Eric Price, Deputy Mayor for Planning and Economic Development
Testimony at Committee on Finance and Revenue public hearing on “Ballpark Revenue Amendment Act of 2003,” Bill 15-270
June 12, 2003

Home

Bibliography

Calendar

Columns
Dorothy Brizill
Bonnie Cain
Jim Dougherty
Gary Imhoff
Phil Mendelson
Mark David Richards
Sandra Seegars

DCPSWatch

DCWatch Archives
Council Period 12
Council Period 13
Council Period 14
Election 1998
Election 2000
Election 2002

Elections
Election 2004
Election 2006

Government and People
ANC's
Anacostia Waterfront Corporation
Auditor
Boards and Com
BusRegRefCom
Campaign Finance
Chief Financial Officer
Chief Management Officer
City Council
Congress
Control Board
Corporation Counsel
Courts
DC2000
DC Agenda
Elections and Ethics
Fire Department
FOI Officers
Inspector General
Health
Housing and Community Dev.
Human Services
Legislation
Mayor's Office
Mental Health
Motor Vehicles
Neighborhood Action
National Capital Revitalization Corp.
Planning and Econ. Dev.
Planning, Office of
Police Department
Property Management
Public Advocate
Public Libraries
Public Schools
Public Service Commission
Public Works
Regional Mobility Panel
Sports and Entertainment Com.
Taxi Commission
Telephone Directory
University of DC
Water and Sewer Administration
Youth Rehabilitation Services
Zoning Commission

Issues in DC Politics

Budget issues
DC Flag
DC General, PBC
Gun issues
Health issues
Housing initiatives
Mayor’s mansion
Public Benefit Corporation
Regional Mobility
Reservation 13
Tax Rev Comm
Term limits repeal
Voting rights, statehood
Williams’s Fundraising Scandals

Links

Organizations
Appleseed Center
Cardozo Shaw Neigh.Assoc.
Committee of 100
Fed of Citizens Assocs
League of Women Voters
Parents United
Shaw Coalition

Photos

Search

What Is DCWatch?

themail archives

Testimony of Eric Price
Deputy Mayor for Planning and Economic Development

Before the Committee on Finance and Revenue

June 12, 2003

The National Pastime. The Nation's Capital.

Overview

Selection Process & Status

• Major League Baseball formed a Relocation Committee in order to select a location for the Montreal Expos to play in Spring 2004
• MLB outlined process: select city first then ownership group
• District attended preliminary meeting with MLB Relocation Committee in late January
• District made its formal presentation to MLB Relocation Committee March 20
• MLB Relocation Committee plans to make a location recommendation to Commissioner Selig in July

The Role of this Legislative Initiative

• The proposed legislation provides the tools for us to negotiate with Major League Baseball
  • Identifies the categories of revenue that will be used to finance the ballpark, and
  • Puts the legal and financial structures in place to participate in a public private partnership
• The legislation create the ability to structure a financing plan and enter into negotiations
  • No actual financial plan has been negotiated with MLB or a prospective ownership group
  • The actual financing plan for such a deal will be voted on by the Council (like MCI Arena and the Convention Center)
• The Ballpark Revenue Amendment Act of 2003
  • Creates a Ballpark Revenue Fund:
    • Establishes a sales tax of 10% for tickets, concessions and merchandise at the ballpark; and
    • Establishes a Ballpark Fee -- assessed on a sliding scale against gross receipts that exempts 89% of eligible business.
  • Will take effect only if, on or before October 1, 2003, there is a binding agreement with MLB to relocate a team to the District.

Economic Benefits

• Financing a ballpark represents an investment in the economy of the District of Columbia.
• This investment supports neighborhood revitalization efforts and will have a catalytic effect on development in a growth corridor of the city.
• We will show the economic benefits that a ballpark and team will bring to the District.
• We will also review the kinds of financial commitments we will negotiate with an ownership group that will benefit the greater community.

DC: A Powerful Market

Strength of the Market

• 5.1 Million People, 5th Largest in the Country
• Effective Buying Income (EBI) is $131 Billion, Making DC the 4th Largest EBI
• Median Income is $73,000, Making DC the 2nd Highest in the U.S.
• The DC Television Market (DMA) has 5.7 Million Viewers, Making it the 8th Largest Market in the County
• 20 Million Annual Visitors Spend $5.9 Billion
  • 12 million visitors during baseball season
• DC is the Only Market in the Top 10 That Does Not Have a Major League Baseball Team
• The District Conducted 3 In-depth Market Studies
  • DC Resident Interest Survey
  • Fan Interest Survey
  • Corporate Interest Survey
• DC Residents Survey: 504 DC Residents Regarding Bringing a MLB Team to DC
  Showed consistent support across Wards, Racial, Ethnic and Gender Categories
  80% Supporting Bringing Baseball to the District
  72% Plan to Attend at Least One Game Per Year
  77% Believe the Ballpark Will Help the District's Economy
  77% Believe The Ballpark Would Bring Other Positive Developments to the Surrounding Area
• Fan Interest Survey: 493 High Income Households in the Television Market
  67% are Interested in Purchasing a Season Ticket Package at high price points
  33% are Interested in Purchasing Single Game Tickets
• Corporate Interest Survey: 100 DC Market Corporations
  Showed untapped market with significant interest at high price points; little impact on Orioles.
  Advertising: 42% Would Advertise at New DC Ballpark or be a Team Sponsor
  Suites: 28% Would Lease a Suite at New DC Ballpark
  Naming Rights: 5 Local Companies Interested in Naming Rights

Financial Proposal

• Our financing model is built to demonstrate how we can support our financial commitment to Major League Baseball for funding a portion of a new ballpark and renovating RFK.
• We have not proposed the use of any general fund revenues and have built a model that utilized revenues that would not exist if not for the return of baseball to the District
• This financing model is based on diverse and reliable funding sources and the assumptions on which they are based are conservative.
• While we have used conservative assumptions for the financial model, our market research indicates much greater revenue potential. 

Assumptions

• Gate:
  • 38,000 paid first year, 30,000 stabilized
  • average ticket price of $22
• Suites:
  • 87 leasable, 95% occupancy
  • $125,000 average lease value
• Club Seats
  • 2,000, 97% occupancy
  • $2,800 average lease value
• Concessions, Merchandise, Parking:
  • 35,000 actual attendance first year, 28,000 stabilized
  • concessions per-caps at $7.50 (higher in premium)
  • merchandise per-caps on $1.75

Source: Brailsford & Dunlavey; PricewaterhouseCoopers; MLB Published Figures

Proposed Deal

• DC's Financial Participation
  • $338 million (72%) of $463 million of Total Project Cost
  • Including $15 million of renovation of RFK for interim use
• Full Operational Control During Season for $1 Per Year Lease

Bond Sources & Uses (In Millions)

• Dedicate Tax Streams in 2003
• Case Fund RFK in 2004
• Cash Fund New Ballpark Pre-Development in 2004-2005
• Issue Bonds for New Ballpark in Early 2005
  • Capitalize 2005 Interest

Source: UBS PaineWebber Inc.; Strategic Advisory Group

Public Cash Flows (In Millions)

Source: UBS PaineWebber Inc.; Strategic Advisory Group

Projected Public Cash Flows with 20% Attendance Decline vs. Stablized* (In Millions)

*Stabilized paid attendance is 30,340; stabilized actual attendance is 27,913. 

Source: UBS PaineWebber Inc.; Strategic Advisory Group

Sensitivity Analysis

Attendance sensitivity analyses indicate that, as proposed, even is attendance goes down 20%, the project will still maintain debt service coverage of over 1.5 x debt service

Projected Public Cash Flows with 50% Attendance Decline vs. Stablized* (In Millions)

*Stabilized paid attendance is 30,340; stabilized actual attendance is 27,913. 

Source: UBS PaineWebber Inc.; Strategic Advisory Group

Sensitivity Analysis

Attendance sensitivity analyses indicate that, as proposed, even is attendance goes down 50%, the project will still maintain debt service coverage of over 1.4 x debt service

Hypothetical Rank of 2002 Attendance (Current Projection - Stabilized)

Source: UBS PaineWebber Inc.; Strategic Advisory Group, Brailsford & Dunlavey

Hypothetical Rank of 2002 Attendance (Assuming 20% Attendance Loss vs. Stabilized)

Source: UBS PaineWebber Inc.; Strategic Advisory Group, Brailsford & Dunlavey

Hypothetical Rank of 2002 Attendance (Assuming 50% Attendance Loss vs. Stabilized)

Source: UBS PaineWebber Inc.; Strategic Advisory Group, Brailsford & Dunlavey

DC's Financing

• UBS PaineWebber Inc. Advising the District
• Municipal Bond Insurers Have Reviewed Financing Package

Economic Benefits

• Financing a ballpark represents an investment in the economy of the District of Columbia.
• This investment supports neighborhood revitalization efforts and will have a catalytic effect on development in a growth corridor of the city.
• We will show the economic benefits that a ballpark and team will bring to the District.
• We will also review the kinds of financial commitments we will negotiate with an ownership group that will benefit the greater community.

Construction Benefits

• The $272 million construction project will:
  • Create 3,548 direct and indirect jobs over three years.
  • Generate direct and indirect payroll of $130 million.
  • Result in spending of $136 million in materials, $34 million of this spending in the District.
  • Generate $41 million in contracting; $10 million in the District.
  • Result in $72 million in local economic activity and income tax revenue to the District of $5 million (discounting for revenues that will leak out to surrounding jurisdictions).

Inside the Ballpark Benefits

• Ballpark operations will create 360 total jobs with associated payrolls of over $94 million.
• The Ballpark tenant will spend over $135 million a year in operations.
• Total annual tax revenues to the District (discounting for leakages to other jurisdictions) are projected at $23 million.

Outside the Ballpark Benefits

• Nearly $50 million will be spent outside the ballpark each year by visiting teams and fans supporting 675 jobs in the District.
• That's 241 hotel jobs; 175 retail jobs; 174 restaurant jobs; 114 transportation jobs and 71 parking jobs.
• These jobs will represent over $14 million in payroll.
• Total visiting teams and fan spending at restaurants will be almost $18 million and spending at hotels will be over $15 million (over 113,000 hotel room nights/year).
• Almost $6 million a year in total new tax revenue (discounting for leakages to outside jurisdictions).

Total Impacts

• The ongoing benefits of a ballpark will total over $1.1 billion over a 30-year period.
• Total annual tax collections for ballpark operations and outside the ballpark spending will come to almost $29 million.
• Total tax collections for ballpark construction will be $5 million.
• By bringing baseball to the District, we have the opportunity to capture revenues that would otherwise be spent in another jurisdiction.
• These will be mainly new revenues rather than shifts in spending within the District.
• All benefits are "net new" to the District compared to cities building ballparks for existing teams.

Impact of MCI Arena

• MCI Arena opened in 1997
• By 2002, within 5 blocks of the Arena -
  • 25 projects worth $1.2 billion paying $54 million/year in taxes
  • 15,600 jobs created
• By 2007, within 5 blocks of the Arena -
  • 62 projects worth $4.4 billion will be paying $141 million/year in taxes
  • 34,500 jobs will be created

Source: The Downtown Business Improvement District

Other Cities' Experiences

• Denver - ballpark opened in 1995
  • 3,200 units of new housing built around Coors Field in ten years after the ballpark was first announced in 1991 (90% of these were built after 1995).

Public Benefits

• As with other publicly financed projects, the owners will be required to commit to DC resident hiring goals and LSDBE contracting requirements.
• As an example, standard First Source Agreements stipulate:
  • 51% DC resident hiring
  • 35% LSDBE usage
• Specific commitments will be negotiated with the team owners and become part of the overall transaction.
• The District will seek specific returns on our investment as part of a negotiated agreement with team owners:
  • Guarantee of 400-800 seats to each game for $1-$5
  • Minimum annual contribution from the Team Foundation to the District* - such as 
    • Direct 50% toward youth sports programs, fields and equipment
    • Direct 50% toward education and literacy programs

(*In Phoenix, minimum contribution is $1,000,000/year)

Recap

• We have a very strong market.
• We have viable sites.
• The proposed legislation is not a financing proposal.
• We have a doable financing model based on conservative assumptions.
• Financing a ballpark will create economic benefits to the city.
• We have not proposed the use of general fund revenues.