What I don't like about stadium deals with professional sports teams: DC soccer stadium edition

Proposed site, DC United soccer team stadium, Buzzard Point.  Washington Post graphic.

Yesterday's Post had a story about DC's announcement of a stadium deal with the DC United soccer team.  The team will build a stadium, DC will contribute the land and other infrastructure improvements.  It's supposed to cost each party about $150 million.  See "Mayor Gray, D.C. United reach tentative deal on soccer stadium for Buzzard Point" and "Key lawmakers back DC United-District stadium deal."

DC will pay by trading some properties, so the transactions--not unlike Enron or other financial engineering stratagems, stay off the books.

The stadium will be located in Southwest DC at Buzzards Point, which is a mostly industrial area.  The site is roughly equidistant from both the Waterfront and Navy Yard Metro Stations (about 0.8 miles).

I am torn, generally, about these kinds of deals, especially after DC agreed to such a one-sided deal with professional baseball--the city spent $700 million on the stadium--for some rent payments.

At the metropolitan scale, professional sports teams aren't "economic development," they merely trade one form of entertainment spending for another.

On the other hand, for the jurisdictions where stadiums and arenas end up being based, the facilities can be a net positive economically, depending on:

• how the contracts are structured between the city and the team and whether or not the city shares in certain revenues;
• where the facility is located, especially
• whether or not the facility is integrated into the city outside of the stadium grounds, in a manner that contributes positively to economic revitalization in adjacent parts of the city;
• whether or not the facility is mostly reached by automobile or by other means;
• whether or not the facility is used for many events (football stadiums generally have about 10-15 events per year, baseball stadiums 81-100, arenas as many as 150 days, depending on how many teams operate there, soccer stadiums up to 40 maybe);
• if admissions taxes are assessed on ticket sales (DC is giving up some of this money to Verizon Center for improvements there); etc.

This facility won't be terrible on those elements.  So maybe it's worth doing.  But it comes at a great cost, in any case.

Good resources on this general issue include:

-- Field of Schemes website
-- "A New Old Ballpark," Chicago Reader
-- Costas Spirou and Larry Bennett, It's Hardly Sportin': Stadiums, Neighborhoods, and the New Chicago
-- Philip Bess, City Baseball Magic--Plain Talk and Uncommon Sense about Cities and Baseball Parks
-- "Serious Investment and Savvy Marketing Revive Soccer in Kansas City," New York Times
-- "Warriors' arena - Is Embarcadero< the right place?, San Francisco Chronicle
-- "Opening Day Distraction - Why the ballpark was a great idea, four years later," San Francisco Chronicle
-- past blog entry, "More on sports stadiums"
-- past blog entry, "Tale of Two (or more) Cities"

In the thread on the topic on Greater Greater Washington ("To build a soccer stadium, DC will swap the Reeves Center") there is spirited discussion about whether or not sports facilities contribute to economic development, with the Nationals Stadium being listed as one positive example, along with others.

For many years I have argued that Verizon Center wasn't essential to the economic improvement of what had once been called Downtown Washington's East End, and I still agree with that assessment overall, because development was going to move east anyway, because there was nowhere else to build in the Downtown core.

However, I have to admit that the arena was crucial for one reason and remains key for another.

First, the choice by then team owner Abe Pollin to move the basketball and hockey teams back to the city from a suburban arena was a very important decision that said--especially at that time when DC was pretty f*ed up financially and politically--the city is important and worth investing in.  This perhaps stabilized the economic calculus in the city at that time, with developers, and set the stage for a big increase in development velocity once Anthony Williams was elected mayor.

Second, the arena brings in lots of suburbanites into the city to attend events.  And they end up, some of them at least, re-sampling and re-visiting the city.  This effect isn't as good as I'd like, because Verizon Center schedules events early, making it difficult for workers to eat at local restaurants before events.  Instead, they go directly to the Arena and eat on the premises.  Still, the arena is a visitation anchor.

That's the case also for the Nationals Stadium.  In and of itself, it's not why there is a great deal of development going on in the M Street SE corridor--and the development started long before the city decided to put a baseball stadium over there too.

There's development there because of the height limit and the constant expansion of office districts east and south of the core of Downtown, as well as the movement to various Navy Dept. functions to the Navy Yard over the past 10 years.

But with 81 events, minimum, each year, and like Verizon Center, most people who go to Nationals Stadium go by transit, it means that people are on foot, exploring the area, and some spend money here--even if they have to go to Barracks Row (8th St. SE) to do it.  That helps the city, even if it doesn't contribute any benefit to the overall economy at the metropolitan scale.

Right: rendering of one of the options for a new DC soccer stadium.

Opportunity cost is the big question

The issue is can the city get more economic return by spending money on other things?

The cost of the deal is more than $150 million, when you figure that the agencies moving from the land sites that will be traded will go into new buildings that have to be paid for out of the city budget.

And arguably, other "investments" could potentially net a better return.

It does set the stage for doing something different with the RFK site.  The Kennedy Family though is committed to keeping the stadium, even though it is obsolete, because it is named for Robert F. Kennedy and they consider it a great memorial.

And the site has environmental issues (see the RFK Stadium Site Redevelopment Plan by the National Capital Planning Commission) and currently there is a recreation easement on the property, so to re-develop it for other purposes, the city would have to pay the National Park Service to extinguish the easement.  On the other hand, we don't need acres and acres of parking lots there either.  (See the past blog entry "Wanted: A comprehensive plan for the "Anacostia River East" corridor.")

Why don't local governments get an ownership interest or a revenue interest in sports teams, for their financial contributions?

For years I have argued that Congress needs to step in and produce laws that protect local governments from themselves vis-a-vis deals with sports teams.  But that won't happen so long as Congressman and Senators get tickets for football, baseball, hockey, basketball, and soccer games.

The National Football League made it illegal for communities to own teams, grandfathering in permission for the Green Bay Packers, which are owned by a community corporation.

Maybe the Packers are the exception that proves the rule.  But why not give the local government a profit participation right in the value of the sports team, not unlike how royalties work for intellectual property or mineral resources.

Why shouldn't a city get a hefty chunk of the increased value of a team when they build a $700 million stadium?

In any case, DC needs an open and transparent capital improvements planning and budgeting process

Finally, the biggest problem here is that DC doesn't have an overt public process for capital improvements planning and budgeting.

Trading properties so you can keep debt off the municipal financing books--to stay under the debt ceilings negotiated with municipal bond/financing firms--are the kinds of transactions that need the utmost scrutiny.

Yes, capital budgeting occurs, but only in the context of the annual budget.  We need a more rigorous and public process where the opportunity costs could be measured and considered outside of wheeling and dealing behind closed doors.