Wednesday, December 28, 2005

More Stadium Funding Math

The Washington Post has an article today discussing the possibility that the city may sell some land to raise money for the Nationals' stadium. I'm not in general in favor of selling real estate - they aren't making any more of it (well, maybe just a little). But if it means that Marion Barry loses the vote, I'm for it.

It also gives me the opportunity to discuss another baseball-related source of income for D.C. as a result of the new stadium. My previous analysis suggested that the city would earn $303 million in baseball-related additional revenues over the course of the 30-year lease on the new stadium. That figure would support bonds worth $196.5 million on its own.

One thing I thought about when doing that analysis, but never quantified, was the effect of the stadium on the surrounding neighborhood. Certainly, businesses would spring up around the stadium and pay taxes to the city. It is almost impossible to quantify those benefits. However, it may be possible to quantify the increase in property values surrounding the stadium, which then will allow us to quantify the increase in property taxes.

Ok, let's start with the beginning land values. The city has estimated that the land and building value of the 14 acres upon which the stadium and surrounding structures is $98 million, i.e., the cost of site acquisition. Now, that part of DC is a relatively ugly and depressed area - I've been through it, and it is basically an industrial wasteland east of South Capitol and south of M Street. Let's assume that the stadium will impact favorably the same land it occupies in every direction. In other words, it will impact 8 times the land it occupies in a pattern like this:

0 0 0
0 X 0
0 0 0

So at $98 million times 8, it will impact land currently worth $784 million (this is really a rough estimate, because the west side of the stadium site is a relatively developed area worth more, and the south side has less development). Assuming that half of this land is residential (currently taxed at a rate of $0.96 per $100) and half is commercial/industrial (taxed at a rate of $1.85 per $100), the property taxes on this area run approximately $11,000,000.

Now assume that the property values double in 5 years as a result of the stadium. Assuming the same 1/2 residential (think new expensive townhouses worth 3x the current stock) and 1/2 commercial (think restaurants, bars, and Nats merchandise stores) mix, that would be an $11 million per year increase in property taxes. Over the 30 years of the lease, those 25 years of increased property taxes will lead to $275 million in additional tax revenues to the city, which, on their own, would support $135 million in bonds.

Together with the previously identified $303 million in baseball-related revenues, this would be a total of $578 million in DC city revenue attributable to the new stadium. Even if that revenue would support only $320 million in bonds, the city would be past halfway towards financing the stadium.


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