Financing Stadiums Faces Political Hurdles

COUNCILMEMBER:

The bill passes.

RAY SUAREZ:

With that announcement, baseball in Washington, D.C., is closer to reality.

Yesterday, the D.C. Council approved legislation clearing the way for the Montreal Expos to move to Washington next season and be renamed the Nationals.

The city will sell up to $584 million in bonds for construction of a 41,000-seat stadium south of the U.S. Capitol and for the renovations to RFK Stadium, where the team will play until the new stadium is built.

Washington Mayor Anthony Williams helped negotiate the deal.

MAYOR ANTHONY WILLIAMS:

The Washington Nationals are finally rounding third and they're heading home to the nation's capital.

RAY SUAREZ:

But the prospects for baseball in Washington were not so bright just a week ago.

Major League baseball suspended the team's business operations after City Council Chair Linda Cropp amended the deal Mayor Williams had negotiated with baseball officials.

LINDA CROPP:

I was looking for opportunities to reduce costs and risk to the District of Columbia. I truly believe that the contract before us was one that was lopsided.

RAY SUAREZ:

Cropp inserted a provision that would have required at least half the stadium construction costs to be privately financed.

Unhappy with her maneuver, baseball officials threatened to take the team to another city if the original deal wasn't approved by the council by Dec. 31.

After concessions from Major League Baseball and the mayor, Chairwoman Cropp removed the provision yesterday.

LINDA CROPP:

I did make an agreement with Major League Baseball and with the mayor on this language.

I did try to make sure that we were protected. I think we are protected, and I think we're going over semantics now.

RAY SUAREZ:

The final legislation calls for the city and baseball to split the cost of stadium construction insurance.

That would limit the city's liability on cost overruns or construction delays. Many other cities have faced political hurdles during stadium negotiations.

In Seattle, Detroit and Baltimore, local leaders struggled over how to pay for the multimillion-dollar structures: Using taxpayer money or through private financing.

There were also differing views on whether a stadium leads to an improved local economy. That was part of the debate in Washington yesterday, even as the Council headed toward approving the deal.

ADRIAN FENTY:

Why can't these owners pay their fair share? These are multimillionaires who do not need a government subsidy for their business.

CAROL SCHWARTZ:

I remained concerned about forcing businesses out, both out of the area and taxing others out.

So I commend Major League Baseball on its major league negotiators, and I condemn our own minor league negotiators. They cleaned our clock.

RAY SUAREZ:

Nonetheless, ticket and team merchandise sales resumed today, and Mayor Williams has vowed to sign the bill as soon as it gets to his desk.

The new Washington Nationals home opener is scheduled for April 14..

RAY SUAREZ:

For more on the issues at stake in building and paying for new stadiums, we turn to Andrew Zimbalist, professor of economics at Smith College and author of "May the best team win: Baseball economics and public policy."

And Michael Beyard, economic development expert at the Urban Land Institute in Washington, D.C.

And Michael Beyard, are stadiums a good deal for municipalities that build them?

MICHAEL BEYARD:

I think it depends on what your definition of a good deal is and how you measure the deal.

Quite often we see the measurement looked at in terms of purely economic cost and economic… and the revenues that the communities receive, but I think we need to look at this issue at its broadest possible level.

We're in an era of global competition among metropolitan areas and among regions. We are in an era of regional competition between cities and their suburbs.

And all of these issues related to this competition I think can be boiled down to one thing. That is, where is the best quality of life? Where are the opportunities for people who want to live in those metropolitan areas or in those jurisdictions?

And I believe that there are many factors, many reasons, why people choose to live where they live, where those opportunities are.

Baseball is certainly one of those issues in the United States. After all it still is the national pastime. For many people, that is an important element when they choose where to live, where they choose to stay.

And we need to consider economics certainly, but we also need to consider the broader implications for our metropolitan areas, how they grow, how they change, and how they remain competitive.

RAY SUAREZ:

So for you a net-plus for Washington.

MICHAEL BEYARD:

I think so. I believe that certainly it is a cost to the city in terms of financing those bonds.

But I think in large measure the discussion of whether it's a public cost or a private cost is confusing to many people.

Is a tax on a ticket on merchandise on parking for those who are going to the stadium, is that a public cost or is that a user fee for people who have chosen to go to baseball games?

I think it's probably the latter. So I think…and yet the same logic in terms of the large companies within the city, the large businesses who are also going to be taxed.

I think though not universally approved I think there's a large amount of support there as well because of the benefits that those companies perceive in terms of the image of Washington as a place to do business, as a place to live.

So I think overall I think it will be a plus for the city.

RAY SUAREZ:

Professor Zimbalist when you do the numbers and try to conclude whether this is a good investment for the city do you take in some of the broad intangibles that you just heard Michael Beyard describe.

ANDREW ZIMBALIST:

No, you don't take those into account because they're intangibles they're not quantifiable. It's true what he says, that there's the quality of life issue.

And the problem is that if you look for increased jobs, you look for increased per capita income, which is the way these things get promoted, and indeed it's the way that Mayor Williams promoted it, that those benefits don't seem to be present so it's really a question of truth in advertising here when you go to the public and you say, "we want to put down $400 million or $500 million for this investment that we're make for the city's future and you say to them this is the economics cat's meow, that's false.

If you say to them, this is a quality of life issue and don't expect an economic boom as a result, then and then let them or let their representatives in the city council decide on those terms is it worth $500 million for quality of life, then that's fine.

Now that's an average statement. All of the econometric work that is been done is looking at a broad sweep of decades and decades and dozens and dozens of stadiums. Some stadiums are a little bit different than others.

All that the economists are arguing is that you can't anticipate a net economic or financial gain as a result of sponsoring one of these teams. In a particular circumstance there might be a small gain or a small loss in economic terms.

RAY SUAREZ:

Well, yesterday Mayor Williams in response to the very narrow victory in the city council said it's more than baseball. It's the rebirth of the waterfront.

It's 3500 jobs; it's $15 million every year added to our tax base. It's $450 million in resources for other projects.

He's quoting from a study that was done by the D.C. Sports Commission trying to figure out the economic impact.

You're saying these numbers are impossible to pin down?

ANDREW ZIMBALIST:

Well, I'm saying they're probably inaccurate.

Practically every stadium that's come on stream in the last 20 years in the United States has been accompanied by a consulting report– these are hired-out consulting companies– that are working for the promoters of the stadium.

They engage in a very, very dubious methodology. They make unrealistic assumptions and they can produce whatever result they want to produce.

But the notion that you're rejuvenating the waterfront because you put a baseball stadium there frankly is silly.

Yes, there's a quality of life that you're gaining but the idea… look, a baseball stadium is going to be used eighty to ninety days a year.

And it's used for four hours a day when it's used. And those four hours have tens of thousands of people inside the stadium.

They're not outside milling around on the streets buying shirts and hot dogs.

They're inside spending money on concessions that are managed by the owner of the baseball team, whoever that will be.

That doesn't promote development in the area. The greatest icon of the stadium in the United States is Yankee Stadium in the Bronx in New York. Go up there.

Take a look at the development that should have been spawned according to these studies. It does not in and of itself a baseball stadium, a baseball team doesn't generate economic development.

Now if Mayor Williams is going to make other investments in the surrounding real estate, maybe there will be a rebirth. But it won't be per se because of the baseball stadium.

RAY SUAREZ:

Michael Beyard, how do you answer that?

MICHAEL BEYARD:

Well, I think the professor is certainly right in part. This alone is not a silver bullet. Stadiums never are.

But I believe that one of the key factors in the success of these stadiums is when they are part of a much larger public strategy, public plan, public vision, for an entire neighborhood or an entire district.

When you look at the success that has occurred in downtown Denver and the rebirth of the Lodo District as an arts and entertainment district, when you look at the rebirth of the inner harbor of Baltimore, certainly these were not exclusively due to the presence of stadiums.

But the stadiums are one factor. They are one of the key anchors within these areas along with other anchors.

And I think that it's necessary to be part of a larger whole and to talk about how it's integrated with the surrounding neighborhood.

What is the larger strategy for making sure that people do come out of the stadium in order to go to a bar or to a restaurant or in Washington's case to the waterfront itself?

After all games are in the summer. It's a perfect place for a picnic or to stop at a takeout and carry that to the waterfront or to stroll after the game.

If it's properly designed to integrate it rather than to wall it off from the community, it can have tremendous impact as part of this larger overall vision.

After all, in Washington, the Anacostia Waterfront revitalization is a multi-billion dollar plan that the city has that the stadium will be part of and will reinforce.

Is it the reason why that will be a success? No. Is it one of the factors? Yes.

RAY SUAREZ:

Professor, don't you bring people to an area that hasn't been a performing part of the city, that hasn't been getting a lot of attention even from people who live quite close to the area by putting an amenity there and creating the opportunity for other things to be built around it, as Michael Beyard suggests?

ANDREW ZIMBALIST:

Well, look, I think that Michael is partially correct that if this is done properly and it's done as part of a broader development plan and the synergies are well thought out, yes, they can be present there.

But the notion… look, of these 80 games that are going to be played in the stadium, 60 of them are going to end at 11:00 or 11:30 at night.

Are they going to have a picnic on the waterfront then? This is not an easy thing to do.

The example that Michael brought up about Lodo and Coors Field in Denver, is cumerical. If you talk to city planners in Denver they will being acknowledge that that the reason that Lodo developed is because the city was developing.

Coors Field came on in 1995 right smack in the middle of our ten-year economic boom in the United States. Denver was going more rapidly than the United States and they built the stadium on the periphery of the prior development.

Of course that development continues and now it surrounds Coors Field. It's a different matter about whether Coors Field creates or supports that development.

I think when things are planned very, very well you can have some of these synergies. But again, if you're looking at these stadiums as the way to generate economic development by themselves, they don't do it.

RAY SUAREZ:

Washington is on the verge of embarking on this process. A lot of other cities are engaged in it right now or have just finished it.

How do you assess whether this has worked as a municipal investment, whether it was worth putting public money into this three years, five years, ten years down the road?

MICHAEL BEYARD:

Well, I think you need to look at it again in its broadest perspective.

You know, we hear about the impacts of this and we hear about whether, in fact, the revenues generated are going to cover the costs that accrued to this construction.

But in the metropolitan areas, there is a difference between who pays the cost and who generates the revenue.

In Washington's case, for example, we are unable to tax our commuters. We're unable to put a toll on our bridges.

But we can tax a ticket to a baseball game where 70, 80, 90 percent of the people who are coming to that game will in fact be from the suburbs.

So what you're seeing is an income transfer from the suburbs into the city in terms of that recapture of those taxes. Yes, if you look at the overall cost and benefit, you might say that it's a wash.

But where are those costs coming from, accruing, and where are the revenues coming from? And that's a much broader perspective of this.

It also brings in people to a neighborhood in which they have perhaps never been, perhaps never would come into that neighborhood.

It creates a visibility in a neighborhood that's attempting to revitalize itself and creates a buzz.

It creates national attention on that waterfront, on that stadium in a way that would simply not be possible simply by building a few condominiums or retail uses first.

Those uses will come after the stadium, not necessarily because the stadium is going to provide all of the business because it certainly won't.

But it is one additional leg of demand for people who want to live there, people who want to shop there, people who want to go to restaurants there.

In downtowns, which this will be on the edge, that is the key to success is creating as many legs of demand to support those activities as possible. Each adds to the whole.

RAY SUAREZ:

To be continued. Professor, thanks a lot. Michael Beyard, good to see you.

MICHAEL BEYARD:

Thank you.

ANDREW ZIMBALIST:

A pleasure.