Rebuilding Place in the Urban Space

"A community’s physical form, rather than its land uses, is its most intrinsic and enduring characteristic." [Katz, EPA] This blog focuses on place and placemaking and all that makes it work--historic preservation, urban design, transportation, asset-based community development, arts & cultural development, commercial district revitalization, tourism & destination development, and quality of life advocacy--along with doses of civic engagement and good governance watchdogging.

Thursday, July 25, 2013

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.

Labels: , , , , ,


At 9:29 PM, Anonymous BeyondDC said...

What I don't like about stadium discussions that focus exclusively on the economics is that they ignore the main reason we build stadiums in the first place: They're cultural amenities that people want, and are willing to pay for. Like opera houses or museums, except more popular.

We can talk about the planning impacts, but at the end of the day we build these things because people want to have them. We try to squeeze some economic development out of them because we may as well, but that isn't why they're built.

This is why all the policy wonk handwringing over how stadium deals always lose money never convince anybody to stop building stadiums.

At 7:15 AM, Anonymous charlie said...

I agree with you on the ownership interest, althought the issue comes up more about franchise moves rather than stadiums.

(and a minority ownership stake isn't worth much in terms of control and/or finances. You don't buy 5% of a sports team for the money, you buy it for access and the fun)

But yes, the proper frame to look at this is capital allocation.

The GGW post has some good back and forth on the benefits, and from what I remember from the inital proposal DC would be using transporation dollars for the local improvements.

In terms of the reeves center, it is shame to lose even a few jobs on U st for people with suits. As I've said before the strange part of DC is just how concentrated employment is downtown. However, the real waste the mass of section 8 housing to the side of U St, all low density, and could be ripped out and replaced. There is one proposal (turing the parking lot of the elder housing into condos) but you really could gut the entire block right now.

Just don't touch the gas station and fast gourmet!

side note, on chicago's downgrade last week:

At 8:18 AM, Anonymous Anonymous said...

Beyond DC is right- but I have a problem with the lack of quality in the design of these stadiums- and the pictures I see of this new one are very nasty- what is that overhanging piece of metal in the air above all of those people supposed to be or to do? I hate much of this trendy "design" which tries to focus on some kind of nostalgia for a modernism that never was. What is there not beautiul sculpture or art work INTEGRAL to the structure ? Why is the construction always so cheap looking and temporary? This and other reasons makes me disgusted- when the desingers could be better integrating the structure into it's neighborhood- they drop the ball.

At 9:19 AM, Blogger Richard Layman said...

Dan -- DC is in a strange place, like NYC, it has the strong real estate market to do this deal. More and more, other municipalities do not.

But DC doing this deal puts pressure on other municipalities to commit and fold, e.g., see Sacramento and Seattle.

Plus I keep forgetting to write about how Glendale is pushed to the point of selling its City Hall so they can pay what they "owe" to the NHL for running the bankrupt Phoenix Coyotes. Yes, the City was stupid enough to sign such a contract. We all do stupid s*** at one time or another. It's why the state (e.g., in the case of Canada, the provinces) or federal govt. needs to step in and change the playing field.

It won't happen, because of politics and Growth Machine type stuff.

And I would argue that it is the purpose of urban policy writers like me to point out these critical issues, and connect them to multiple jurisdictions, rather than fold.

This deal probably isn't terrible. But it comes at a great cost nonetheless, and perhaps those costs need to be better balanced.


In this economic period going forward, those kinds of encumbrances and choices are f*ed up. It doesn't matter what you "want" or what "we want" it's what we can do or ought to do with the scarce funds we have, given the constraints we face.

At 9:26 AM, Blogger Richard Layman said...

Charlie, as usual you raise multiple excellent points.

Yes, we got screwed with "deconcentration" development policies after the riots, combined with the concentration of low income housing, in the 14th Street corridor.

Yes, that housing should be rebuilt, higher and mixed income.

I don't think it will happen. (E.g., I look at CH Village all the time and rue the decision making from way back. Even the Duron at the time I said was an underutilization of the site.)

I was one of few voices to argue in favor of the Boys Club selling the property, but maintaining their club on the first two floors, in order to add more housing and density to that area, and some financial assistance to the org.

But people, especially CM Graham, opposed it.

2. I don't necessarily agree with you about the Reeves Center and jobs. But that's because I am in thrall to agglomeration economies. People want to be downtown. OTOH, there are other businesses that would locate in other places, if we had better space choices for them. Did you see the article in the Weds. NYT about NYC firms subletting spaces to startups? It's a classic example of what JJ wrote about in terms of having flexible spaces, old buildings, etc. as being key to economic health and vitality in cities.

OTOH, government workers suck in terms of "revitalization energy." They don't spend a lot of money outside of their workplace. (E.g., some studies in DC show that workers bring their lunches 65% of the time.)

Too bad we didn't get some of the industrial building stock that is great for repurposing. Instead that building stock--of course you know this--is in places like Baltimore, Pittsburgh, Philadelphia, Brooklyn, etc.

At 9:29 AM, Blogger Richard Layman said...

Oh, and I just meant profit from sale of the team, mostly. Not unlike the difference between Class A and B stocks. The municipality would have operating participation, but when the team would sell, they would get a big chunk of the sales price, because of the contribution of the stadium-arena.

At 9:33 AM, Blogger Richard Layman said...

wtf? belonged in the paragraph about Glendale.

At 9:35 AM, Blogger Richard Layman said...

Argh. I meant to write, "the municipality _would not have_ operating participation"

At 10:30 AM, Anonymous Anonymous said...

aesthetics is so oftenoverlooked in these discussions when it is very important. WE should not let just any crappy modernist design go up- and I fear that no one really cares and will allow this to happen. There is something to be said of traditional materials and looks- these places tend to live in their areas and be better neighbors for a longer time. We have lost the ability to build for the ages it seems.

At 10:41 AM, Blogger Richard Layman said...

The book by Philip Bess listed in the entry, albeit it is about baseball stadiums, covers the issue of aesthetics. It's about "old time" styled baseball stadiums, like Camden Yards.

At 12:51 PM, Anonymous Anonymous said...

they did a good job on that stadium
actually Nats stadium- despite its horrbile aesthetics, is well organized and flows very well and has great views- but it sucks as architecture. Jessica once said that modernist buildings are meant to be used from the inside where they sometimes have big windows with great views- and are not meant to be seen from the street or outside. They need to make them look goood and have great views- it can be done.

At 8:23 AM, Anonymous Cavan said...

Please read my piece at GGW from back in May:

The media hasn't reported anything about the new facilities that the city will get for almost nothing. The city needs new fire and police HQ. the current building in Judiciary Square is crumbling. As part of the deal for Akridge getting the Reeves Center site, it will also pay to construct a new facility for fire and police on city-owned land in Anacostia.

The infrastructure costs at Buzzard Point will be comparable to any apartment building you build there. They will also come from expected future tax flows from the new development at 14 and U.

The city gets: taxes from 14/U, new facilities for almost nothing, pays for infrastructure with a small piece of new taxes

Akridge: gets new development at 14/U, builds city new facility

DC United: gets land that was vacant to rent to pay $150 million to construct new stadium

The only one who is paying cash from its current funds is the team. The city won't be paying for anything with bonds or out of existing tax receipts.

At 1:16 PM, Blogger Richard Layman said...

If Akridge pays for new facilities that's different. It's unclear if that's the case.

Personally, I doubt that it is, because then it becomes considerably uneconomic for the developers.

E.g., I am no expert, but expect the cost for a new headquarters to be at least $100 million. The Unified Communications Building cost about that, for 150,000 s.f.

Same for a replacement building for the agencies at Reeves. (That will be different probably, AEDC will own the building, but DC will be on the hook for rent for decades.)



Post a Comment

<< Home