The January 1st deadline for the Gray administration to submit a soccer stadium deal to the DC Council has come and gone, but word at the Wilson Building is that the proposal will be transmitted soon. It’s been a while since the District’s Dime wrote about this proposed use of taxpayer dollars, so today we’ll refresh your memory on what the agreement is likely to include and our concerns about the financial aspects of the deal.
The final agreement is likely to mirror the initial term sheet, under which DC United would pay for constructing the stadium, which could be $150 million. The District would buy land estimated to be worth $100 million dollars for DC United, and then pay for $40 to $50 million in infrastructure improvements. The District would sell government-owned land in return for privately-owned parcels at Buzzard Point — a land swap. This includes the District selling the Reeves Center at 14th and U Streets NW in exchange for parcels owned by the real estate development company Akridge.
The land deals are still being worked out, but the final agreement could end up costing the District much more than $150 million. Even after the land is acquired, the proposal involves moving a substation for the District’s electric utility, Pepco. Beyond moving all the infrastructure and equipment, there may be significant environmental costs. The term sheet calls for the city to absorb all these costs, no matter how high.
Even if the District set a legally binding cap on the land costs at $150 million, that does not mean the costs would be evenly split. The Washington Post reports that the final agreement could include provisions that reduce property and sales taxes that the team and other businesses would pay at the stadium site. For the first five years of the team’s 30 year lease, the team would pay no property taxes. The team would then pay a reduced amount of property tax until year 20, when the team would pay 100 percent of what it would normally owe. For the entirety of the lease, sales taxes collected from ticket and concession sales, and from restaurants, bars, and hotels that locate on the stadium site, would be kept by the team rather than going into city coffers.
That, in essence, means the city would pay not only for the land, but also would help the team pay for stadium construction by relieving tax obligations. These are monies that could otherwise go to city services such as afterschool programs, health care, and supportive services for the homeless. The District plans to recoup part of these costs by collecting 50 percent of the team’s revenue above a “reasonable profit,” but a reasonable profit is yet to be defined and the approach is highly reliant on the team’s success. Start-ups, including successful ones, often lose money for a substantial period of time.
The financial issues are just one area of concern. There also are important questions about the impacts on the community near the stadium site, the quality of jobs at the new stadium, and whether it makes sense to sell District properties simply to raise money, without any control over the future use of the sites.
The DC Fiscal Policy Institute is a member of the Winning Goal Coalition, which supports efforts to help DC United find a new home in DC, but wants to make sure the deal is good not just for the team but for residents too.
Before DC Council deliberates on the final deal, they should consider the substantial risks the agreement imposes on District tax payers and how tax abatements for DC United will affect the ability to fund city services needed by all District residents. Keeping DC United in the community is a worthy goal for the District, but support for the team through public resources should be fair, open, and responsible.
