Deadspin has an article up this morning with one of its typically cut-to-the-chase headlines: “The Real Cost To Miami For Marlins Park Is In The Billions.” The upshot: While Miami-Dade County spent $500 million on the Marlins‘ new home, it borrowed the money during the worst of the credit crunch, and thus had to agree to some ridiculously onerous payment terms. How onerous? Deadspin links to a Miami Herald article showing that a single $91 million loan will end up costing $1.2 billion in balloon payments between 2026 and 2048.
That’s “a lot of money,” as county bond program chief Frank Hinton helpfully explains to the Herald. But Deadspin’s Barry Petchesky points out, “To make Miamians feel better, $1.2 billion in 2048 will be worth a lot less than it is today, thanks to inflation.”
That’s true, but it’s not exactly the whole story. In fact, $1.2 billion in 2048 wouldn’t be worth $1.2 billion in present value even if inflation were zero, as I discussed when this issue first came up three summers ago. The true cost in present-day dollars is how much you’d have to set aside now to pay off those future costs — and even if Miami were to do this by, say, buying treasury bills (current interest rate a craptacular 1.76%), they could pay off $1.2 billion in 2048 with a current investment of just $650 million.
Some of the $1.2 billion needs to be paid off before 2048, of course, but then also there are better ways to make money over 30 years than by investing in T-bills. If we use this present value calculator and average the payments out to all occurring in the year 2038, and use a relatively conservative 4% discount rate, that $91 million loan is actually costing Miami more like $450 million — still a lot of money, but somewhat less than $1.2 billion.
So how much is Miami really going to be on the hook for, in present value terms? As I said in my initial post in 2009, this is more art than science, but I’d say something in the $800 million to $900 million range is probably a more reasonable guesstimate. Which might just barely be enough to make Marlins Park the second-most-costly ballpark to taxpayers, behind new Yankee Stadium, which came in at around $860 million in combined city and state costs. Um, yay?