Dan Snyder, owner of the newly-renamed Washington Commanders football team, reportedly wants to build a $1 billion stadium that would anchor $2 billion in commercial development including hotels, offices, and retail. And politicians are falling all over themselves to provide public dollars to help him.
Like the team’s long-suffering fans, those local pols have fallen victim to the triumph of hope over experience. They believe a new football stadium is a fast track to massive economic development. Yet, extensive research suggests this outcome is about as rare as a Super Bowl victory for Washington’s football team. Here is one example. Here is another. And another.
No matter. In Virginia, lawmakers are debating competing bipartisan proposals to authorize up to $1 billion in tax-exempt bonds to fund Snyder’s project. In one version, the state would help the Commanders repay the bonds by diverting to the team 2 percentage points of any sales taxes paid on purchases made at the project as well as any income tax from the salaries of players and executives. Plus, the team could retain any revenue from the naming rights it sells on the stadium. A competing bill is somewhat less generous: It would allow the team to keep only half the naming rights revenue.
Gov. Glenn Youngkin is a big supporter of Snyder subsides. As a former private equity exec who presumably understands numbers, he should know better.
Senate Majority Leader Richard L. Saslaw (D-Fairfax), who sponsored the bill, said it would not cost the state “a nickel,” according to The Washington Post. He is right about that. It is likely to cost state and local governments millions of dollars in lost revenues, plus hundreds of millions more for transportation and other infrastructure improvements.
A less than optimal partner
For now, Virginia has the only plan on offer. But some Maryland lawmakers want Snyder to keep the team at its current location, with a brand-new stadium and a similar mixed-use commercial development. And the District of Columbia may offer incentives for Snyder to build a new facility at the site of the long-abandoned R.F. Kennedy Stadium. Of course, if Maryland and DC don’t take the bait, Virginia may end up bidding against itself.
Despite the state’s enthusiasm, the Commanders seem like a less-than-optimal investment partner.
So far this century, the Washington football team has won exactly one playoff game. Average reported attendance (which likely overstates real attendance) has fallen by roughly one-quarter since 2008 and the team has reduced seating capacity at its current stadium by about 15 percent.
The team’s problems go beyond poor performance. It also has been plagued by repeated off-field scandals, management turmoil, and a less-than-successful rebranding effort.
What about Nats Park?
Supporters often point to Nationals Park, the stadium of the District of Columbia’s Major League Baseball team, as an example of how public funding of a sports stadium can jump-start local development. But Nationals Park is located in an urban neighborhood that already was ripe for development and within easy access of public transportation. And a baseball team plays at least 81 games in its home stadium plus playoff games.
By contrast, the locations being promoted by Maryland and Virginia are not near any public transportation or other amenities. And professional football teams play a maximum of only nine home games (plus up to three playoff games). That leaves a massive structure surrounded by acres of parking lots unused for more than 350 days-a-year. Only so many of those dates can be filled with rock concerts and the like.
The substitution problem
The flaws of publicly financed stadiums are not limited to the Commanders deal. Most stadiums are poor economic development investments. Crucially, rather than increasing entertainment spending in a community, they simply reallocate it.
In other words, absent a local stadium people likely would spend their entertainment dollars elsewhere. Die-hard football fans might head to their local sports bar. Others, perhaps less hard-core, might go to a restaurant or a movie.
Worse, if this boondoggle succeeds as Snyder and his political pals hope, it also would subsidize that additional commercial development. The result: A hotel located a mile down the road would lose out to one built at the publicly funded site.
And then there is the opportunity cost. It is not hard to imagine how government could encourage economic development with $1 billion. It could, say, improve schools or public transportation. It could encourage development of local grocery stores or community health centers.
Yesterday, three congressional Democrats, including one from Virginia, introduced a bill barring the use of tax-exempt bonds to finance professional sports stadiums.
There are issues with bills such as this (a topic for another day). But the massive public subsidies that Virginia would lavish on Snyder and his team not only won’t support local businesses and their communities, they’d very likely hurt them.