Wizards/Caps execs release glowing arena impact report, or as economists call it, a “clown document”

And finally, let’s get to that economic impact study of the proposed Alexandria, Virginia arena project for the Washington Wizards and Capitals, which could include more than $1 billion in public costs. After the public waited nearly two months for the release of anything more than a brief summary, team owner Ted Leonsis and his staff finally provided a fuller version on the Friday before a holiday weekend. The resulting news reports said that the numbers showed the arena would have an enormous economic impact on the city and state, so let’s dive in and see—

Monumental Sports & Entertainment hired CSL International (CSL) in 2023 to develop a business model related to the operations of a new arena in Alexandria, Virginia.

Oh, those guys, the ones who were last seen presenting Milwaukee Brewers stadium projections that one local economist summed up as “it’s pretty easy to make arguments in favor of an idea if you ignore the cost.” But wait, maybe this time CSL and HR&A, the company that did the actual number crunching based on CSL’s projections, actually took into account all the factors—

HR&A utilized the IMpact analysis for PLANning (IMPLAN) input-output model, created by MIG, Inc., to analyze the project’s economic impacts from both construction and annual ongoing operations at full build-out of Potomac Yard.

Oh, that model, the one that economist J.C. Bradbury said “can best be described as garbage in garbage out.”

And yet! We really should look at the numbers themselves that are contained within the report. No, not the “economic output” numbers, economic output is a garbage stat, what we want is to see if either the city or the state can somehow recoup their $1 billion in costs through real tax revenue. Okay, these look marginally more promising:

“Baseline” is what HR&A expects would be built on the Alexandria site without arena subsidies; what we’re interested in is the right-hand section, which is what the consultants project the fiscal impact would be from the arena district plan. And there we find a staggering public cost — $1.6 billion between the city and state — plus an even more staggering flow of new tax money: $2.8 billion, most of it from state income taxes and city property taxes.

Even if you take IMPLAN’s LOLmath at face value, there are two obvious huge problems here. First off, HR&A doesn’t look to have done any calculations of whether this new tax revenue is really new tax revenue: If people paying income taxes in a new arena district would otherwise be living somewhere else in the state, that’s not a net gain to Virginia’s coffers. (As Aaron Gordon points out, it would also mean having “workers pay their employer for building their workplace, funneled through their income tax revenue.”) Plus, there are other costs that aren’t included here: City property taxes, for example, are generally used to pay for schools for the people who move in to a development, but here they’re being treated as if they’ll be available to repay Alexandria’s share of the construction costs, and you can’t spend the same money twice, that’s illegal.

The report includes lots more unhelpful charts — some of them with the numbers actually blacked out — but let’s see what actual economists are saying about it:

Spokespersons from the clown industry were not immediately available for comment on Bradbury’s characterization.

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8 comments on “Wizards/Caps execs release glowing arena impact report, or as economists call it, a “clown document”

  1. Here’s the sponsor of the Senate bill, Scott Surovell, on prospects for the bill’s passage:

    “It’s on life support,” he says. “I’m not sure we’re ready to call in hospice yet.” Lawmakers are exploring options to address [Senate Finance Committee Chair Louise] Lucas’s most pressing concern about the deal, he says: having Virginia taxpayers act as a backstop on the project bonds, if the arena’s financial promise doesn’t materialize.

    https://dcist.com/story/24/02/19/virginia-senate-budget-metro-funding-alexandria-arena-capitals-wizards/

    Even if Leonsis were willing to be on the hook for covering the bonds, which is never going to happen, the scrutiny would then shift to their plan for transportation to/from the arena, which is just as half baked as the financing.

    The most likely result now is Youngkin being left with egg on his face, and Leonsis having settle for only $500 in taxpayer money to overhaul the existing stadium in DC.

    1. Threatening to move to Virginia and not being able to get the deal done destroys all leverage in a negotiation with DC. They will need to threaten to move to Baltimore to get the bidding going again.

      1. One would think. The Nationals getting everything they wanted from D.C. right after Arlington and Alexandria shot down stadiums there is a data point to the contrary.

    2. Sen. Lucas is having too much fun trolling:

      https://twitter.com/SenLouiseLucas/status/1759960061558853876

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