacostia waterfront is inevitable, it would surely take years longer without the jump-start from a baseball stadium, at a cost of tens of millions of dollars in foregone tax revenue.

In other words, the cost of backing out of the $631 million stadium project now would be substantial.

In contrast, city taxpayers, with one exception, would pay nothing toward the stadium under the current proposal. Yes, the District government would "finance" the stadium -- that is, borrow the money at favorable rates in expectation of revenue to pay it off. But the people actually paying back the interest and principal would be those who use the stadium -- the team owners, in the form of rent, and baseball fans, in the form of sales taxes on tickets and money spent on hot dogs.

The exception involves 2,000 large businesses that effectively "volunteered" to pay an annual ballpark fee that would generate $14 million a year. In theory, that's money that could be used for more worthwhile purposes. As a practical matter, imposing a new tax on those businesses for other purposes would have been a political non-starter.

Of course, taxpayers might be on the hook for cost overruns on the stadium that have already totaled $100 million since the plan was approved. But let's consider where some of the added costs have come from.

Some of the increase is the result of rising construction costs. But think about it: If it costs more to build the stadium, it also costs more to build the billions of dollars worth of other development going on around the city. Higher construction costs translate into higher assessments, which translate into more property tax revenue. The fiscal benefits of that tax windfall swamp the higher cost of stadium construction.

Another reason the stadium project costs are rising is that the land turns out to be more expensive than expected. But, again, that's good news. It means all the other land around the stadium is also worth more than we thought and will generate more tax revenue than previously expected.

There's also lots of bellyaching about the $20 million it would take to expand the Metro station to accommodate stadium-bound riders. But remember, those fans wouldn't ride free. By my back-of-the-envelope calculation, that works out to an extra $4.5 million a year in fares -- enough to cover the carrying costs on $20 million in capital expenditures, with plenty left over for the incremental costs of operating the extra off-peak trains.

The point here is that the cost of a baseball stadium must be considered in the context of what else is going on in the city and the very real fiscal benefits that would flow from the project. This would not be a one-time expenditure but an investment with long-term paybacks.

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