There's the new baseball stadium and the new convention center hotel and the new Skyland Shopping Center in Southeast. And now there's the new National Capital Medical Center, on the site of the old D.C. General Hospital.
What do these normally private-sector projects have in common? Mayor Anthony A. Williams wants to subsidize them, big time.
I'm not a purist on these matters -- sometimes public money makes sense, as when markets fail or ignore potential public benefits. But I'm getting the sense that Mayor Williams and his team have gotten so hooked on high-profile, politically popular dealmaking that public subsidy has become a financing tool of first resort.
The problem with these trophy projects isn't only that they may divert money and attention from other pressing needs. It's also that there is too much wishful thinking built into their pro formas and too much price escalation between the moment of conception and final delivery.
It hardly inspires confidence that all these deals have been negotiated in secret, with the financial details withheld from the public. And it doesn't help that each project has become a fresh opportunity for the mayor to pay back union supporters and placate neighborhood "activists" with cumbersome rules on hiring and contracting.
It is only in the past few months, for example, that the mayor has been willing to drop his ridiculous plan for the city to get into the hotel business and consider private financing for a new $400 million convention center hotel. And even now that Bob Johnson and Marriott have stepped forward with a private-financing proposal (which became public only because of the intrepid reporting of The Post's Dana Hedgpeth), some city officials are still grousing that a private deal will foreclose the possibility of a big payday for the city when the project is refinanced.
Other than contributing the land for the convention hotel under a favorable ground lease, there is no need for any further subsidy for this oversized, 1,220-room hotel. No tax breaks. No financing backstops. Nothing.
That doesn't mean private financing is always superior. We can argue about the wisdom of taxing D.C. businesses to pay for roughly half the cost of the new baseball stadium. (The team and fans will pay the rest.) But if you accept the idea of taxpayer subsidy, there is little advantage to going with Deutsche Bank's "private" financing proposal, as city officials are now inclined to do, rather than simply having the city issue bonds.
One of the problems with the city's public-private projects is that they are driven more by politics than economics. And nowhere is that more true than the Skyland project, which the mayor and certain council members are determined to push through, irrespective of cost.
So far, the estimates for acquiring the 18.5 acres have doubled in three years, to about $48.5 million. And the oft-cited projection of $100 million in annual sales for the 240,000-square-foot center works out to more than $400 per square foot. That's well above the national average -- and that in a neighborhood where household incomes are well below average. If there's really $100 million in retail business to be done at Skyland (which I doubt), it wouldn't require a government subsidy to lure Target and Applebee's.
The mayor's latest big-deal project is for a fancy new $400 million medical complex on the old D.C. General site, a joint project with Howard University. This project makes sense if you assume that the existing Howard University Hospital and Greater Southeast Community Hospital are not viable full-service hospitals and would be better transformed into smaller, 24-hour ambulatory care facilities (which I do). It also makes sense if you think it important to improve the quantity and quality of health services in the poorest sections of the District while boosting Howard's medical school as a research center and training ground for black physicians (which I do).
What's not so clear is why a well-run hospital can't break even without $300 million in upfront subsidy from the city. Other hospitals do it, with grants and donations and the know-how and negotiating clout of hospital management firms. And as long as the city pays reasonable reimbursement rates for services to the poor, there's no reason Howard's new medical center shouldn't be able to do it as well -- particularly if the city donates the land, which seems reasonable.
The real danger of providing too much subsidy to these worthy projects is that it denies them the financial discipline that markets impose and makes it less likely that they will be economically viable. It's a lesson Mayor Williams and his economic development team have yet to learn.
Steven Pearlstein can be reached at firstname.lastname@example.org.