Will Marlins park cost taxpayers “billions,” or mere hundreds of millions?

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?


5 comments on “Will Marlins park cost taxpayers “billions,” or mere hundreds of millions?

  1. New tourism slogan: “Miami – we aren’t as dumb as New York”.

    or “Miami – We haven’t had to sell our hospitals to benefit sports teams… yet”

  2. Doesn’t the Big Oh-Oh (Stade Olympique) in Montreal still count as #1? Wasn’t that entirely paid for by the taxpayers. Maybe the value of the Canadian dollar at that time would keep it out of #1?

    It took a lot of money to build the world’s first non-working retractable roof stadium (made almost entirely of concrete).

  3. Yeah, probably. I’ve never seen a solid final cost estimate for the Big Owe (other than “around $1 billion”), though given that this was in 1976 dollars, I imagine inflation (yes, this time actually inflation) would make it pricier than any of these current deals regardless.

  4. Well, it’s certainly nothing to be proud of… but I believe Quebeckers may have done significantly better than some of the current ‘mortgagees’ of sports stadia will have by the time all is said and done.

    http://www.cbc.ca/news/canada/montreal/story/2006/12/19/qc-olympicstadium.html

    Yes, over the nearly 30 years, the province spent almost $1.5Bn on the development. But it does include other things as the article makes clear. The stadium itself sits atop a major transit (metro) hub that services a good part of east Montreal. Also included is the appalling architectural nightmare that is the athletes village (which is now a condo development, I understand). The development heavily remade much of the area of east Montreal.

    I’m not saying it was worth it, mind you… but I struggle to see how some of the current facilities cities are going bankrupt trying to service will be any worse.

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