In case you missed it, I didn’t have an op-ed in this Sunday’s Washington Post. That’s actually normal for me — I’ve never had an op-ed in the Post before — except that last week, a Post opinion editor approached me and asked if I’d consider writing something for the occasion of the Washington Nationals‘ first postseason appearance, making the case why the city’s $667 million stadium deal might still be a bad one for D.C. residents and taxpayers.
I spent the next 24 hours writing up 1,000 words on the subject, which you can read below. Only hours after I submitted it, though, I was told that the story was being killed, after someone higher up in editorial had raised “serious concerns” about several points, namely:
- I wrote that D.C. taxpayers were paying for the stadium, but it’s actually being paid for by taxes on large businesses and taxes on concessions and ticket sales.
- I wrote that stadium taxes are paying for one-third of the construction cost, but actually they’re paying for twice the cost, and the stadium bonds are set to be retired early.
- The Post’s figures are that 85% of Nats fans come from the suburbs, so isn’t spending by those fans a net gain?
I supplied answers — more on that below — but the reply was the same: Sorry, it’s being spiked.
I’m writing about all this here not to slag the Post in particular — they were actually very apologetic about the whole mess — but rather to point out how widespread economic innumeracy is among the general public, as well as in news coverage. Each of the objections raised to my piece is an example of a common misconception about how public subsidies work that helps sports owners (and other purveyors of “public-private partnerships”) sell their plans to stick the public with hundreds of millions in costs and still claim that it’s a win for taxpayers.
Let’s take them one at a time:
1. It’s only business taxes and stadium taxes that are paying for the stadium. This one baffled me the most when I first read it — last I checked, businesses were taxpayers, too — but the logic goes something like this: The D.C. Chamber of Commerce agreed to a tax surcharge to raise money for the stadium, so it’s really private businesses paying the largest share of the bills, not the public.
This is a commonly used argument among stadium boosters: It’s not taxing everyone, it’s just taxing business owners/car renters/cigarette smokers/etc. First off, this overlooks the fact that across-the-board business taxes aren’t totally cost-free — at least some small chunk of it is going to get passed along to consumers, or decrease businesses’ spending in other areas and so depress the local economy slightly. But there’s a far bigger problem as well: Once you levy a tax increase for one item, that’s a tax you can no longer use for anything else. My favorite example here remains the four sports lotteries that Maryland put in place to fund the Orioles and Ravens stadiums (it’s not taxpayer spending! it’s just those gamblers paying for this!), only to have the state discover when it later wanted to add new lotteries for other needs that the lottery market was tapped out.
In short: Tax money is fungible. A business tax may or may not be a good way of raising revenue, but however you slice it, once it lands in the public treasury it’s taxpayer money, and if the city then spends it on a stadium, that’s money that’s not available for anything else.
2. The stadium is paying back twice its cost. This is what other outlets reported this summer, but it was a gross misreading of what’s actually going on, which is that those tax streams being funneled off to pay for the stadium are running above prior projections, thanks to the fact that D.C. is the one place in the nation where the economy is actually doing well. That doesn’t mean that the stadium is paying for itself, though — it’s still city tax revenue that’s paying for the stadium, it’s just paying for it more quickly, because D.C. businesses and residents are paying more in taxes.
And, of course, while this is the case so far, tax revenues can swing wildly from one year to the next. Cincinnati’s two stadiums were at one point being paid off quickly, too — before the economy took a nosedive and next thing they knew they were having to sell off public hospitals to make up the shortfall.
3. Suburbanites make up 85% of Nats fans, so that’s all new money to the city. I see this argument time and time again, and it’s based on a gross misunderstanding of the substitution effect: It’s not money spent by out-of-towners that should count as new spending, but rather money spent by people who otherwise wouldn’t spend it in D.C. So people from Rockville who otherwise would have gone into the city to eat at District restaurants — or, for that matter, people from Iowa who are in town on vacation and take in a Nats game instead of going to the Kennedy Center — still represent money cannibalized from existing spending.
Does that amount to all of the 85%? No way. But as I noted in my op-ed, even if 50% of Nats spending is new, each fan would have to plunk down $300 per game to pay back the stadium’s costs from new sales tax revenue alone. (Or, if you prefer, if 75% of Nats spending is new to D.C., they’d have to spend $200 a head. Either way, not bloody likely.)
Now, are all these points arguable? Sure, though I’d certainly argue that doing so with all of them simultaneously requires twisting your brain so far over backwards that grey matter leaks out your ears. More to the point, though: None of this is arguing about facts, but rather about the interpretation of facts. Which you would think would be the whole point of opinion pages. Instead, my interpretation was ruled outside the bounds of acceptable debate, because people in power say that the Nats’ stadium is a money-maker, so it damn well must be one.
Anyway, you can read my rejected essay below. Further discussion welcome, especially with regard to what was supposed to be my main point: Not how much the stadium cost taxpayers, but how former Mayor Anthony Williams got snookered in negotiations, when he actually had the leverage to cut a far better deal…
Nats May Win, But They’re Still a Loss for D.C.
There’s no denying it: As moments worth waiting for go, this is a big one. When the Washington Nationals take the field today for the National League Division Series opener, the broadcasters will run down the numbers. It’s been eight years since the former Montreal Expos relocated to D.C. Thirty-three years without baseball before that. Seventy-nine years without a postseason appearance, and 88 since Walter Johnson brought home Washington’s only championship.
This, no doubt, was what Mayor Anthony Williams anticipated on that day eight years ago when he donned a red cap, led council members in a round of “Take Me Out To The Ballgame,” and declared proudly that “the American game is rounding third and at last heading back home to the nation’s capital.” After a years-long search for a new home, the Expos would be transplanted to Washington in exchange for a promise of a $440 million stadium — a number that later swelled to $530 million, then $614 million, and ultimately $667 million, almost all of it footed by taxpayers.
It was a huge ransom — at the time, it was both the priciest U.S. baseball stadium to date and the most heavily subsidized. Innumerable economists had studied the level of economic impact that sports stadiums have on their host cities, and come to the overwhelming consensus: not much. Sales-tax receipts? They don’t budge. Per-capita income? No effect. On the brink of Williams’ deal with MLB, 90 economists signed a public letter warning that “the vast body of economic research on the impact of baseball stadiums” suggests that one “will not generate notable economic or fiscal benefits for the city.”
So how has it worked out? The excitement over a division title aside, any economic benefits are still uncertain. What’s now more clear than ever, meanwhile, is that when Williams bargained to land the Nats, he gave away the store.
Both the D.C. economy and the Navy Yard neighborhood are booming, but it’s hard to say how much, if any, is the result of the Nats, and not the new Metro stops, parks, and other amenities the District has provided. In fact, development immediately adjacent to the stadium has if anything lagged, with fenced-in lots bearing banners that promise possible townhouses and sports bars to come. (This last is a common problem for new stadiums, which are not nearly the catalysts for revitalization they’re claimed to be, in part because of all the in-house restaurants and high-end shopping designed to bring fan spending inside the turnstiles.)
The ballpark itself generates some tax money, but only enough to pay off about one-third of its cost. And while stadium boosters like to tout ballpark taxes as found money, they’re not: Most people have a more or less set amount they spend on entertainment, and if they’re plunking down cash for baseball tickets, much of that substitutes for dollars they’d otherwise have spent elsewhere. In fact, because ballpark taxes are kicked back to the team to help pay for Nationals Park, any spending shifted from Dupont Circle restaurants to ballgames ends up a net loss for taxpayers.
Washington, with so many fans coming from outside city limits, comes out a little better in substitution terms. But even if we count half of Nats fans as “new” spending, they’d each have to spend more than $300 a game on tickets, food, and souvenirs for D.C. to be made whole on its annual $32 million stadium tab.
All this would be easier to swallow if it were just the price that cities have to pay for pro baseball — but all evidence is that D.C. badly overpaid for the Nats. Let’s go back to 2004: MLB had obtained the Expos and promptly set out to conduct a bidding war for the team’s services, but after two years it had gone nowhere, and the team was playing several “home” games a year in Puerto Rico in an attempt to draw fans. (Asked if this should be considered an embarrassment to baseball, Selig could only mumble, “I don’t know if ’embarrassment’ is the right word.”) Other suitors for the Expos’ hand included northern Virginia, whose leading candidate, Arlington, had just withdrawn its bid on the grounds that citizens didn’t support it, and Portland, which a few years later would cement its commitment to baseball by converting its only ballpark to soccer-only, driving its minor-league team out of town altogether. One pair of prospective owners turned out to have faked their resumes as investment-banking tycoons; another, to have falsely claimed that he once sang backup for Sting.
With rivals like those, Mayor Williams could have felt justified in thinking that he had the leverage to take a hard line in stadium talks, especially with three new anti-subsidy councilmembers set to take office. But when baseball relocation chief Jerry Reinsdorf told Williams that his proposed two-thirds/one-third public-private split “is fine, but three-thirds/no-thirds is more of what we had in mind,” Williams didn’t tell him to get the hell out of his office. He said, in effect, “okay” — agreeing not only to pay for the stadium, but for all cost overruns and future capital repairs as well.
Instead, D.C. could have done what Seattle did this year: Emboldened by a voter referendum that barred sports deals where the city didn’t turn a profit, the city council there told hedge fund financier Chris Hansen that if he wanted a new NBA arena, he’d have to pay for it mostly from his own pocket. Because Seattle, like Washington eight years ago, is by far the league’s best vacant market, Hansen agreed — and even agreed to give back some arena taxes to pay for transit improvements. It’s the rare case where city leaders realized that teams need access to their ticket buyers more than the city needs a sports franchise, and won.
If Williams and the D.C. council had followed that path, then today Washington could have not just its first pennant in eight decades, but a stadium that is a model of how to host pro sports without draining the public treasury. And that would be a victory worth celebrating.
Neil deMause is co-author of Field of Schemes: How the Great Stadium Swindle Turns Public Money Into Private Money and runs the stadium news website fieldofschemes.com.