I have a particular interest in the internal politics of the Washington Post’s editorial hierarchy when it comes to stadium economics, so it’s been fascinating for me to watch the last couple of days, in which the Post editorial board gave an only slightly qualified endorsement to the D.C. United stadium plan, only to have their own stadium reporter point out a laundry list of reasons to be worried about the potential risks involved.
First the editorial: On Sunday, the Post editors showed that they’d skimmed the executive summary of the Convention, Sports & Leisure report on the stadium deal, writing that “a major league soccer stadium in the District would bring revenue, jobs and economic development to the city” (true, if you accept CSL’s never-explained-in-the-report methodology at face value) but that D.C. might not be getting the best price in the land swap that is at the heart of the deal — which was the one qualm that CSL highlighted as well. Wrote the Post: “Why not separate the transactions in a way that ensures fair market value for both properties and dispels any suggestion of a sweetheart deal?”
That’s perfectly reasonable, and something that could be agreed upon by all parties, and if this were the only thing that suggested a sweetheart deal, the Post editors would be doing a fine job. Except that the next day their stadium reporter, Jonathan O’Connell, who actually went to last week’s council hearing on the stadium plan, proceeded to run down a list of eight risks that the city would be running with the United plan, none of which were spelled out in the CSL report but any of which could be figured out by 1) reading it thoroughly and 2) using your brain:
- Akridge, the developer carrying out the land swap, can terminate it unilaterally if D.C. makes any changes that “materially impact” it, which would leave the district on the hook for any money already shelled out.
- There’s no cap on cleanup costs for the two sites in the land swap, which could push district costs beyond the $150 million projection.
- If the district buys the land, then D.C. United later decides that building a stadium is too rich for its blood, D.C. would be, in technical financing terms, screwed.
- D.C. has to spend its money by the end of 2016, while United can back out anytime before March 2018.
- The most that D.C. can get in damages if United backs out is $5 million.
- This is a potentially huge one: Part of the plan is for the government employees at the Reeves Center, which would be traded away in the land swap, to move to a new building in Anacostia — which not only hasn’t been built yet, but which hasn’t even begun planning. If that ends up being delayed, D.C. could be forced to throw in additional money to house its workers somewhere in the interim.
- The United plan doesn’t specify who will pay for maintenance and upgrades of the stadium.
- As former city administrator Robert Bobb testified at the hearing, “there is a high probability that at some point [the team] would seek a permanent property tax exemption” on the stadium. According to the CSL report (see chart on page 14), this would cost the District an additional $40.4 million in lost future property tax income.
These are all pretty significant concerns, though it’s always possible that United’s owners (or D.C. officials) have answers for some of them. If nothing else, it’s something that points up the need for the District to take their time on this, and not rush into a deal without fully vetting all of the possible risks involved with — sorry, what’s that, last paragraph of Sunday’s Post editorial?
The District can’t afford to dawdle. Monies need to be allocated this year. D.C. United, playing in a stadium that is ill-suited to its needs, won’t wait forever. And the team is willing to pay for its own stadium, which should make it attractive to other jurisdictions — including neighboring Maryland, which just elected a Republican governor who promised to be more competitive in going after business.
Oh, right, I forgot: The team could move to a stadium in Maryland that doesn’t exist yet and hasn’t even begun being planned for OMG OMG OMG. When it comes to making decisions based on fear, we always have been susceptible to focusing on all the wrong threats.
Nice write up by O’Connell, although it looks to me like about half of his eight risks are the same thing restated (1, 3, 4, and 5), that Akridge or the United won’t fulfill their end of the bargain. Failure to build the stadium seems unlikely, but I certainly could see them cutting costs and building something significantly less than what is being promised, leading to risks 7 and 8, shifting maintenance costs to the city and demanding lower rent.
Risk 2 is a certainty, of course the cost to the city is being understated just as it was for Nats Park (from $550 million to $800 million). Risk 6 isn’t really a risk as much a issue being ignored that will have to be dealt with if this plan goes through, particularly considering that Barry’s support for the stadium was bought via a promise that the new center will be built in his ward.
That last paragraph from the editorial indicates the Post’s true intentions, that they want this deal done regardless of the cost and value to the city. The threat that the team is going to run off to Maryland is laughable considering that they already tried that and failed, the proposed deals in Prince Georges County fell through and talks with Baltimore went nowhere. The new Republican governor might make a difference? Outside of the team and it’s fans the biggest backers of the stadium deal in DC are the unions, I’m guessing that the new guv isn’t going to be quite as pro-union as the guy on the way out.
You left out the third Post item from yesterday, a column against the stadium because there aren’t enough giveaways for the neighborhood. Because part of the assumption when you buy into an area is that it will never change for as long as you shall live. The horror of the local government supporting a project intended to raise local property values and improve the neighborhood. Just a shake down attempt to tack on an extra cost to the city.
http://www.washingtonpost.com/blogs/local/wp/2014/11/10/time-to-rethink-the-d-c-united-stadium-deal/
“Yes, a neighboring state just elected a governor from the party that hates taxation and hates gov’t so much it wants to shrink it to where it can drown in a bathtub; they might totally put together a plan to spend public money and build a stadium if we don’t.”
I actually have an even bigger concern with item 6: Where is the money supposed to come from the build a replacement for the Reeves Center? And shouldn’t that be counted as part of the soccer deal? I mean, even I could find a way to make money by selling a city office building and then not budgeting for its replacement.
Explosive Tweets from Jonathan O’Connell (@OConnellPostbiz) from the Post:
Wow, Mendo reads letter from CSL, company that wrote #DCU report, rolling back estimate of net new value to city of $109 million
That $109M estimate included $71.4M in value CSL attributed to “land exchange proceeds” from Reeves and land going to Pepco
But selling Reeves and K St property for $71.4 million isn’t a net new benefit — it’s a transfer on city’s books from land to cash
Upshot: Stadium consultants say they screwed up, net economic benefit to city not likely to top $38 million, rather than $109.4 million
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Also, a real nice write up from the City Paper on current development plans that would be abandoned if the stadium deal passes: http://www.washingtoncitypaper.com/blogs/housingcomplex/2014/11/12/own-goal-the-d-c-united-stadium-faces-a-skeptical-d-c-council/