This afternoon, as all eyes around the country (well, just those watching MLB Network) are on DC’s first playoff baseball game since 1933, much will likely be said about Nationals Park and what a great stadium it is. There will likely be no discussion of the politics behind how the stadium was funded — and how the DC public could have fared much better than it ultimately did. But that’s not surprising considering it’s a baseball telecast.
What is surprising is that the Washington Post, which asked stadium funding expert Neil deMause to write an op-ed for Sunday’s paper on how the stadium deal might still be a bad one for the public, then turned around and spiked the op-ed after he had submitted it. DeMause is generous with the Post and doesn’t hold them over the fire, but he does use the occasion to discuss how the Post held many common misconceptions about the way stadium funding works.
DeMause’s whole post is an absolute must read, but especially these points he makes, which are vital to understanding stadium financing misconceptions:
1. It’s only business taxes and stadium taxes that are paying for the stadium. This one baffled me the most when I first read it — last I checked, businesses were taxpayers, too — but the logic goes something like this: The D.C. Chamber of Commerce agreed to a tax surcharge to raise money for the stadium, so it’s really private businesses paying the largest share of the bills, not the public.
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This is a commonly used argument among stadium boosters: It’s not taxing everyone, it’s just taxing business owners/car renters/cigarette smokers/etc. First off, this overlooks the fact that across-the-board business taxes aren’t totally cost-free — at least some small chunk of it is going to get passed along to consumers, or decrease businesses’ spending in other areas and so depress the local economy slightly. But there’s a far bigger problem as well: Once you levy a tax increase for one item, that’s a tax you can no longer use for anything else. My favorite example here remains the four sports lotteries that Maryland put in place to fund the Orioles and Ravens stadiums (it’s not taxpayer spending! it’s just those gamblers paying for this!), only to have the state discover when it later wanted to add new lotteries for other needs that the lottery market was tapped out.
In short: Tax money is fungible. A business tax may or may not be a good way of raising revenue, but however you slice it, once it lands in the public treasury it’s taxpayer money, and if the city then spends it on a stadium, that’s money that’s not available for anything else.
2. The stadium is paying back twice its cost. This is what other outlets reported this summer, but it was a gross misreading of what’s actually going on, which is that those tax streams being funneled off to pay for the stadium are running above prior projections, thanks to the fact that D.C. is the one place in the nation where the economy is actually doing well. That doesn’t mean that the stadium is paying for itself, though — it’s still city tax revenue that’s paying for the stadium, it’s just paying for it more quickly, because D.C. businesses and residents are paying more in taxes.
And, of course, while this is the case so far, tax revenues can swing wildly from one year to the next. Cincinnati’s two stadiums were at one point being paid off quickly, too — before the economy took a nosedive and next thing they knew they were having to sell off public hospitals to make up the shortfall.
3. Suburbanites make up 85% of Nats fans, so that’s all new money to the city. I see this argument time and time again, and it’s based on a gross misunderstanding of the substitution effect: It’s not money spent by out-of-towners that should count as new spending, but rather money spent by people who otherwise wouldn’t spend it in D.C. So people from Rockville who otherwise would have gone into the city to eat at District restaurants — or, for that matter, people from Iowa who are in town on vacation and take in a Nats game instead of going to the Kennedy Center — still represent money cannibalized from existing spending.
Does that amount to all of the 85%? No way. But as I noted in my op-ed, even if 50% of Nats spending is new, each fan would have to plunk down $300 per game to pay back the stadium’s costs from new sales tax revenue alone. (Or, if you prefer, if 75% of Nats spending is new to D.C., they’d have to spend $200 a head. Either way, not bloody likely.)