With much fanfare last week, Mayor Gray and the owners of DC United announced general terms of an agreement to build a soccer stadium in the Buzzard Point area. While keeping Major League Soccer in the DC area is great — and having a new stadium would help DC United succeed here — the question now is whether the proposed deal is a good one for DC taxpayers. That question will soon go the DC Council, which must approve the deal before it can go forward.
There are good reasons to be skeptical. A sports team like DC United is a great part of our region’s cultural fabric, but in the end the team is a privately held company interested in making a profit, and a new stadium will help its owners do that. The mayor’s plan would obligate the city to contribute an estimated $140 million, more than his commitment this year to affordable housing, and the costs to the city could rise even higher. Also, there is substantial evidence that stadiums alone do not contribute much to economic development.
That is why, as the council moves forward to consider the deal, the costs and risks to the District be as transparent as possible. This will allow DC residents to see just how much taxpayer funding is being offered and whether the city is getting a fair deal.
Under the current agreement, the District would be obligated to assemble several parcels of land just southwest of Nationals Park, estimated to be worth $100 million, and lease it to DC United for $1 a year. This involves complicated land swaps between the city, private developers and a public utility. One of the swaps involves exchanging land the developer Akridge owns in the proposed stadium area for the Reeves Center, the municipal building in the epicenter of new development at the crossroads of 14th and U Streets NW. The District would also pay an estimated $40 million for infrastructure improvements to the stadium site, such as demolition of existing structures and street/sidewalk construction.
For its part, DC United would pay the costs associated with building the stadium structure. The term sheet for the deal does not identify the estimated costs, but they have been reported to be close to $150 million.
According to the terms, if DC United is not expected to make a “reasonable profit” after meeting its operating costs and debt service, the team would pay reduced property taxes and the District would give all the taxes collected at the stadium — presumably property and sales taxes — to DC United. If the team is expected to make more than a reasonable profit, the team would share a portion of these excess profits with the city.
In the past, the District’s Dime has raised concerns about taxpayers financing stadiums because of ample research and the broad consensus among economists that stadiums are not a strong driver of economic development. In this case, other concerns surface as the District would be obligated to devote significant resources, while facing many other unmet needs — including affordable housing, education, and job training.
DCFPI will be digging into the deal in upcoming weeks. Here’s a start on questions District leaders and residents need to ask as we move forward:
- What will be the real costs of assembling the land? The land swap structure is complex and not transparent. The DC Council and residents should fully understand the value of the land it is getting and the land that it is traded away, to show how much the city is contributing. The District should carefully consider all costs and potential lost revenue associated with the land deals and make them known to the public.
- What are risks to the District if the costs of the stadium rise? As seen with Nationals Park and other stadiums around the country, costs incurred by taxpayers are often more than expected. The initial cost of Nationals Park was estimated to be about $450 million, but final costs rose several hundred million more.
- Is the deal fair to the District and its residents? Under the proposed deal, the District will provide United with additional assistance beyond the land and infrastructure improvements if the team is not expected to turn a “reasonable profit.” Given unmet needs of the community, the District will have to consider if adding to corporate profits is the best use of public money.
- Have we considered all other financing mechanisms that may limit the District’s financial exposure? A DC sports team is regional, and fans come not only from the District but Maryland, Virginia, and beyond. The District could share costs regionally, by considering financing that is shared by the team’s supporters no matter where they live, such as increased sales tax on tickets, merchandise, and club level seating. The District and DC United could also raise revenue through selling the naming rights of the stadium. The Houston Dynamo, another soccer club, sold the naming rights of their stadium for $20 million.
Keeping soccer in the DC region is desirable and will increase community engagement and civic pride. DC United and the District have both made a commitment to this goal, but we hope that they explore all options to make this possible, while considering the needs of all residents.
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