The Dubious Economics of Stadium Subsidies, D.C. United Edition

A blog about business and economics.
July 25 2013 2:39 PM

D.C. United Stadium Deal Is Better Than Most but Still Pretty Terrible

dc united stadium

Gene Thorp / The Washington Post

My friend the fanatical D.C. United fan is eager to point out to me that by the standards of stadium boondoggles, the new deal between the D.C. government and the D.C. United soccer team looks pretty good.

And indeed it does look pretty good. Basically, the city is going to swap an existing municipal builiding that sits atop some very valuable land in order to acquire some not-so-valuable land. The not-so-valuable land will be used to build a stadium (D.C. United wins!), the existing municipal building will be turned into a mixed-used condos-and-retail structure (jobs! residents! tax revenue!), and the city agencies will be relocated to a new facility near the Anacostia Metro where they'll help contribute to what's hopefully a rennaissance for retailers in the Historic Anacostia downtownish area. That'd be a change for the better relative to what we have now.

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But the fact that this counts as a pretty reasonable stadium deal as far as stadium deals go just goes to show how dumb stadium deals are. The building the city is giving up as part of this deal, the Reeves Center, has an estimated value of $100 million. The D.C. United soccer franchise is worth about $50 million. According to D.C. United, the reason a new stadium is necessary is that they can't earn profits at RFK stadium but will be able to turn a profit at the new facility. So we're talking about investing a sum of money that exceeds the present value of the team in order to take an action that will have substantial private benefits for the team's owner. Now it's conceivable that keeping the team in D.C. has some public benefits that make it worth doing, but for the price D.C. is paying the city could literally buy the enter soccer team which would be a much better way of obtaining the public benefits.

Note that while we superficially have a story about sports subsidies here, the real devil's work is being done by accounting. Imagine we had already sold the Reeves Center to a private developer and moved the government offices across the river and had $100 million sitting around in a room somewhere. Now we're debating what to do with the $100 million. The option "use it to buy land and then give it for free to a soccer team" would probably not seem very appealing to people. But since selling the Reeves Center and moving the offices is a very good idea, including that swap as part of the bundle rather than considering it separately makes the plan look pretty good.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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