When I wished for somebody in Washington, D.C. to crunch the numbers on the D.C. United stadium plan so that I wouldn’t have to, I was secretly hoping for the D.C. Fiscal Policy Institute to weigh in, since they did an excellent job breaking down the numbers on the Nationals stadium deal a few years back. And last night, DCFPI obliged, with a long post on their blog exploring the details of the plan.
Some of this we covered here last week: D.C. would engage in a complicated land swap that would end up with the District buying land in Buzzard Point worth an estimated $100 million and handing it over to the soccer team for $1 a year. D.C. would also provide $40 million to tear down existing buildings on the site, build new streets and sidewalks, and so on. D.C. United, meanwhile, would pay the estimated $150 million cost of building the stadium itself, making for roughly a 50/50 split on a $290 million project.
Except: An additional clause in the stadium agreement that could dramatically change the public share of the costs. From DCFPI:
According to the terms, if DC United is not expected to make a “reasonable profit” after meeting its operating costs and debt service, the team would pay reduced property taxes and the District would give all the taxes collected at the stadium – presumably property and sales taxes – to DC United. If the team is expected to make more than a reasonable profit, the team would share a portion of these excess profits with the city.
In other words, D.C. taxpayers would effectively be guaranteeing D.C. United a profit: If team revenues fell short of what was expected — and nowhere in the agreement does it say what’s considered “reasonable,” or how this would be calculated — the District would cut the team a break on its property and sales tax bills to fill in the gap. The Washington Post previously estimated that such a kickback could be worth $2.6 million in its first year, rising as United had higher tax bills to write off; over time that could easily be worth $60 million or more in present value if team profits lag (or the team can present a set of books that show them lagging), which would put D.C.’s public cost at more like $200 million.
On the upside, the clause does also say that D.C. would share in any windfall profits, so it’s possible the city’s cost could go down from $140 million. Still, given that United would get all the revenues from the stadium while paying no rent, this amounts to: Pay for half our stadium costs and also share the risk with us that we won’t make enough profit on the deal, and maybe if we have enough money left after taking all of the revenues we’ll let you have some. As opening gambits go, it’s better than the Reinsdorf Ultimatum, but that’s not saying much.