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Councilmember Carol Schwartz
Questions submitted to the Executive
Committee on Economic Development and Committee on Finance and Revenue Joint Hearing on the “Ballpark Omnibus Financing and Revenue Act of 2004,” Bill 15-1028
October 28, 2004




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Councilmember Carol Schwartz’s Questions to the Executive Regarding Bill 15-208, the "Ballpark Omnibus Financing and Revenue Act of 2004" Submitted Through the Committee of Finance and Revenue

October 28, 2004

1. According to the Sports Business Journal, the trend is for the team to contribute at least 1/3 of the cost of a new stadium. In fact, the St. Louis Cardinals are paying 77% of the cost of their new stadium, The Detroit Tigers are paying 62% of the cost of their new stadium and the Arizona Diamondbacks are paying 28% of the costs of their new stadium. Why, then, is the District being asked to pay 100% of new stadium costs? What other cities have paid 100% of new stadium costs?

2. According to an analysis in the attached September 30, 2004 Washington Post article, the deal the mayor has submitted to the Council is "one of the most generous deals some Major League Baseball Officials had ever see." What is your response to that comment? (see Washington Post, "Lucrative Deal on Stadium Won Baseball Over," September 30, 2004, page A1).

3. Early in the process of trying to get a baseball team, the Executive commissioned a group of consultants to conduct an evaluation for potential sites. The result was a report entitled, "Washington, DC Major League Baseball Park Site Evaluation Project," which was dated November 6, 2002. The executive seems to have followed the suggestions in this report carefully. The report recommends a 41,000-seat capacity stadium with 1,100 parking spaces and that is what ended up in the agreement. The report suggested one of 5 sites for the stadium and the executive has chosen 1 of those 5. However, the report recommends that the stadium be financed through a public-private partnership, but the legislation before us today calls for the vast majority of the stadium to be publicly financed. Why?

4. In the proposal that has been submitted to the Council, the residents of the District are going to take on the very real risk that the stadium will cost substantially more than estimated. Just last night, the CFO told us that the project would likely cost $91 million more than originally budgeted. Additionally, we bear the risk that the stadium will generate fewer taxes than estimated. On the other hand, District residents will not share in the Team’s profits—those profits will go to the owners. What exactly is the risk to the team?

5. There are varied opinions on whether or not baseball will spur economic development in the city. But, even those who believe that baseball will speed up development give the caveat that the team must be successful in attracting fans. What considerations have been given to the possibility that the team may not be popular in DC just as they became not very popular in Montreal?

6. The very first finding in the proposed legislation is that a publicly owned stadium will contribute to the economic well being of District citizens and enhance the economic development and employment opportunities in DC. However, the attached October 21, 2004 document entitled, "An Open Letter to Mayor Anthony Williams and the DC City Council from 90 Economists on the Likely Impact of a Taxpayer-Financed Baseball Stadium in the District of Columbia," seems to refute that finding. How do you reconcile the findings of the legislation with the findings of the 90 economists?

7. Given the fact that renovations at RFK will have to be done in time for the team to play there in April 2005, will the District have time to borrow the $13 million necessary for the renovations or will this money come directly from District funds? If yes, where will these funds be taken from?

8. Who will be responsible for any cost overruns for the RFK renovations?

9. I have received hundreds of letters regarding this legislation and one in particular stood out to me. The authors are the owners of a mid-sized law firm in DC and they asked about the legality of taxing one private for-profit business to support another private for-profit business. Can you please speak to the legality of this financing scheme? And, beyond the legal question, there is a general question of fairness. Is this fair?

10. The legislation provides that if estimated revenues from the baseball tax for any year is less than $24 million, the mayor shall increase the rate of the baseball tax so that it will at least be $24 million. Am I to understand that the mayor would be bound by law to raise the baseball tax in this scenario? And, would the Council merely be notified of the increase in tax, rather than have the opportunity to vote it up or down?

11. The land that we are proposing to buy for the Southeast waterfront site is described as 21 acres bounded by N Street, Potomac Avenue, South Capitol and 1st Street. Will this site contain only the stadium or will it contain the various anticipated retail and restaurant outlets as well?

12. According to exhibit F of the agreement, fourteen former limited partners of the Montreal Expos are suing Bud Selig, Robert DuPoy, Baseball Expos GP, Inc. and Baseball Expos, LP for $100 million in damages and it is expected that the plaintiffs will seek to enjoin any relocation of the Montreal Expos.

  • What is the current status of this case?
  • If the plaintiffs are successful in getting an injunction preventing the relocation of the Montreal Expos, what will happen to this agreement? If that injunction comes after the investment of funds by the District, how will the District recoup those funds?
  • Assuming the plaintiffs ultimately prevail, what effect will that have on this agreement?

13. If a new stadium is built, there is a huge concern from local construction entities that there be no mandate that the construction be performed only by unionized companies because many of the District’s construction companies are non-union. What safeguards are being put into place to ensure that DC companies would not be excluded from working on the project?

14. To facilitate this project, DC will have to relocate existing utilities, connect new water, sewer, and storm and telephone services, and construct new roads, plazas and sidewalks. Additionally, the city will have to provide for a new or improved Metro station and increased police presence to serve the stadium.

  • What are the estimated costs for those things?
  • Are those numbers included in the $440 million cost of a new stadium anticipated by this legislation?

15. I have consistently said that I felt RFK would be an excellent site for a new stadium. And, the site evaluation supports my opinion. According to the evaluation, a new stadium could be built without impeding the use of the existing stadium and the vast amount of land at the RFK site "provides unparalleled opportunity for complementary development." The evaluation also shows that RFK would be the least expensive site on which to build. So, why was RFK ignored?

16. It was suggested, given the proposed site’s proximity to the Anacostia River, that some portion of the proceeds from the stadium be used to clean up the river. It was also suggested that the stadium be an environmentally friendly or green stadium. Can you give me the Executive’s position on these suggestions?

17. Given the fact that the proposed stadium site is currently an industrial area, is there any environmental clean-up required to prepare the land for development? If so, how much will it cost and is that amount included in the $440 million?

18. The proposed gross receipts tax to help fund the new stadium has been marketed as a new tax on big businesses that won’t really be affected by this tax.

  • Exactly how many companies will be affected by this new tax?
  • What percentage of those companies has communicated that they are in favor of this tax?
  • Some companies with large gross revenues actually have significantly smaller profit margins, so a new tax could ruin these companies. What is the executive going to do to address this situation?

19. A study by the D.C. Convention and Tourism Corporation estimates that baseball fans would spend $31.4 million annually on DC hotels, restaurants and other entertainment. Does this number take into account the reduction in spending on other forms of entertainment to compensate for the baseball related spending?

20. The legislation authorizes the mayor to determine the interest rate to be paid on any bonds issued. Will the total cost of the stadium fluctuate based upon the interest rate determined by the mayor? In the projected figures used to estimate the debt service, what interest rate was used?

21. I see that the lease, which has yet to be negotiated, will require the Team to maintain its Major League Baseball Franchise in DC for the term of the lease. Why aren’t the "non-relocation clause" and the specific consequences for violating that clause a part of the current agreement?

22. Why does the agreement cap the Team’s rental payments to the District in lease year 7 and beyond at $10,000 less than 102% of the previous year’s rent and prevent the rent from increasing at all if certain attendance levels are not met instead of letting the Team—not the District—take the risk that attendance may be lower than average?

23. In addition to the risk of cost overruns for the new stadium, the District will also bear the risk of time delays on the new stadium. In other words, if the stadium is not completed by the March 1, 2008 deadline, the Team will be entitled to recover from the District any compensatory damages, including, lost profits form luxury suites, premium seats, parking, advertising, naming rights, etc. It seems like the damages could be quite expensive. How much money has been budgeted to cover damages if the project runs behind schedule?

24. The small contribution that the Team is supposed to make in this proposed deal is an annual rent payment to the District. The payment will start out at $3.5 million per year and increase to $5 million by the 5th year. However, the attached CATO Institute briefing paper entitled, "Caught Stealing: Debunking the Economic Case for D.C. Baseball" (see page 2), asserts that the rent the team will pay will decrease every year after 2009 when accounting for inflation. So, by the end of the lease in 2035, the team will only be paying $3.3 million per year in today’s dollars. So, my question is why doesn’t the agreement guarantee an increase in rent payments that will at the very least keep up with the rate of inflation?

25. If the stadium is located at the proposed Southeast location, the city will have to compensate the current landowners for their land. However some businesses located in that are lessees rather than owners. Will there be any compensation for displaced lessees?

26. It has been suggested that the placement of a new stadium at the location will spur economic development in a manner similar to the area around the MCI center. However, the proposed area lacks the old, architecturally appealing buildings that were available around the MCI Center, which were later renovated to house retail and restaurants. What effect do you think the lack of building infrastructure would have on development of the proposed site?

27. Other than San Francisco, can you tell me of any other cities that have seen proven economic development benefits from a baseball stadium?

28. The proposal indicates that there will be 1,100 parking spaces built to support this 41,000-seat stadium. This seems inadequate to say the least. I have heard the theory that fewer parking spaces will mean more people on public transportation. But, in reality, this will likely mean more people parking illegally and clogging up our streets. How will the city ensure the use of public transportation rather than the creation of a parking fiasco?

29. As a result of the Team being temporarily located at RFK, what additional upkeep and maintenance costs will the District incur?

30. The agreement requires all notices, demands, certificates and other communications under the agreement to be delivered to the Mayor with a copy to the Attorney General. If, in fact, this agreement is approved I would also like for the Council to receive a copy of those documents. Do you agree to make the appropriate change to the agreement?

31. Is any of the proposed Southeast Waterfront site federally owned? If yes, what agreement has been reached with the federal government regarding this land?

32. Please respond to the following findings contained in the attached CATO Institute briefing paper (see page 5):

  • The presence of pro sports teams in the 37 metropolitan areas in our sample had no measurable positive impact on the overall growth rate of real per capita income in those areas.
  • The presence of pro sports teams had a statistically significant negative impact on the level of real per capita income in our sample of metropolitan areas.
  • The presence of pro sports teams had a statistically significant negative impact on the retail and services sectors of the local economy. The average effect on employment in the services sector of a city’s economy was a net loss of 1,924 jobs as a result of the presence of a professional sports team.
  • The presence of pro sports teams tended to raise wages in the hotels and other lodgings sector by about $10 per year. But it tended to reduce wages per worker in eating and drinking establishments by about $162 per year.
  • The presence of pro sports teams tended to raise the wages of workers in the amusements and recreation sector by $490 per year. However, this sector includes the professional athletes whose annual salaries certainly raise the average salary in this sector by an enormous amount. As it turns out, those workers most closely connected with the sports environment who were not professional athletes saw little improvement in their earnings as a result of the local professional sports environment.

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