Florida Pilot

A compendium of random thoughts from a former Washington Beltway insider who is now having a lot more fun flying small airplanes in Central Florida.

Wednesday, December 21, 2005

Washington D.C.'s gift to baseball heads for the record books

The Washington, D.C. goverment spent years denouncing major league baseball for abandoning the city some years back (and leaving a stadium that had not yet been paid for). Last year, the city decided to demostrate its feelings by gifting baseball with a stadium expected to cost slightly in excess of half a billion dollars, all to come from the pockets of local taxpayers. Providing this facility to the baseball team relocating to town caused the value of the franchise to increase by a cool $300 million or so, none of which will, of course, been seen by local taxpayers.

But as typically happens in this type of arrangment, the original cost estimate was maybe a little bit to low; in this case, by $130 million or so -- and that figure may go even higher as construction hasn't even started yet! And, of course, since the costs of the stadium will be paid for by borrowed funds, the ultimate cost to taxpayers will end up being well over a billion dollars, quite a bit of money for a city with many school buildings over 100 years old that are deteriorating year after year.

For its part, major league baseball had indicated a willing to make stadium rental payments of $6 million per year plus a one-time $20 million amount. The is apparently some issue about what the $20 million can be spent for but, let's face it, that amount is a small drop in a very large bucket.

So, let's do a few back-of-the-envelope calculations and see what they reveal. (Of course, all of the actual agreements are going to be many hundreds of pages and written by a legion of well paid lawyers in $1,000 suits.) Let's start out by assuming that the stadium will be in use for 30 years. This may seem like a short period of time but it is not given the recent history of publicly-financed stadiums built to benefit private organizations. In addition, since the new stadium is being built as a baseball-only facility, the ability to use it for other purposes is greatly diminished. Anyhow, let's say that the total cost to the taxpayers including principle and interest is $1.2 billion and is paid out over the estimated 30 year life. In reality, the $1.2 billion amount is probably low and the payout period rather short but to the extent that the payout period exceeds the actual life of the facility, it means that future taxpayers will be paying for a facility that no longer provides any benefits whatsoever.

Amortizing $1.2 billion over 30 years would take $40 million per year. Offsetting this taxpyer expense will be a lease payment of $6 million. I'm not sure who is going to pay for the maintenance and repair of the facility itself but I would be surprised if it was NOT the taxpayers of the District of Columbia. So the taxpayers of D.C. will be out a minimum of $36 million per year to have a bunch of millionaires play ball. Of course, the team will also generate a variety of minimum wage-style jobs for ticket-takers and folks hawking beer and hot dogs. Assuming that baseball in Washington draws 4 million fans per year (the actual number will surely be less), the minimum out-of-pocket subsidy for each ticket-holder will be $9.

Now let's look at this another way. The lease payment on the stadium is equivalent to the goverment constructing customized million dollar houses and offering them for rent at $800 per month!

But the D.C. stadium deal may be the most costly stadium ever constructed (at least, until the next one). Chicago claims the record expenditure for Soldier's Field http://abclocal.go.com/wls/story?section=News&id=612180 at $606 million but it is clear that the D.C. baseball stadium will exceed that figure by a considerable amount.

This all leaves one one inclined to believe that the city leaders in Washington don't care about their schools falling down or the students enrolled in them. Not true. In fact, the city council is hard at work trying to increase the number of free tickets distributed to disadvantaged youth in the city. Perhaps students who cannot attend classes due to plumbing or electrical failures in their antiquated schools will be given tickets to attend baseball games instead.


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