- The Washington Times - Wednesday, October 27, 2004

Mayor Tony Williams promised low-income kids free tickets to baseball games in the new stadium. That promise didn’t make it into the agreement with the Expos, but one group of residents will get free seats: The D.C. Sports and Entertainment Commission is guaranteed a pair of private suites and 25 box seat tickets to every game at no cost.

Nobody likes to see politicians grabbing free goodies for themselves, but it’s the rest of the agreement that makes the $440 million stadium a really bad deal for the District.

One reason stadiums don’t help revitalize neighborhoods is because they are designed to get fans to spend their money inside the stadium rather than at any nearby businesses. The District could have insisted on a design that would encourage fans to spend their money in the neighborhood outside the stadium. Instead, our leaders literally gave away the store by promising to build “market-appropriate concession, entertainment and retail areas” inside the stadium.

These include a 500-person restaurant and picnic grounds for up to 2,000 people, where food and drink will be available. These diners might have patronized nearby restaurants, but now they won’t because they’ll be spending their money inside the stadium. This is especially bad for the District because under the agreement all the money spent inside the stadium goes to the Expos.

And while the agreement says the District will borrow up to $500 million to pay for the stadium, the agreement also contains other, hidden, subsidies. For example, the District has promised to provide 40,000 square feet of office space in the stadium to the team. Considering that prime office space in Washington goes for about $40 per square foot, this amounts to an additional $1.6 million annual subsidy to the Expos. This number will never appear in any stadium accounting, but it is a real cost.

To provide these subsidies and pay for the stadium, the city will impose a tax on the District’s 2000 largest businesses. But the census shows that there are not many large businesses in the District, so this group will actually include hundreds of small businesses with 20-50 employees or even fewer. Some of those will be restaurants and entertainment venues that will lose business as families shift their entertainment dollars away from local businesses to the stadium.

In other words, many small businesses will pay a tax that, in effect, subsidizes their competition.

And this tax could increase if the city needs additional revenue to pay for the stadium. Stadiums are notorious for going over budget. Cleveland’s Jacobs Field — which the District points to as a success — busted its budget by $120 million, in part because the city had promised the Indians a state-of-the-art facility, which the Indians claimed meant the best of everything. Washington’s agreement similarly calls for a “first-class” stadium with amenities comparable to other new stadiums. That’s especially great for the Expos because the agreement requires the District to pay for cost overruns.

And while District businesses are footing a potentially growing bill, the Expos are getting a sweetheart deal on rent. Their rent will increase at just under 2 percent a year for 30 years. Inflation, however, has averaged 2.5 percent over the last 10 years and nearly 5 percent over the last 30 years. So if the past is any guide, the Expos’ rent will actually decrease in inflation-adjusted dollars every year.

It is important to acknowledge that one real, but intangible, economic benefit is that many people are simply happy to have a local ballclub. But how much do people really value the existence of a local team? The District’s population and the probable size of the subsidy mean that every man, woman and child would have to value the mere presence of the stadium between $500 and $1,000 to make the District’s investment worth it. To justify the District’s investment, a family of four would have to get nearly $4,000 worth of happiness just from having the stadium here.

But no matter how much happiness local politicians get from their free luxury boxes, this deal is nothing less than corporate welfare for Major League Baseball funded by the District of Columbia.

Economists almost unanimously agree that stadiums do not create economic growth, revitalize neighborhoods or deliver fiscal benefits.That’s why 90 Ph.D.-holding economists recently signed a letter advising the District that it is making a big mistake by subsidizing a stadium for the Expos.

Let’s hope the District listens, or at least reads its own agreement.

Scott Wallsten is a resident scholar at the American Enterprise Institute and a fellow at the AEI-Brookings Joint Center.

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