Thursday, December 29, 2005

More Baseball-Related DC Revenue

In my two prior analyses of the revenues generated by a new ballpark, I had left out a couple of sources of revenue that I did not have a complete grasp upon. Just now, I got off my duff to google those revenues, and can add a whole wad of cash to the pile.

1. Tax on Tickets

In addition to getting rent money directly from the sale of seats over a certain number, DC gets tax revenues from each seat sold. As
a part of the legislation approving the stadium, the DC Council initiated a 10% tax on the price of all tickets. Thus, a $45 Field MVP seat has $4.5 going to DC and $40.50 (roughly) going to the Nationals.

I'll make a rough estimate and suggest the weighted average tax per ticket is $2. There are a large number of seats available at $29 or more to more than balance out the number at $14 and less. It's a guess, but an educated one.

This means that, assuming again that the Nats draw 2.5 million fans per season over the course of the 30 years of the stadium, that DC will collect $5 million per year in revenues, for $150 million in total revenues. Those revenues would support a bond worth $72.7 million today.

2. Tax on Parking

DC has also levied a 12% tax on parking in RFK and new stadium lots. On a $10 parking fee, that's another $1.20. We'll assume that parking stays at $10 over the course of the 30 years (this, of course, is an absurdly conservative assumption), and that 6,000 cars park at the stadium per game to support the 30,000 fans in attendance. I have no idea whether that 6,000 figure is accurate (I haven't been able to find an estimate anywhere on the Internets), but one per 5 attendees seems conservative. That's $7,200 per game, and $582,000 per year. The total revenues over the 30 years would be $17.5 million, which would support a bond worth $8.5 million now.

3. Tax on Souvenirs

In my first post on this subject, I erroneously stated that there would be a 5.75% tax on souvenirs sold at the stadium. In fact, that tax will be 10%, according to the DC Council's final bill. Instead of $172,000 in revenues per year on $3 million in merchandise sales, it will be $300,000. The total revenue over the 30 years would be $9 million, which would support a bond worth $4.4 million today.

Add it Up

So, pulling together all the baseball related revenues from my three posts, here is what I get:

Source Per Year $$ Total Amount Bond Value
Ticket Tax

$5.00

$150.0

$72.7

Lease (less maintenance)

$3.50

$105.0

$50.8

MLB Payment

N/A

$20.0

$20.0

Non Game Day Parking

$1.33

$40.0

$19.4

Player/Staff Income Tax

$2.98

$89.4

$43.3

Tax on Concessions

$2.16

$64.8

$31.4

Tax on Merchandise

$0.30

$9.0

$4.4

Tax on Parking

$0.58

$17.5

$8.8

Increased Property Tax

$11.00

$275.0

$147.6

Total

$27.00

$825.7

$398.4



Not too shabby in terms of baseball-related revenue. The stadium produces $825.7 million in revenues for the city over the 30 years, which has a current day bond value of $398 million - roughly three-fourths of the price of the stadium.

I believe this analysis to be conservative. In fact, I think there will be a great increase in tax revenues from the bars, restaurants and other establishments around the stadium. I also think that the area around the ballpark is likely to pull in higher-income individuals who might otherwise live in lower-tax Virginia or Maryland (I am one of the them), meaning that there will be addition income tax revenues for DC. In addition, parking, ticket prices and other bases of baseball-related tax revenues are likely to rise as well, which should generate additional revenues. Altogether, I would not be surprised if the stadium finances itself with baseball-related revenues only.

14 Comments:

At 3:12 PM, Blogger spchrist said...

that's a lot of taxes...

 
At 3:26 PM, Blogger DM said...

Well, we know that taxes are in D.C.'s wheelhouse, so they should be able to get that right.

 
At 5:53 AM, Anonymous Anonymous said...

Don't you need to subtract the taxes that DC would have received on other entertaniment expenses -- movies, night at the theater, etc. -- that will be forgone because those people will be at a baseball game instead?

 
At 7:58 AM, Blogger SuperNoVa said...

Sure, I would, if anyone could prove to me that: (1) those people would be going to the movies in DC, rather than VA or MD; and (2) the presence of baseball merely shifts around people's entertainment budgets rather than increases them.

 
At 10:34 PM, Anonymous Anonymous said...

Supernova: That's not really a fair response. To be sure, some of those people would have gone to to movies in VA or MD. I'm not asking you to take them out of your calculations. But others surely would have spent money on sporting events or other entertainment in DC. Someone who understands statistics as well as you must appreciate that even if you can't be certain how many of them would have gone in DC, your best guess of what that number would be is not zero. So saying that some of the people who attend games would have otherwise been going to movies in MD and VA isn't responsive at all to the point that *some* of the revenue is just moved from one part of DC to another. We can have a fair discussion about how much that is. But there is surely some.

Your second point is interesting, but common sense (and at least my own experience) supports the proposition that there is some shifting, and not *just* an increase in aggregate entertainment spending. Ask yourself how many nights last summer you found yourself at RFK. Can you fairly say that in the previous year you (or some of the 32,000 people with you) wouldn't have spent some of those nights doing something else? Spending $$$ in DC? And is it really true that even with the number of summer nights you spent at RFK, you nevertheless spent the same number of dollars on other activity in DC that you would have spent had the Nationals played last year in Montreal or San Juan or Portland? Is that really believable? That surely isn't my experience. Like many youngish professionals with young kids, I can get out on X nights a year. And spending some fraction of X at Nationals games (which I loved) means that other nights out -- some material fraction would have been spent in restaurants and theaters in DC -- got crowded out. Looking around at RFK, my hunch is that's true of many. Do you really disagree with that?

 
At 12:10 AM, Blogger dexys_midnight said...

This is part of what I like about Nats Blog having three authors. Personally, as SuperNova knows, I disagree with him on this one (in general). I did a couple of economics degrees and one of the guys who had the same thesis advisor I did tried to do his thesis on how paying for a stadium and bringing a team to a city created revenue and no matter how many times he ran the numbers and theories, he couldn't come up with anything feasible--as anonymous says, almost all economic studies show that money simply shifts.

That being said, Washington DC is exactly the market where SuperNova's argument would be strongest. If the money going to DC baseball comes from Maryland and Virginia citizens (which I believe the vast majority of it does), it is hard to imagine that said money would be spent on other DC activities.

Last season when I worked in DC, I went to games on nights after work and on Sat nights. I can say that almost 100% of the after work nights, I would have gone home to Virginia if I didn't have a Nats game. For Saturday nights, the percentage was maybe 95%. This season, I'll work in Virginia, so for after work games, the number will certainly be 100% and for Sat nights, 90-95%. My guess is that the majority of MD/VA citizens would say the same or close to it. And I'd love to see the percentage of season ticket holders that live in MD/VA--my guess is it is very high.

DC is a rather strange situation in that the majority of "DC money" is in the suburbs and its suburbs aren't even part of the same state so any dollar that goes from the suburb to RFK really is a 1 for 1 move as oppose to a mere shift from one part of the tax stream to another.
So, not to be wishy-washy but I think the answer lies between your two arguments.

 
At 4:28 AM, Blogger DM said...

I think I'm generally in Anonymous' camp, in that I think the amount of mere shifting is probably higher than SuperNoVa and other stadium proponents think.

But, as I think about it, the history with the MCI Center provides a good precedent for SNV's argument. I wonder if anyone has studied what percentage of people who attend things there come from the suburbs. It certainly seems anecdotally that the facility has revitalized the area -- 10 years ago only Chinatown was the reason to head to that neighborhood.

 
At 10:36 AM, Anonymous A Different Anonymous said...

As a teenager who went to 15 Nats games this year, and /does/ live in DC, I don't think I diverted much money from other DC entertainment. Simply because, with the exception of a few good movies, there is very little taxable entertainment that is both cheap and good, and we're not going to do anything that isn't cheap and good. I didn't watch any fewer movies this summer than last. Without the Nats, time with my friends at RFK would probably be replaced with time with friends playing video games at somebody's house.

But obviously my case is probably not typical and not too significant because we bought the cheapest seats and tried to avoid buying much food, so were not generate much tax revenue. I thought I'd mention it anyway.

 
At 9:11 PM, Blogger SuperNoVa said...

Look at Dexy's whipping out the econ degrees on me. What's great about both Dexy's and DM's comments is that they take both sides in the posts.

I am generally aware of the studies done by Zimbalist, et. al. trying to quantify the impacts of building baseball stadiums. As with any economic studies, however, the availability and reliability of the data is always at issue. How do you prove or disprove the size of the metro area's entertainment budgets. And are the people who go to baseball games the same people who go to the Arena Stage? (For me, yes). You'd have to compare tax receipts and attendance before and after and adjust them for a lot of things (better movies that year? worse plays?) to get your answer. I'm not sure it could ever be done.

DM makes the best point by referring to the MCI Center. Having worked around the MCI Center before and after, it's remarkable how much of a transformation it has caused. That area is now the sparkling center of DC. Why can't there be a second focus of that kind of development?

The central problem that I see with why baseball teams don't build stadium like they used to is that they cannot internalize all the benefits of the development. Think of what Wrigley Field has done for Wrigleyville in Chicago. The property values for that area of Chicago are vastly higher than similarly situated locations elsewhere in the city. Things like Wrigley create secondary markets for food, parking, etc. that wouldn't exist but for the stadium.

Now, most businesses can't generally internalize all of the benefits they generate - e.g., the coffee shop on the corner makes its living off of the local businesses. But baseball, unlike other sports and businesses, is unique inasmuch as it brings masses of people - 33,000 on average in DC this year - to a single place. You don't see neigborhoods built up around football stadiums.

 
At 11:47 PM, Blogger Yuda said...

I went to 30-some games at RFK this year (we had a 41-game plan, but didn't go to all of them and didn't keep track of exactly which ones we went to). For most of those games, we purchased dinner somewhere in D.C., which is something we almost never do.

I feel safe saying that we wouldn't have spent any more than 2 or 3 of those evenings/weekend afternoons in the district. Most of the weeknights we'd have stayed in (and eaten in). Most of the weekends we'd have done things in Virginia, if we went out at all. We likely cut back on visits to the Mall by 1 or 2, but that doesn't make money for D.C. anyway: all the museums are free and we rarely spend money when we visit them.

Granted, my wife and I have no children at the moment. But I don't think our behavior was all that atypical: most people who live in Virginia or Maryland go out in Virginia or Maryland, not D.C.

 
At 3:04 AM, Blogger DM said...

What's great about both Dexy's and DM's comments is that they take both sides in the posts.

Well, there are two sides to every story, so you might as well be on both of them. ;-)

Also, doesn't Abe Polin own the MCI Center?

 
At 10:11 AM, Anonymous Anonymous said...

Even if the money doesn't shift entirely from entertainment expenditures, it shifts from something. This isn't entirely new wealth stemming from economic growth we're talking about here. Anything worht building will pay for itself, besideds, with taxes we're just reimbursing ourselves.

 
At 11:00 AM, Blogger Yuda said...

Well, some of it *is* new wealth, at least to the District.

Even if we ignore shifting of spending from Virginia and Maryland, there is money coming into the local economy from visiting fans: last year, there were often quite a few Phillies and Mets fans in town for those series.

I mean, yes, I suppose that's just shifting cash from New York, but for our purposes, it's "new" money.

 
At 11:04 AM, Blogger DM said...

Yuda, if you're gonna talk about benefits from Phillies and Mets fans, you gotta account for the property damage and burden on the jails and court systems they bring.

 

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