Economic Meltdown in DC
It’s not happening at the Treasury Department, or at the Board of Governors of the Federal Reserve. According to today’s Washington Post, it’s happening down on the waterfront, at the new Nationals Park. Academic research indicates that new sports facilities typically draw gobs of fans for the first 4-5 years. There are a number of studies documenting this “novelty” effect in various sports, but for some reason I’m fond of this one.
But something different is happening on the banks of the Anacostia River this season. The Nationals have put an astonishingly bad team on the field, and despite having a shiny, new, publicly financed $600 million ballpark, they are averaging under 30,000 a night (19th best in MLB). The bad news is that DC is financing the principal and interest payments on the bonds used to finance the construction of this new stadium based, in part, on taxes collected at the stadium. DC expected to collect over $16 million in tax revenues at the stadium this year, but it looks like the actual figure will be closer to $13.5 million. Worse, the Nat’s owners still have not paid $3.5 million in rent that was due at the beginning of the season because they claim that the stadium is still not finished.
I have argued many times that the claimed economic benefits in “economic impact studies” are forecasts, not gurantees, and that the people who generate those “studies” need to state explicitly that they are forecasting these numbers and provide decision makers with the appropriate information for making informed decisions. Like confidence bounds on their forecasts, or margins of error. But the subsidy seekers want everyone to believe that their economic impact estimates are hard facts, not forecasts of future events. The DC government is learning this lesson the hard way.
In another shocking development, the projected ancillary business and retail development in the neighborhood surrounding the new Nationals Park is also not appearing. I am shocked! Shocked, I say!