On September 21 2004, the site for the then yet-to-be-built Washington Nationals Park was announced. Construction began in May 2006, and construction was completed in a record breaking under two years with the first game taking place on March 22 2008. It has a 41,000 seating capacity. The initial projected cost of the stadium was $611m however the final price tag came up to $693m for construction plus an additional $84.2m for transportation, art, and infrastructure upgrades, for a total cost of $783.9m.
How did the district come up with the money to build this stadium? The district paid about $135m upfront and then borrowed an additional $535m via a bonds issuance. The bonds have a 30-year tenure with an annual repayment cost of $38m. Now how is the district repaying these bonds? Why, via taxes of course!
The district had four main ways to repay the bonds, the first being rent paid by the Nationals and the other three being additional forms of taxation. The district imposed a gross-receipts tax on businesses with revenue exceeding $5m per year. Let me be clear that, the $5m threshold refers to revenue and not profit, meaning that low margin but high revenue businesses would be more adversely affected. Simply a terrible idea.
Source: Washington Post
In addition, the other two taxes were a share of the utility taxes paid by every non-residential tax payer, as well as a special 4.25% special tax on stadium sales. In the opinion of many (myself included), this was totally unfair and no less than a form of corporate welfare.
Why? Firstly, baseball is a private enterprise, and this private enterprise is somehow being financed using public funds? Nothing more than outrageous. Two out of the four revenue raising methods are basically just additional burdens on the public to pay for this private enterprise. Further some non-residential tax payers were hit by both the gross receipts tax and the utility tax. The tax on stadium sales seems fair; baseball fans paying for a baseball stadium, however, when DC reports sales taxes from the stadium, the regular sales tax, which is currently 6% on the same items, and the 10% tax on concessions is combined with the special sales tax. As all taxpayers pay the regular sales tax and concessions tax, which pay for things like roads, schools, and public infrastructure, this calculation method suggests that baseball doesn’t contribute to schools or roads.
Oh, and one more thing: the annual rent that that is paid to the district for the stadium is only about $6m a year! That’s a ridiculously low amount considering the total cost of the stadium; further, since 2012 the annual rent increase on the stadium has been at about 2%, below the annual rate of inflation; meaning in real dollar terms the rent is actually decreasing!
It is now 2016 and the ballpark tax looks like it’s here to stay, despite the protestations of many. Unfortunately, the district has had quite the history of using public funds to fund private sport enterprises’ facilities. Deadspin has a fantastic article on this right here: Washington, D.C. Makes Sure No Billionaire Sports Team Owner Is Left Behind.
Now don’t get me wrong, I love myself some baseball. I played it extensively as a kid and throughout high school (that’s when I first started my obsession with consuming cheap protein powders), but this blatant use of public funds to fund private sport enterprises is wrong and has got to stop. Period.