Tuesday, December 21, 2004

You Can Never Be Too Rich or Too Cynical

by Tom Bozzo

Max Sawicky, on the D.C. baseball stadium blow-up, December 16, 2004.

...[W]e need some kind of kabuki exercise to provide the illusion that democracy is functioning and some brake on fiscal insanity and malfeasance in governance is in play.

So after Linda Cropp gets a little something something -- headlines attesting to her pull and her fiscal responsibility -- she rolls over and buys some fig leaves on the original arrangement. The financial details are lost on the public. Lo and behold, the day is saved, baseball is coming to the nation's capital, and the taxpayers get reamed for the cost of the stadium and associated public expenses.

You heard it here first.

Washington Post, December 21, 2004, page A1, "Accord Reached On D.C. Stadium: Williams and Cropp Negotiate Financing."

D.C. Mayor Anthony A. Williams and Council Chairman Linda W. Cropp said last night that they had reached agreement on a stadium financing package that would satisfy Major League Baseball by guaranteeing construction of a permanent home for the Washington Nationals along the Anacostia waterfront...

District officials will continue pursuing private financing for the project for several months. But Cropp said she will drop a requirement that 50 percent of the construction costs be paid for with private money...

Even if private financing is found for some of the costs, the city still expects to implement a gross receipts tax on large businesses and a utilities tax on businesses and federal offices.

"This is materially the exact same thing the mayor sent over," [D.C. Council member Adrian] Fenty said. "It's a publicly financed stadium with less risk, but still a publicly financed stadium."

The latest variation on the D.C. baseball stadium deal is still subject to a council vote later this morning. Assuming Cropp brings sufficient votes with her, my sympathies to D.C. taxpayers.

Not So Early Morning Addendum: I almost let the D.C. baseball deal pass without comment. Since my College Park days, when my houesemates and I declined cable TV so the availability of nearly the complete Orioles schedule on the Tube wouldn't set our studies back, Peter Angelos pretty well beat the love of baseball out of me. Then I moved into the Brewers' TV market.

From the outset, the D.C. baseball deal has exemplified the worst of modern sports financing. It was almost explicitly sold to the District for its ability to steal tax revenues from surrounding jurisdictions. Even under the fanciful projections of the District's economic impact consultant — which claimed, among other things, increased lodging tax revenue requiring that about 10 percent of the Nats' attendance would stay in D.C. hotel rooms that wouldn't otherwise be rented — the tax shift wouldn't nearly be enough to service the bonds to be issued to finance the stadium and related construction. That job would fall to the new gross receipts tax levied on "large" District businesses, mentioned above.

The latest iteration of the deal proposes the creation of a 3000-space on-street parking district. Apparently, a firm is willing to pay the District $100 million upfront for the rights to a percentage of the revenue stream from the spaces as a "private" financing element. You might ask (as did the Post's Tony Kornheiser) if the present value of the entire revenue stream from game parking in those spaces would be worth $100 million. I leave the details as an exercise, but the short answer is not at any price that wouldn't divert the would-be marks to private lots or to Metro. In short, quite a lot of the $100 million in "private" financing looks to be extracted through a stadium-area parking tax. Some deal!
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