How To Make Sure a Dc United Stadium is a Win for the District

The Numbers

There is something magical about going to a major league sports game and cheering along with thousands of other people. That's why the proposal for a new 25,000-seat soccer stadium for DC United is exciting news for many in the Washington region.

But set aside your exuberance for just a minute to think through some hard issues. Stadium deals gobble up huge amounts of precious public resources and subsidize an industry filled with million-dollar players and billion-dollar owners. The District's $150 million offer to DC United is larger than any other initiative announced by Mayor Gray this year, even his $100 million commitment million to housing. Building a soccer stadium suddenly become the city's top budget priority. It probably shouldn’t be.

There are lots of reasons to be skeptical about the deal as it now stands. For starters, DC's offer is double the amount contributed by the typical city, and the costs could get higher if the stadium turns out to be more expensive than planned. The stadium would be a huge gift to DC United's owner, who would keep all the revenues from tickets to naming rights. The plan would even use DC tax dollars to guarantee that the team makes a profit.

The way the District would raise money for the stadium -- by trading away the Reeves Center and other valuable public properties -- also raises concerns. Discussions about selling public assets shouldn't be rushed, especially for a stadium. And a land swap -- as opposed to selling DC assets to the highest bidder -- seems like a good deal for developers but a bad one for the city.

Finally, a new stadium needs to take its impact on neighbors and all DC residents into account. How will traffic problems be addressed? Will the stadium have extra fields for the public and support local soccer leagues? Will the team owner pay workers decently during construction and after the stadium is open? None of these questions has been addressed yet.

The deal is far from final. It has to be spelled out in more detail and go before the Council for review. That means there will be chances for residents to make sure we get a soccer stadium that is a winner for everyone.

How the Proposed Stadium Deal Would Work

Under the non-binding “term sheet” signed by DC officials and DC United, the District would acquire four parcels of land at Buzzard Point in Southwest, estimated to be worth $100 million, and then lease the land to DC United for $1 per year. The parcels would be obtained by trading DC-owned land. In the highest-profile swap, the Frank Reeves Municipal Center, at 14th and U Streets NW, would go to the DC developer Akridge. The city also would take over land used by Pepco as an electrical station, and help the utility find a new location. One of the other parcels is used as a scrap yard and another is owned by venture capitalist Mark Ein.

The city also would pay for all of the clean-up at the site and for new roads and other infrastructure. That is estimated to cost $40-$50 million.

DC United would then pay to build the stadium, with some suggesting that would cost up to $150 million. The team also would have the ability to build hotels or restaurants outside the stadium.

The Stadium Deal: A Safety Net for DC United But Big Risks for DC

There is little doubt that DC United's owner is the big winner in the proposed deal. The team, which is losing money at RFK stadium, now has a half-price offer for a new stadium that will mean more revenue from tickets, concessions, ads, and naming rights, plus a big jump in the market value of the team.

United has not gotten this sweet an offer from any other jurisdiction. And neither have most soccer teams. The public subsidies for 12 soccer stadiums across the nation vary from as little as $7 million in Kansas City to $247 million in Newark, NJ. Four of the stadiums received under $50 million in public funds, and the typical subsidy among the 12 cities is $77 million — or just half of what Mayor Gray proposes. Only two stadium deals — in Denver and Newark — got more than $150 million in public assistance.

The current price tag is just an estimate. The costs of buying land with unknown environmental hazards, relocating a PEPCO substation, and providing new infrastructure could easily top $150 million.

The risks don’t stop there. The agreement calls for public funds to guarantee that DC United makes a “reasonable profit” from the day the stadium opens. If the team is not making a profit, DC will reduce DC United’s property tax bill and turn over all sales tax revenues collected at the stadium site. On the other hand, if the team makes more than a “reasonable profit,” the excess profits would be shared by the team and the District.

This is not a fair deal for the District. Instead, it is a soccer safety-net for DC United.

Swapping City Assets for Stadium Land? That’s Eyebrow Raising

Gray Administration officials say that the need to buy stadium land is a good reason to do something they want to do, anyway: dispose of valuable city-owned real estate. The Reeves Center, they argue, is no longer needed to bolster U Street’s economic activity. By selling it, the District can promote more private development along U Street and relocate government employees to Ward 8, a part of the city in need of economic development.

Whatever you think of the Reeves center, it is centrally located and metro accessible, making it an important site for a public building. Given that, selling any public asset should not be rushed but should be done as part of a thoughtful long-term plan. The District does not appear to have such a plan.

The land swap raises eyebrows for other reasons as well. Is this the best way to sell valuable DC assets, or is it just the fastest way to get land for the stadium? If the District is ready to sell some of its properties, a better approach would be to sell them to the highest bidder. The Reeves Center could be worth up to $186 million, according to DC’s Chief Financial Officer.

Making Sure a New Stadium Benefits both DC United and the Community

Finally, a new stadium could prove to be a win for the surrounding neighborhood, but none of those details has been worked out, and many questions remain.  Buzzard Point is home to marinas, the Earth Conservation Corps, parks and more. What would happen to those? What will the District do to ensure that the added traffic volume is not disruptive? Will the stadium's job opportunities go to area residents, particularly those in nearby public housing, and will they pay living wages? Finally, many soccer stadiums are part of larger recreational facilities. Will DC's stadium come with public fields, youth soccer opportunities, or other public amenities?

In the end, a new soccer stadium at Buzzard Point could be a great thing, or it could be a bust. Mayor Gray should refine the deal to reduce the costs and risks to the city, and the DC Council should be assertive to protect the interests of residents, especially those living nearby. That way, DC United can get the stadium it needs to thrive, fans can get a great game experience, and DC taxpayers can get a fair deal.

Lazere is executive director of the DC Fiscal Policy Institute (www.dcfpi.org), which conducts research on tax and budget issues that affect low- and moderate-income DC residents.


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