How many billions of dollars would a Commanders stadium subsidy be? An investimagation

I had a long chat with University of Colorado Denver economist Geoffrey Propheter on Friday to try to nail down exactly how much the total subsidy — in government cash, discounted land, and tax breaks — would be for D.C.’s proposed Washington Commanders stadium. While “exactly” is a hopeless cause at this stage of the game, with so many unknowns about both the project and what else could otherwise be built on the RFK Stadium site, what follows is the best accounting to date of all the ways that D.C. would be enriching Commanders owner Josh Harris at the expense of taxpayers:

• $1.058 billion for stadium construction, garages, and site infrastructure. This would all be direct city spending, and has been well established since day one of Mayor Muriel Bowser’s plan. (That some of the money would be used for actual construction of the stadium foundation and not just infrastructure wasn’t revealed until day two.) It’s the basis of the $850 million public cost figure that much of the media and pollsters have settled on, though that number leaves out either one of the garages or one of the site infrastructure items, hard to say which as the media sources generally fail to cite specifics.
• $429 million in property tax breaks for the stadium, plus an unknown amount of property tax breaks for the surrounding commercial development. The $429 million estimate is from Propheter, and includes only the stadium itself, not the land or any additional development. How to calculate the cost of giving Harris a 90-year lease on tax-free land is a bit tricky: The RFK land is owned by the federal government and leased to D.C., so it wouldn’t be subject to property taxes regardless, though the district could conceivably ask Congress for permission to charge payments in lieu of taxes to a site developer. And even if you consider that far-fetched, there’s still a benefit to Harris here from getting non-taxable land — an added value that under normal circumstances a developer might pay for in additional rent. Which brings us to…
• Somewhere between $6 billion and $25 billion in free rent. The Commanders stadium itself, it’s becoming clear, is only an amuse-bouche for the far bigger subsidy Harris is set to receive via rent-free use of city-controlled property for private commercial development. Harris’s deal would give him a 90-year lease on 24 acres of land, for which he would pay no rent for the first 26 years and a reduced price thereafter. Guessing at what fair market value for that land would be is, well, guesswork, but Propheter used two different comparable tracts of D.C. commercial property and a bunch of different assumptions about the value of future money and came up with a low-end estimate of $6 billion in rent discounts for Harris, and a high-end one of $25 billion.

[Ed. note: All numbers above are in present value.]

The absolute minimum cost to D.C. taxpayers for Harris’s RFK Stadium site project, then, is $7.5 billion, and if the land turns out to be more valuable than expected, it could be more than three times that. Some of this would be out-of-pocket costs that would come out of D.C.’s existing budget and some of it would be money that the district would be leaving on the table by handing over the land to Harris rather than seeking a developer who would pay real rent; all of it, though, puts the lie to the notion that Harris would be paying for most of the stadium costs out of his own pocket, since he’d be getting benefits from D.C. that would repay his construction bill many times over.

And even if we stick with the most conservative $7.5 billion figure, that is a whole hell of a lot of money — by far the biggest public subsidy for any stadium project the world has seen. Maybe the Washington Post’s pollsters should consider going back to D.C. residents and asking them “Would you favor or oppose the District government using about eight hundred fifty million dollars in city funds, plus several billion dollars of free rent and exemption from property taxes, to help finance development for a new football stadium for the Washington Commanders where RFK Stadium now stands in D.C.?” and see what the results show? I’ll wait here.