“Pitch”-ing the Perfect Deal

The Numbers: A Fair and Responsible Way for DC to Support a New Soccer Stadium

DC caught the soccer buzz this summer. The World Cup dominated televisions across the city, and DC United played a superb start to the season. The enthusiasm for soccer adds to our cultural fabric and highlights DC’s diversity.  

That helps explain why many area residents are excited about the plans for a new stadium for DC United – at Buzzard Point, near Nats Park – that would allow the team to move out of their current home at RFK stadium. 

But in the midst of that excitement, we should not forget that the stadium deal proposed by Mayor Gray is complex and contains many possible pitfalls for DC taxpayers. There are hefty city subsidies – covering more than half of the costs – even though the greatest financial benefits will go to the team. The plan includes complicated land swaps including trading the Reeves Center to a private developer in a no-bid process. And it will have big impacts on residents in at least two communities – at Buzzard Point and near the Reeves Center. 

This means the DC Council still has a big job when it takes up the stadium deal as early as this fall, to address its financial fairness and transparency and to make sure it benefits all affected communities. 

DROP THE SWAP

Mayor Gray’s stadium plan looks a little bit like a DC version of the game Monopoly. At the heart of the deal, the District would trade the Reeves Center for cash and some of the land needed at the stadium site.  The city would acquire other stadium parcels by trading other pieces of city-owned land near the Sursum Corda housing development to Pepco.

Just as any Monopoly player knows, high-stakes property deals can be intense and controversial. A closer look at the Reeves Center trade shows why this is better as a game than in real life. The mayor wants to turn over the Reeves Center, at 14th and U Streets NW, to local real estate developer Akridge. In return, the city would get cash and land from Akridge at Buzzard point. Akridge would continue to own some land near the stadium site that presumably would become ripe for development with a new soccer stadium. 

This deal raises several concerns.

First, the Akridge land swap looks shady and isn’t really needed. Gray administration officials say that the city needs to sell city properties to get money for stadium land, rather than borrowing money, because the city is close to its borrowing limit or “debt cap.” They say a land swap would also be a fast way to get stadium land. 

But the District could just as easily sell the Reeves Center to the highest bidder –Akridge or another company – and use the proceeds to purchase land at the stadium site.  

That’s important because the mayor’s team and Akridge settled on a sales price – $56 million – that is well below some recent appraisals. What’s more, we all know that property in DC’s hottest neighborhoods, such as 14th and U, often sells for more than its appraised value. Without putting the Reeves Center out for bid, the District could be offloading an important public asset at a price well below value. 

Second, the mayor’s plan would turn decisions of re-developing an important public property entirely over to Akridge. Usually when public property is sold, the District sets conditions on how the site can be redeveloped, taking into account the needs of the community. However, under the proposed deal, there are no such stipulations, and Akridge would not be required to seek or respond to public input. Community members have raised concerns of the lack of affordable housing and the need for daytime retail and commercial activity. 

Control of the Reeves Center gives the District the ability to shape the continued development of the U Street area. The District shouldn’t give up that control just because it needs cash quickly. 

STADIUM COSTS: DC SHOULDN’T PAY MORE THAN ITS FAIR SHARE

Mayor Gray’s plan would have the city buy land and pay for cleanup and new infrastructure, up to a cap of $150 million.  But the District also would take on several expenses outside of the cap – putting taxpayers on the hook for more than half of the stadium’s costs.

While it’s true that professional sports stadiums usually get some financial help from their host city or state, that is based more on fear of losing the team than on any hard economic analysis.  It’s important to remember that DC United stands to benefit hugely from a new stadium – higher ticket sales, control of concessions, naming rights, an increase in the team’s value, and more. So it makes sense to have the team pay as much of the stadium’s costs as possible.

The proposed stadium legislation caps the city’s obligation at $150 million for buying and preparing the land. (City officials estimate actual costs may be about $120 million.)   

However, contrary to the widely-publicized notion of a “50/50” deal, the District also would give DC United property and sales tax breaks estimated at $44 million. This would be partially offset by a $2 ticket surcharge the city would collect, but not until after 10 years. That would total $10 million. 

Another cost not discussed is the relocation of the operations and agencies within the Reeves Center. When Akridge takes control, it will temporarily lease space to the District at a cost of $15 million. Once the lease is up, the District must relocate agencies and the traffic operation center located there, at a cost of $14 million. 

In total, the District would pay $183 million to complete all aspects of the project. With the team poised to make a lot of money off of this venture, it does not seem fair that taxpayers take on the bulk of the costs. 

A WINNING GOAL: ENSURING COMMUNITIES BENEFIT 

A new soccer stadium will allow fans across the region to enjoy games in an accessible, world-class venue. But it also will have an impact, potentially disruptive, on the nearby community. It only makes sense that the stadium deal address possible negative effects and include new benefits for the community surrounding the new stadium.

The District will need to ensure basic protections for the residents of Buzzard Point: preserving affordable housing, alleviating game-day traffic and parking congestion, making the area safe for walking and biking, and providing adequate public transportation. Neighbors also want the city to mitigate environmental hazards that surface as industrial lands are redeveloped. The city is working toward some of these goals already. It produced a transportation study and is working to produce transportation management and operations plans. 

Most stadium developments also include new amenities to ensure that the community thrives along with the team and the fans. Community benefits agreements (CBA) are binding and hold the city and the developer accountable to the community for specified new amenities. In Southwest, a CBA could address concerns raised by the community by providing access to job and apprenticeship opportunities, recreation and after-school programming for neighborhood youth, and rehabilitation of recreation centers. Community groups are already in preliminary discussions with the team and the City Administrator, and all parties have expressed an interest in a CBA. 

Because the soccer deal involves several neighborhoods, the city should look to foster similar community benefit agreements with neighbors of the Reeves Center and with Sursum Corda residents.

DC is a soccer town and will likely make some financial contribution to help DC United build a new home. But in representing a city with a lot of needs and limited financial flexibility, the DC Council should rethink the approach to how the city and the team share that burden. Costs should fall more to those who primarily benefit – DC United – and new development and amenities should improve the lives of all affected residents. If those conditions are met, a new stadium would be a true community asset and a vehicle for positive development in Southwest. 

Rivers is a policy analyst at the DC Fiscal Policy Institute (www.dcfpi.org), which conducts research on tax and budget issues that affect low- and moderate-income DC residents.