Jul 25, 2018

DC Taxpayers to Fund Nearly Half of New Stadium Costs

Michael D. Farren Research Fellow , Anne Philpot Research Assistant

Earlier this month, the DC City Council, Mayor Bowser, and soccer fans alike celebrated the ribbon-cutting at Audi Field, the new home of Major League Soccer’s DC United. In the stadium’s inaugural match, United won against the Vancouver Whitecaps, but DC taxpayers ultimately lost in the subsidy deal between the team and the city. If a large body of academic research is any indication, the promised economic benefits won’t materialize.

With construction costs over $400 million, the facility leads the league as the most expensive soccer-specific stadium. It claims another superlative as well. The city offered the largest public subsidy in MLS history: $183 million. To sweeten the deal, DC tossed in property and sales tax abatements—meaning the public is paying for forty six percent of the total cost of the project. The city also handed over its public authority to the project, kicking out existing property owners to make room for the stadium. It’s now involved in a messy eminent domain battle, so the final cost to taxpayers could go even higher.

The problem with sports subsidies—or any government handout—is the tradeoffs that have to be made. Some are obvious: to fund the stadium project, the District shifted $32 million away from other budgets, including school improvement. Others will be more subtle, when consumers shift their entertainment spending from local businesses to the subsidized soccer stadium. The net change in spending may be negligible across the entire city, but individual businesses will feel the effects of the city council picking winners and losers.

For example, a couple living near Navy Yard might buy tickets for a match this summer. By doing so, they’ll contribute to what looks like an influx of spending in that area. But because they’ll pay about $90 for a pair of tickets, they may choose to eat at home instead of going to the local restaurant they used to frequent. The restaurant loses business and the stadium gains some, but the net effect is often missed—entertainment spending hasn’t changed, tax revenue hasn’t increased, and jobs haven’t been created. They simply shifted because the city decided to subsidize soccer.

Team owners benefit from encouraging the misuse of public dollars while politicians gain political capital for attending ribbon-cutting ceremonies and appearing to support economic growth. The benefits of the handout are “concentrated” in a small group who can easily organize to support the government policy, while the costs are spread across many people who find it more difficult to make their voice heard.

As the city celebrates the inaugural season in a sparkling new stadium, other cities’ stadium subsidies serve as warning signs for the future, like lingering debt, expensive publicly financed renovations, and economic results that simply fall short of the glowing promises. DC United may have won the subsidy, but taxpayers will lose in the long run.

Photo credit: Tony Quinn/ISI/Shutterstock

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