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.
For now, some city leaders and activists have questioned why first-season profits for the team and Major League Baseball exceeded projections while the city might not reach its revenue goal. In response, city officials stressed that their preseason projections were made with little knowledge of how the team would perform and how fans would respond.
D.C. Council member Adrian M. Fenty (D-Ward 4), who voted against public funding for a stadium, said Major League Baseball should chip in more because the deal to build a stadium was struck when no one knew how profitable the franchise would be.
"There's no question that for a lot of D.C. residents, the team brought a lot of civic pride to the city," Fenty said. "I also do not think there's any question that the deal as was negotiated is an unfair deal. . . . Given how much this team is now going for, I think it's more than fair that the owners who reap the profit from the sale of the team contribute back to the cost of the stadium."
Nationals President Tony Tavares said the stadium financing deal is closed.
"A deal is a deal," he said, adding that the Nationals might not always be profitable. "People lose sight [of] what it takes to be a successful operation. You shouldn't take a snapshot of one year and say this is a panacea."
Some city and team officials said two factors could help stem a potential drop in ticket sales and attendance next year.
For one thing, the team's cable television exposure was severely limited this season because of a legal dispute between Comcast and Orioles owner Peter G. Angelos, who are fighting over broadcast rights to the D.C. area. When the team gets a more expansive cable deal, some officials said, more people will learn about the club and attend games.
And when Major League Baseball sells the team, a new owner will spend more on marketing or even make improvements at RFK, they said.
"No-shows were excessively high here," Tavares said. "Hopefully, with a new owner coming on board here, we'll be able to do some things we haven't been able to do in the past as far as marketing and sales."
The city will try to improve food service at RFK in hopes of shortening lines and getting fans to spend more money, said Allen Y. Lew, chief executive of the D.C. Sports and Entertainment Commission.
Lew said the problem is hard to fix: The 44-year-old facility has just two kitchens and one service elevator, archaic compared with modern stadiums. Spending a lot of money would be foolish because the team is scheduled to play there just two more seasons, he said.
The District's tax revenue from parking also was compromised because more fans than expected rode Metro. About 45 percent of the crowd took the trains, compared with the preseason projection of 40 percent.
City officials had a chance to make some extra revenue -- about $2 million -- by selling naming rights at RFK. But a deal with the National Guard fell through shortly after the season began after federal officials objected.
Some city leaders said they hope the District's biggest gains will come when the Nationals are sold by Major League Baseball to an ownership group, probably next month.
"We should put all our energy into getting local ownership," said council member Vincent B. Orange Sr. (D-Ward 5), "someone with a stake in the outcome who is sensitive to sharing the profit."
Staff writer Barry Svrluga contributed to this report.