Post columnist: More is less!

We have an early contender for the Dumbest Reasons of 2006. Washington Post columnist Steven Pearlstein writes that D.C.’s $80 million or so in projected cost overruns on the Nationals stadium are actually a good thing:

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.

For those of you who haven’t already choked on your breakfast cereal, here’s the flaw in Pearlstein’s argument: If land costs are higher, then city property tax revenues are higher, yes. But that’s true whether or not the city builds a stadium. The incremental cost of a stadium – D.C.’s net cash outflow relative to doing nothing – is still higher because of the increased land and construction costs.

Pearlstein submits other howlers – that since the city has already spent $62 million in prep costs it might as well spend $600 million on a stadium, and that because the stadium tax on businesses was set higher than is likely needed to pay construction costs, that represents profit to the city – but he’s already secured a spot in this year’s winner’s circle. Save something for 2007, Steven.

3 comments on “Post columnist: More is less!

  1. I know you are pretty anti-stadium. I eard your interview on WAMU a couple of weeks back. With respect to the land costs, the fact that the stadium is coming is only reason the values are increasing. No stadium, no property value increase and no additional tax revenue.

  2. That’s the going myth, but it’s 100% untrue. In fact, eminent domain law prohibits property owners from charging the city for the land value resulting from the new project – only pre-stadium land values can be taken into account. So the inflation in land price is entirely the result of Mayor Williams lowballing his estimates of what it would cost.

  3. And for the record, I’m not “anti-stadium.” Given the rich suburbanites currently spending money in neighboring states, D.C. actually has a better reason than most cities to subsidize a stadium. It’s just that the price point that would make sense for the city is more like $100 million or $150 million – at $500-million-plus, you’d need 100,000 Marylanders eating steak dinners before and after every game to make it break even.