Let's take them one at a time: $5.5 million a year in rent payments by the team By the standards of modern-day stadium deals, this would be a fairly high rent: the Orioles pay $6 million a year on Camden Yards, but other teams in new stadiums pay far less. The cost would, however, be offset by a huge public asset--the naming rights to the new stadium--that would effectively be given to the team for free. This is standard operating procedure in most stadium deals, and it's an enormous hidden subsidy that skews the stated public/private funding mix. For example, the Mariners are paying $700,000 a year in rent to the state of Washington, but that comes right off the top of the $1.8 million a year they earn in naming-rights fees from Safeco. Naming-rights values have been all over the place of late--how the Astros managed to stick first Enron, then Minute Maid for $6 million a year is beyond me--but around $2.5 million a year seems like a reasonable benchmark. Split this one, then, into about 45% public cost, 55% team. $11-14 million a year in "in-stadium taxes" This is a major fudge by stadium proponents, as what's being called "in-stadium " is a mix of existing sales taxes on stadium goodies, plus a new surcharge on tickets and parking. While this whole business of new vs. existing taxes may seem like a trivial matter, it's anything but. Ask most economists, and they'll tell you that surcharges on such things as tickets and parking ultimately end up coming out of owners' pockets. If fans are willing to pay 40 bucks for a box seat, goes the argument, they're going to pay the same whether the tickets have a $40 face value or a $36 face value plus a $4 tax surcharge. So (apologies in advance for using "rational" and "owner" in the same sentence) a rational profit-maximizing owner would charge the same either way, eating any tax surcharge. Existing taxes are a whole 'nother kettle of wax. Ballpark boosters like to sell the use of stadium sales taxes as some sort of poetic justice--baseball fans get the benefit, baseball fans pay the fare--and since there would be no team without a stadium, it's all found money anyway, right? Hogwash, say economists: Baseball fans are just people, and they're going to spend their disposable income somehow, whether it's at a ballgame or a movie or a bowling alley. (For some reason economists really love examples about bowling alleys.) If this "substitution effect" just cannibalizes the sale of movie tickets that would generate sales taxes, and replaces them with baseball tickets that wouldn't, it's a net loss to the public purse. The current plan, according to the D.C. mayor's office, is to divert all stadium sales tax revenue to pay off the construction bonds: the existing 5.75% sales tax, plus a 4.25% surcharge. (Food sales are already taxed at 10% in D.C., and parking at 12%, so these would have no additional surcharge.) It's hard to guess what the substitution effect would be in this case--D.C. has two neighboring states to draw spending away from, but it's also already the region's entertainment hub. Let's figure (based on Doug Pappas' numbers) that about two-thirds of ballpark sales would be on tickets and souvenirs that would have the added surcharge, and further guesstimate that at least half of the ballpark spending would be diverted from elsewhere in the District... OK, I think we need a table here: % of total revenue Tickets and souvenir sales tax 19% (diverted from elsewhere in D.C.) Parking and food sales tax 17% (diverted from elsewhere in D.C.) Tickets and souvenir sales tax 19% (new revenue) Parking and food sales tax 17% (new revenue) Tickets and souvenir surcharge 28% So for this revenue stream, that's a total of 36% public, 28% private--and 36% siphoned off of the public treasuries of Maryland, Virginia, and wherever else stadium visitors hail from. $21-24 million a year in a large-business tax As Maury Brown of SABR's Business of Baseball Committee has pointed out, this number has undergone a remarkable metamorphosis in the past few months. In 2003 it was to be $9 million a year, by this June it had hit $18-20 million, and now it's soared past the $20 million mark. Either the proposed tax rate has been raised, or the D.C. finance department just got an extra-large shipment of rose -colored glasses. The business tax would be a new surcharge, so there are no worries about funneling off existing tax revenue. The thing about new taxes, though, is that you can only pass them once. Notes Ed Lazere of the D.C. Fiscal Policy Institute, a budget watchdog group opposed to the current stadium deal: " Elected officials are always saying, 'Well, we raised taxes last year, we shouldn't be going to the well again.'" And sometimes the well just runs dry, as their neighbors in Maryland found out when that state built Baltimore's two new downtown sports stadiums with revenue from four new statewide sports lotteries. Leaving aside for the moment the wisdom of paying for stadiums via state-sponsored gambling (if you're interested in the effects on low-income Baltimoreans, there's an excellent chapter on it in Peter Richmond's book Ballpark, the fiscal consequences came crashing down when, in 1997, local lawmakers proposed legalizing casino gambling to help fund education programs--and were promptly informed that the gambling market had already been tapped out. The O's and Ravens had already staked their claim, so Maryland schoolkids got left in the dust. Of course, it does matter from a public policy standpoint who's being taxed-- if you're a cigarette smoker, a rental-car driver, or the owner of a large D.C. business, it probably matters to you a lot. But from a fiscal standpoint, a tax is a tax, and by passing a tax now to benefit a baseball team, D.C. residents would be forgoing potential future tax revenue that could be spent on, say, better schools. (Or something else they don't have.) The business tax, then, is still a 100% public subsidy. There are still more unknowns about the stadium deal: Who would pay for any cost overruns, in both construction and land acquisition? (The D.C. plan already budgets for expected overruns of 20-30%, but cost increases of more than that aren't unheard of.) What would be the cost to the district in lost property taxes from businesses that would be relocated to make way for the stadium? Would the District try to avail itself of tax-exempt bonds, which effectively reduce construction costs by passing a percentage along to the federal treasury? All these details are yet to be worked out. --

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