Category Archives: Washington Nationals

Friday roundup: D.C.’s ballpark boom, Rays’ stadium “ingenuity,” and other logical fallacies

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You know how the New York Times now offers The Week in Good News, to remind you that not absolutely everything is awful? This is not that, not at all, though it does include a nice oblique shoutout to this site:

  • I think at this point just about every reader out there has emailed or tweeted me about this Washington Post article on development around the new Nationals stadium, variously headed “Ballpark Boomtown” or “The promise: Nationals Park would transform the city. Did it?” or “Nationals Park brings growth, worries to Southeast Washington.” The hook is that construction is booming around the new stadium — one former local opponent is even quoted as saying “Nats Park has been a tremendous boon to the region and the city and even to our neighborhood” — so doesn’t this disprove the idea that sports venues don’t create economic growth? The short answer: It’s hard to say from the anecdotal stories in this article, as it could be that the stadium sparked development that otherwise wouldn’t have happened, or it could be that it redirected development that otherwise would have taken place elsewhere in crane-happy D.C. (a point made in the article by economist Dennis Coates, who says, “This is not income growth; it’s redistribution”), or it could be that the Navy Yard would have gotten developed with or without the stadium. I’ve been poring over the big lists of logical fallacies and cognitive biases and haven’t yet found one that exactly describes the tendency to only look at what did happen thanks to a decision and not what would have happened without it; if this doesn’t have a name yet, the Stadium Catalyst Fallacy has a nice ring to it.
  • The city of Louisville and the state of Kentucky are projected to end up spending more than $1 billion in up-front costs and interest payments on the University of Louisville’s KFC Yum! Center, and while that’s not the best way to determine public costs — really you want to translate future payments into present value, and include not just arena debt service but operating costs and what have you as well, a calculation that this Louisville Courier-Journal article doesn’t attempt — holy crap, one billion dollars is still an acceptable response. (Sports marketer Jim Host, who helped devise the arena plan, has his own response — “If you allowed yourself to be deterred by the negative aspects, nothing would ever get done” — which probably belongs somewhere on that logical fallacy list as well.)
  • Andrew Barroway, who bought half of the Arizona Coyotes in 2015 for $152.5 million and the other half in 2017 for $120 million, and who has complained that his team “cannot survive” without a new arena because of annual losses that are “not sustainable,” now wants to sell half the team for $250 million. Just think on that one for a while.
  • MLB commissioner Rob Manfred thinks Tampa Bay Rays owner Stuart Sternberg will get a new stadium built, despite not having any idea how to pay for one, thanks to his “creative ability and persuasive ability in terms of getting something done,” while Tampa Bay Times columnist Ernest Hooper says “with ingenuity, solutions can be found” — like how about building school offices into a stadium and selling off school administrative buildings, huh, didja think of that one, smartypants? “There always will be naysayers who dismiss every idea and every project with cynicism,” writes Hooper — hey, it’s the Jim Host Fallacy!
  • Another Tampa Bay Times columnist, Daniel Ruth, had a far more acerbic take on the Rays’ stadium plans, boggling at the $892 million price tag for what would be MLB’s smallest stadium at a time when “public transportation is barely above the level of rickshaws.” Then he closed with the suggestion that Tampa could build “a museum dedicated to the history of architectural renderings of all the stuff that’s never happened,” called “the Field of Schemes Institute of Higher Chutzpah.” Which is a lovely thought and much appreciated, but shouldn’t it really be the Field of Schemes Center for the Study of Vaportecture?
  • Finally, huge thanks to everyone who kicked in toward the summer FoS Supporter drive — your generosity toward a site that delivers a daily dose of reminders of the world’s injustice remains a wonder to me. In appreciation, here is a video of my own cat leaping headlong into a seltzer box. Don’t ever say I don’t provide any good news here:

Washington Post doesn’t understand basic stadium economics, free agent spending, Twitter

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If you read this site at all regularly, you should already be familiar with Betteridge’s Law of Headlines. So you know what to do when you see this in the Washington Post:

Could the Nationals’ spring training project be affecting their offseason spending?

The genesis of this story appears to be that Jim Bowden, former GM of the Washington Nationals who is now an ESPN analyst, tweeted that the team may hold off on signing free agents this winter because they “are way over budget on [their] Spring Training Complex, making [their] decision difficult.” A Nats spokesperson immediately countered that “one has nothing to do with the other,” but still, Washington Post story.

Basing an entire article on one stray remark from a guy paid to come up with bulk-size opinions on camera is bad enough, but this report also displays a stunning failure to understand the concept of sunk costs. Think of it this way: You’re about to buy a new computer because you’ve determined it will increase your productivity and allow you to earn enough money that it will pay for itself. Then you find out that your roof has a leak, and you need to spend more than you thought to repair it. Unless you’re short on cash — which is unlikely since you have a net worth of $5.4 billion — you’d be foolish to skimp on one investment just because another cost arose that you’ll need to pay regardless.

For the Nationals to cut back on free agent spending because their spring training complex is running over budget, in other words, they’d have to be incredibly stupid. Which isn’t to say it’s impossible — teams all the time set “budgets” for payroll based on little more than how much the next guy is spending, even though player salaries are sunk costs as well once you’ve signed them. But taking it this seriously is a sign that the Post not only is jumping to write articles based on off-handed tweets, but has a serious misunderstanding of economics. Good thing there isn’t anything happening soon that’s likely to exploit those weaknesses.

D.C. council brags on Twitter about how much stadium money it threw at Nationals owners, um

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Thanks to Deadspin (and a couple of Twitter followers) for pointing this one out:

Boom! Nice snappy comeback, D.C. city council social media person, noting how your local politicians gave MLB everything it asked for in stadium funding without even trying to negotiate a better deal, then kept ladling on more and more money as costs went up, eventually arriving at a figure of more than $700 million, then the largest MLB stadium subsidy in history (but since surpassed by the New York Yankees, depending on how you count federal tax breaks). Now that’s something to brag about.

Adds Deadspin:

This past weekend, the District handed over city land to D.C. United, as part of an agreement for a new soccer stadium that will see the city shell out $150 million.

The D.C. council hasn’t tweeted proudly about that one yet, either because D.C. United is in fifth place and may miss the playoffs, or because the councilfolk are just so darn humble.

No, the Nationals stadium isn’t a success just because business tax receipts are up, sheesh

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Of all the examples of economic innumeracy that are brought to bear around stadium deals, confusing tax revenue raised for a project and tax revenue raised by a project is one of the most common. You’d think the concept would be simple enough: If you raise sales taxes, say, and they come in faster (or slower) than expected, that doesn’t make whatever you do with those sales taxes any better or worse of a deal, whether it’s building a stadium or setting the bills on fire to see if the Secret Service arrests you.

In his Washington Times column on Tuesday, sports columnist Thom Loverro starts out almost getting it right, declaring that thanks to the business tax, ticket taxes, and ballpark sales taxes on the Nationals stadium coming in faster than expected, “if city officials wanted to, they could pay off the 30-year mortgage on the $691 million ballpark — a $585 million debt now down to $395 million — 10 years early.” Then he wrote:

The cries of financial ruin and tax nightmares that ballpark opponents carried at the time into the debate against paying for the new ballpark ring hollow now, as the city’s coffers are overflowing with ballpark revenue.

I don’t actually recall anyone predicting financial ruin as the result of tax revenues falling short — and, besides, they easily could have, if the Washington economy had zigged instead of zagged. But, yes, better for the money you expected to arrive to actually arrive, instead of ending up with an e-pulltab fiasco that requires additional taxes to make up the shortfall. “Overflowing with ballpark revenue” isn’t quite accurate, but surely Loverro doesn’t literally mean—

The ballpark has been a gold mine for the city

Okay, that’s just plain wrong — or at least, plain wrong if all you’re doing is describing tax receipts. Let’s examine why:

  • By far the biggest portion of the Nats stadium debt — more than half the public total — is being paid off by that tax on large D.C. businesses. D.C.’s local economy is booming, and that’s good! But that’s still money that, if the tax surcharge had been passed for any other purpose, could be going to pay for something else — the fact that D.C. is collecting money faster to turn over to the Nationals isn’t a plus.
  • Increased in-stadium sales taxes are generated by actual stadium business, so this is a plus. It’s not as big a plus as stadium proponents would like you to believe, though, as some of that money would have been spent in D.C. anyway — so if Nats fans are spending more on hot dogs, that generates more sales taxes at the stadium, but less sales taxes wherever they would be eating if they weren’t at the game.
  • The new ticket tax surcharge is completely new, so more money there actually is coming from the team, yay! That’s also by far the smallest share of the money, though, less than 10%, so less yay.

In short, this is all good enough news, but doesn’t say squat about whether the stadium has been a fiscal success for D.C. — we have no idea whether tax revenue is up as a result of the stadium, just that tax revenue is up, period, so with more money sloshing around, there’s more to hand over to the Nationals more quickly. An equally accurate headline would have been “D.C. spending more money on Nationals Park debt each year than anticipated,” but that would have sounded like more of a downer.

I don’t entirely blame Loverro: It’s clear that this story was entirely prompted by D.C. councilmember Jack Evans (he’s the only person quoted in it, and the only source for the tax revenue figures), who never met a stadium deal he didn’t like, so would presumably be putting a positive spin on the Nats deal even if it had to be funded by selling public monuments. (“Who really visits the Jefferson Memorial anyway, amirite?”) It’s still a grossly misleading article, though, plus a single-source story where the source has a vested interest in making the project look good to make himself look good, so, yeah. Bad columnist, no donut.

Maintenance costs on Nationals Park to bring city’s tab to more than $700m

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Dave McKenna at Deadspin has a long article up about Washington, D.C.’s inexplicable love for sports subsidies, mostly focused on the new Wizards practice facility (public cost $55 million plus any overruns, Wizards owner Ted Leonsis’s cost next to nothing) and a possible new stadium for the city’s NFL team. But the most interesting tidbit for me was this:

On the same day when the mayor oversaw the groundbreaking for the Wizards practice space, Events DC head Greg O’Dell testified at a sparsely attended oversight hearing held in the city council chamber that $160 million was earmarked for improvements and repairs to Nationals Park.

Wait, what? When did this happen?

The hearing, it turns out, was on February 18, but as our own frequent commenter PowerBoater69 points out on another site, this isn’t exactly new money: The $160 million is just what D.C. has budgeted for future maintenance and upgrades to the Nationals‘ stadium. You can hear O’Dell’s comments about this starting at 2:40 on the video linked above:

“We conducted a study to look at this very issue, and we frankly are doing it for all our assets. The estimated costs over the remaining life of the stadium is about $160 million.”

So no, it’s not a new subsidy — taking on maintenance costs is something that D.C. agreed to in its original deal with the Nats. But it is a dollar figure for an existing subsidy that hasn’t been previously priced out. Even if you back that number down to a present value of, say, $100 million, then when added to the $611 million in construction funds that D.C. approved ten years ago Tuesday, the total public cost for the Nationals stadium will end up being more than $700 million. On a stadium that was originally supposed to cost $440 million. You elected officials really need to start reading the fine print, guys.

 

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No, Nationals Park is not an exception to the rule that stadiums don’t do squat for local economies

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On Wednesday afternoon, WNYC-FM’s Leonard Lopate Show tackled the topic of “Why Cities Fund Professional Sports Stadiums,” a subject of more than passing interest around here. Guests were investigative tax reporter (and my editor on the inequality anthology Divided, still available from finer internet trading conglomerates near you) David Cay Johnston and Grantland staff editor Andrew Sharp, who wrote a long article last month calling on Congress to address stadium subsidies because local officials afraid of losing their teams sure won’t. (Or mostly won’t, anyway.)

Now, one of the problems of talk radio (okay, talk anything) is that hosts feel obligated to pit guests against each other, so here Sharp ended up cast as the pro-stadium side, or at least Mr. Glass Half Full. After Johnston led off by outlining the billions of dollars in public cash that goes to stadiums as “just a drop in a very large bucket” of ways that the public end up subsidizing billionaires, Lopate turned to Sharp for any silver lining, and got this response:

“One of the reasons that cities sell themselves on these investments is that every now and then, particularly when you invest in a stadium in an urban area, it can help stimulate growth around that area, and it can turn into a win-win situation where the owners obviously get their subsidies, but then also the surrounding businesses around those stadiums can prove pretty beneficial to the city at large.”

As an example of one of these wins, Sharp cited the new Washington Nationals stadium, which he said “helped revitalize the whole waterfront area” — though he immediately added that there are far more examples of failures than successes.

I got dragged into this last night when someone asked about it on Twitter, which led to me questioning why anyone would consider the Nats stadium an economic success, and eventually to one of those Twitter conversations where nobody is quite arguing about the same thing and everyone just feels icky and misunderstood. So let me try presenting my side here, in a bit more detail.

First off, as Johnston immediately noted on the air, sports venues are “human surge tanks” — crowds sweep in and sweep out on game days, but most of the year the place is dark, which isn’t a great anchor for neighborhood development. Sharp countered that there are now more bars and restaurants around the stadium, and “you can’t deny that now and then these things work.”

There are a few problems here. First off, you can absolutely deny that now and then these things work, especially given that economic study after study has found no measurable economic benefit for cities that build new stadium, or get new teams, or get teams back in action after strikes and lockouts. If there really are outliers that are win-wins, they’re awfully well-hidden in the data.

Secondly, have you been to D.C. lately? You can’t go anywhere without seeing construction cranes — it’s one of the hottest real estate markets in the U.S., and that’s true of virtually every neighborhood, with or without a stadium in it. It’s impossible to say what would have happened to the Navy Yard area if the Nats were still playing at RFK Stadium (or in Montreal, for that matter) — and even if that area wouldn’t have been developed to the same degree, might developers and residents and restaurateurs have gone elsewhere in the city instead? It’s a huge “but-for” problem, albeit one that stadium boosters love to overlook, especially when they just built a stadium in a neighborhood that was already starting to take off.

But fine: Let’s grant that the arrival of Nats Park at least prompted a handful of sports bars and the like to locate in the immediate neighborhood. (I wouldn’t dispute that.) The question here is whether the stadium project is “beneficial to the city at large,” and you can’t determine that without taking into account the price tag. As I’ve noted many times before, there’s a price point where subsidizing stadiums makes sense: In most cases I’d be fine with spending $1 in public money towards a new sports venue, and even the $20 million or so that San Francisco put up for the Giants‘ stadium is arguably reasonable, even if the SoMa neighborhood was already going gangbusters before Pac Bell Park was built.

Nationals Park, though, cost D.C. taxpayers something on the order of $600 million. That’s a crazy-high figure to justify with a few sports bars, but on Twitter at least, Sharp said that the cost isn’t the point:

I think I get Sharp’s point: We shouldn’t criticize spending $600 million on a stadium just because there are even better investments a city could be making with the money. But that’s not what I was saying at all — rather, the point is that since doing just about anything with $600 million, including sitting on it or throwing it from a helicopter, would be better for the local economy, handing it over to the owners of the Nationals for a new stadium is a massive waste of taxpayer funds.

Let’s start with the simplest example: What if D.C. simply hadn’t collected the money in the first place? About two-thirds of the money came from a tax on large D.C. businesses, and while I’m not about to start defending them as efficient economic engines, they would have done something else with that cash, whether it was hiring more entry-level staff, giving more perks to corporate bigwigs, or (hahaha) cutting prices for local consumers. Sure, probably only a small share of it would have been spent in D.C. — but it’s still a non-zero cost to the local economy. And if that cost is more than the benefit of those handful of sports bars, suddenly the Nats stadium is a net loss for D.C.

The other third (roughly) of the public cost, meanwhile, came from kicking back sales taxes on money spent at the ballpark — not a sales-tax surcharge, mind you, but refunding to the Nats sales taxes that otherwise would have gone to the district. So if the Nats had been playing at RFK, this would have been money that would have gone into the public treasury — and if the Nats had never come to town, at least some of those sales taxes would have been collected when locals spent at other entertainment options in D.C. Again, it’s not 100% — but you can make an excellent case that even doing nothing would have been more economically beneficial to the D.C. economy than building a baseball stadium.

What we’re left with as a pro-Nationals Park argument, then, is that if a city is going to blow a few hundred million dollars on something, at least putting it in a promising neighborhood downtown might shift a little bit of development to that locale. That’s certainly true — Tim Chapin at Florida State has done some good work in this area — but using it as an argument that some stadiums are good public investments is like saying, “Sure, the Pentagon budget may be bloated beyond belief, but aren’t these some cool hammers?”

I don’t want to get on Sharp’s case too much — he was asked to present a counterexample of a stadium deal that’s worked out better, and he threw out one that seems to have been a relative success, at least on a “look around and see if the surrounding streets are blowing with tumbleweeds” basis. But that’s the problem: Just looking at what is there misses what would have been there — and elsewhere in the city — if the project hadn’t been done. Pointing to a full sports bar is easy; pointing to the bar across town that closed, or was never built, because public or consumer spending was diverted away from there is hard without a time machine. And stay away from those things, man, they’re dangerous.

Palm Beach County gives Astros, Nats $135m for spring-training complex, says now go find a place to build it

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The city of West Palm Beach may have voted to take the land that the Houston Astros and Washington Nationals wanted for a spring-training site and hand it over to developers who are actually willing to pay for it, but that’s not stopping the Palm Beach County Commission, which voted yesterday to give the two teams $135 million in hotel tax money to build a new stadium complex … somewhere.

The new $135 million proposal to build another stadium calls for the county to pay for about half of the costs, with the Astros, Nationals and the state paying for the rest.

The latest version of the deal trims $5 million from construction costs in a prior proposal. But the deal would also leave the county responsible for about $17 million more in public money than once envisioned.

The hotel tax is already being used to pay off the county convention center, support local arts programs, and other ways of promoting tourism, but hey, maybe hotel tax receipts will rise by $135 million if these stadiums are built, right? And if not, they can always raise the hotel tax. Because surely that won’t do anything to cause tourists to choose to stay in a different county.

In any event, the Astros and Nationals owners now just have to drive around Florida looking for a place to spend their $135 million, which they’re promising to do within the next couple of weeks. It’s a tough life, running a pro sports franchise.

West Palm votes to pursue alternate plan for Astros, Nats spring site, and what’s up with that graphic?

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The West Palm Beach city commission voted Tuesday to pursue the other offer for land that the Houston Astros and Washington Nationals want for a spring training site, since that proposal wouldn’t require piles of public subsidies, and … you know what, while this is all very interesting, I’m more concerned with what’s going on with the image illustrating the South Florida Sun-Sentinel article on this:

Seriously, what exactly happened here? Did graphics staffer Cindy Jones-Hulfachor supply two alternate images, one with a bluish stadium site and the other in straight greyscale, and then the web production staff mistakenly used both? If so, why are both images cut off at the outside edges? It’s been a day and a half since this went up — isn’t anyone paying attention at the Sun-Sentinel to what’s actually on their site?

Anyway, Nats and Astros still want stadium subsidies, West Palm Beach is still saying no, blah blah blah. That graphic sure is strange, though.

Palm Beach gets better offer for stadium site, newspaper makes sad face

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One of the complaints that I and other subsidy critics like to levy at stadium plans is that localities seldom examine the but-for: What else could be done with the land, money, and political time and energy that might be more productive than a sports facility? Fortunately for Palm Beach County, Florida, a developer has just done this for its plan to build new spring training facilities for the Washington Nationals and Houston Astros, offering to pay the city of West Palm Beach $14 million for its land and not demand tens of millions of dollars in subsidies like the stadium project would.

This, according to the South Florida Sun-Sentinel, is a terrible roadblock:

New obstacles surface for county baseball stadium proposal

(Okay, the Sun-Sentinel is also reporting on county officials raising concerns about the cost of the spring training plan, which could reasonably be seen as an obstacle. Still, it’s a bit odd that the headline writer didn’t go with something a bit less “Oh, noes!” in the headline, like, say, “County officials wonder if there might be a better deal than baseball.”)

Astros, Nats: We’ll pay rent on Palm Beach spring training site if we get it right back in hotel tax kickbacks

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Palm Beach County is still trying to build a new $140 million spring-training complex to lure the Houston Astros and Washington Nationals, with the slight holdup that the county doesn’t actually have $140 million. So the teams have proposed a solution: They’ll pay $2.1 million a year rent (combined), if the county agrees to give them $3 million a year in hotel taxes, rising by 3.5% a year for 30 years wait what? How does that help?

The Palm Beach Post, which apparently first reported this, is behind a paywall, and the subsequent reports in the Houston Chronicle and Washington Post aren’t helping much. (The Chronicle says that $2.1 million a year would pay off $56 million in bonds, which it wouldn’t, and the Post links to a month-old Palm Beach Post article about something else, which is also behind the paywall anyway.) The two teams are making a formal presentation to the Palm Beach County Tourist Development Council on Thursday; hopefully we’ll get some actual information then.