Greater Greater Washington

Development


Here are 8 ways DC can get the most out of a new soccer stadium

Last year, DC announced a tentative deal to fund and build a new soccer stadium for DC United through a land swap. The details haven't been worked out yet, though concern is growing that the soccer team may ask more of DC than it will give back in return. By making sure DC United accepts more risk, the city can get a better deal.


Rendering of a Buzzard Point soccer stadium. Image from DC United.

Under the deal, DC would swap land in Buzzard Point owned by developer Akridge for the city-owned Reeves Center. Then, for $1 a year, it would donate rent the land to DC United to build the stadium. While it appears better than the baseball stadium deal, considering how expensive it was, that's not a particularly high hurdle to get over.

Both the DC Council and local budget activists have begun to question whether the deal is fair or wise. And public skepticism about the deal could help drive a discussion about how to craft a better one.

A new DC United stadium and a successful franchise could be good for the city. It could bring in business and tax revenue and create opportunities for entertainment, local unity, prestige, and civic pride. These things have value, and it would not be unreasonable for DC to help DC United as long as the benefit exceeded the cost, because a stadium is unlikely to happen without some public contribution.

Even AT&T Park in San Francisco, which is often billed as privately financed, got help with the land and transportation improvements along with continued city service to the park. Without any contribution from the city, no stadium will be built and it's possible DC United could move.

So what would a good deal look like?

Have DC buy the land outright. They already own some of the land that the stadium sits on and they have the power to force landowners to sell if they need to. The District's lack of borrowing ability is something of an impediment, but it can probably still buy and assemble the land necessary for less than DC United can.

And the city is, by definition, invested in the area, so it can hold the land for a very long time if the deal goes south. This makes it a low-cost, low-risk way to help the team. The District would continue to own the land and could always sell it later.

Use a crowdsourcing campaign to pay for transaction costs. Assembling the land will require title work and environmental site assessments that will cost a lot of money. DC United fans are eager to have a stadium. Let them raise $1 million of their own money to make it happen.

Periodically, the Green Bay Packers sell "stock" in the team to raise money for stadium-related projects, but this stock consists mostly of a piece of paper that doesn't pay dividends. A similar campaign for DC United would demonstrate public support and allow those who care the most to pay the most, while reducing the city's burden. It would also be a way to get fans outside of the city to pay more.

Let the District pay for environmental remediation. Currently an industrial site, the future stadium location will require environmental remediation. The cost of the land plus the cost of remediation should be somewhat related to the land's value afterwards, suggesting that DC could recapture most of this expense when they sell.

DC United commits to pay for the stadium's eventual removal. One day, the stadium will reach the end of its life, and DC United should be responsible for restoring the land to the condition in which they get it. They could meet this requirement by either posting a bond to cover the cost, or paying insurance to cover it in case they go bankrupt.

DC United pays market-rate rent and full property tax, eventually. The term sheet has DC United paying $1 in rent per year and getting a reduced property tax for 20 years. By buying and preparing the land for DC United, the District is already taking on a large portion of the risk for them.

But the price of the land will include the potential rent they can charge. Paying $1 in rent regardless of revenue, as is currently proposed, means that DC is losing money on its land investment. It's a clever way to mask the contribution, but it isn't in the best interest of the city. Nor is reducing the property taxes.

If soccer is doing as well as its proponents argue, then covering these expenses shouldn't be too difficult. It would make sense to create a system for deferring these payments without penalty when revenue is low, or in the early years while the league is still growing. But they should be paid eventually, at an interest rate similar to what the city pays on its bonds.

Stadium-related sales taxes go to DC whether DC United profits or not. The current deal makes the tax revenue related to ticket sales, concessions, parking and merchandise available to DC United. In exchange, DC would share 50% of the revenue (which includes the tax revenue that DC would normally get) if DC United makes more than a reasonable profit.

This places all the risk on the city, but splits the reward with DC United. Because of concerns that the team will refuse to open its books or to move money around in such a way that it will never turn a profit, City Administrator Allen Y. Lew has stated that this part of the deal may not happen.

This is a good thing. It's far better for the District to be involved in normal government functions like collecting taxes, than trying to be a business partner of Major League Soccer. Being their landlord is enough.

Tax future development to pay for transportation and security. If the argument is that the stadium will generate spillover development in the area, then it can help pay for stadium-related costs, like security and transportation improvements. In addition, the city could also dedicate about $5.5 million in stadium-construction-related taxes it will earn.

Instead of a land swap, sell the land with open bidding. Once DC determines the value of the properties it proposes swapping, potential buyers willing to pay more should do so. DC and developers on the other side of the swap could split the excess value.

This is actually not too far from what DC is already proposing. But it moves more risk and cost to DC United, its fans and the landowners near the stadium that will benefit most from it, which is where those risks and costs should go. By allowing DC United to defer some payments in the early years, DC can create a cushion for DC United to grow into this investment. That's what a good deal would look like.

David Cranor is an operations engineer. A former Peace Corps Volunteer and former Texan (where he wrote for the Daily Texan), he's lived in the DC area since 1997. David is a cycling advocate who serves on the Bicycle Advisory Committee for DC.  

Comments

Add a comment »

Great piece.

by Richard L. Layman on Feb 21, 2014 3:46 pm • linkreport

Makes sense to me. One comment: you write "Under the deal, DC would swap land in Buzzard Point owned by developer Akridge for the city-owned Reeves Center. Then, it would donate the land to DC United to build the stadium."

"Donate" implies that the land would be given away for free to DC United. My understanding is that this is not the case - the District will continue to own the land.

by Dizzy on Feb 21, 2014 4:04 pm • linkreport

That's correct. They would not donate the land, but would allow it to be rented for $1 a year. I'll fix that.

by David C on Feb 21, 2014 4:15 pm • linkreport

These arguments seem like a lot of nickel and diming that threaten to draw this process out unnecessarily. Also, judging by his extensive use of "coulds," he seems rather dubious of the follow-on development potential that will stem from the stadium construction. I'm not. Between the looming Greenleaf redevelopment and the streetcar, this area is prime to take off--but it needs a spark to do so (and yes, I buy into the premise that the baseball stadium was that spark for the Navy Yard).

If you've walked around Buzzard Point, you know what potential this area has. I'm shocked and appalled it's still such an underutilized part of the city. If a stadium can kickstart this vitalization, I'm all for it--and I'm sure the long term development tax revenues will make this a great deal for the city.

by Longtime SWer on Feb 21, 2014 4:23 pm • linkreport

I appreciate the author's attempt to think through his position. My criticism is that it's very strong on the "coulds," and not very strong on the getting it done aspect. It's important to remember that the current deal was crafted around what can get done with the least risk to D.C. and that all parties in the land swap arrangement will benefit from.

Akridge has no interest in selling the land without some sort of trade up. The city has no cash/bond room to build new police/fire headquarters (the existing building is crumbling and is obsolete too) so the compensation from Akridge to make up for the difference between 14th and U and the Buzzard Point land gives cash for new facilities.

The city owning the land under the stadium isn't so much about the money, it's more about about having the local government's blessing to build the stadium. Otherwise, the property taxes on all those square feet makes the stadium uneconomical. That's why the city taxes are in concessions and tickets, just like a Verizon Center.

The deal as crafted by Mr. Lew is actually a good one because it will cause economic development in a long-forgotten corner of the city that will generate new taxes in perpetuity. No cash will be needed except for sewers and electrical that would be needed for any office or residential building.

Everyone has reasons to be skeptical of any stadium deal because experience has taught is that they can be bad deals if done wrong. D.C. United knew that they weren't going to get a handout so they never tried. They went the route of the Verizon Center by paying all construction costs themselves. They need city help with the land and this deal does just that without asking the city for money.

by Cavan on Feb 21, 2014 4:51 pm • linkreport

RFK has been totally awesome as ec. dev. for Hill East. And Landover thrives from the FedEx stadium...

the issue is opportunity cost. It's still money and opportunity regardless of how the money or "in-kind" provisions are made.

The city has to make hard choices about where to invest. There is already more capacity at "Capitol Riverfront" and the "Southwest Waterfront" than there is demand to absorb it. Therefore, adding even more development capacity to that area is problematic.

This is another example of how not having a public capital improvement planning and budgeting process makes the potential for the city getting screwed very high.

Land trades, dispositions, city construction projects, alley closings, tax incentives and abatements, and eminent domain matters should go through a master planning process, rather than as individual legislation initiatives and the annual budget process.

by Richard L. Layman on Feb 21, 2014 5:04 pm • linkreport

the stock thing is tricky. There was an interesting article somewhere in the last week about how the US Treasury changed the ownership benefits of Fannie Mae and Freddie Mac stock in 2009 because of TARP so that stockholders were no longer eligible to benefit from future earnings in the stock, but they didn't disclose this.

Stock where you just give the private owners of the team money, but you have no participation in the upside of the business isn't really stock.

2. I do recommend that cities be awarded a kind of preferred stock in teams that has no role in ownership, and doesn't even get dividends BUT when the team is sold, the city gets a payout on the preferred stock based on the appreciation value of the team because of the value of the stadium to the value of the team and the city's role in the provision of the stadium.

3. Relatedly, a recent blog piece points out that the real enabler of value in professional team sports is the stadium-arena. And its provision is undervalued in terms of the contribution it makes to the overall value of the team and its ability to monetize the entertainment value of the "team" as a media play.

http://urbanplacesandspaces.blogspot.com/2014/01/stadiums-and-arenas-as-enabling.html

So again, we are underselling what we provide in value to a team.

by Richard L. Layman on Feb 21, 2014 5:10 pm • linkreport

I agree that the process seems unecessarily complex. If DC wants to buy the land and rent it for a $1, we should buy the land outright. If we want to sell Reeves Center we should do so at public auction. You better believe we will get multiple good offers on a site like that with favorable zoning. I also find it silly that people keep trotting out the baseball stadium as the sole catalyst that turned the area around. What turned around SW/Navy Yard is the same forces at play on U St, Petworth, H st NE etc.

by BTA on Feb 21, 2014 5:16 pm • linkreport

I'm okay with David's suggestions but I would also like the lease to stipulate that the District has rights to use the venue for other programming. I'd like the Washington Convention and Sports Authority to have some roll in attracting events on behalf of the District. I want high school and college sports, concerts, Team Tennis, Ice Skating, NASCAR, petting zoos - whatever can fit, I want it. There are only, what, 17 United games each year at RFK? That's simply not enough to generate the economic activity that the OCA and other proponents claim. I want at least a 100 days of programming each year in the contract - just to make it interesting.

by Randall M. on Feb 21, 2014 5:23 pm • linkreport

The soccer stadium deal is neither transparent nor a good deal for DC taxpayers. Publicly financed or subsidized sports venues are usually bad deals for localities. What may have made sense for the Nats Park (number of games and sears) is far less economically compelling for soccer.

Moreover, there is no widespread support in DC for this project. I'll bet the vast majority of DC United's fan base doesn't vote in DC. Heck, I suspect they don't (or can't vote) in any US elections!

by JR on Feb 21, 2014 6:06 pm • linkreport

Here is a link to the DC United stadium term sheet.

by selxic on Feb 21, 2014 6:27 pm • linkreport

I'm still opposed.

The government's ability to take land through eminent domain is a powerful tool that was used against the nation to devastating effect with the construction of urban freeways and urban renewal in general. But even at that time, I believe that most of the 'decision makers' behind those movements truly believed they were doing the right thing and serving the public need, no matter how they might have been reviled in the past or in the future.

As a consequence of history, the government's ability to take land today is somewhat less powerful but no less dangerous. That is not at all to say that we should never again wield the power of eminent domain against landowners who obstruct forward progress and the public good. What I am saying is that we must ensure that this power is only wielded to forward the public good and only wielded against obstructionists as a final resort when all negotiations fail.

Having DC buy the land outright through any means is not advancing the public good. It's making life easier for private interests in the hopes that some of what they reap in profits "trickles down" to us. Kelo v. New London was a horrible mistake, and one we should not repeat. Every time we get it wrong, like we did there and like we might here, makes it that much harder for us when we have no other option but wielding the tremendous power of eminent domain to advance a true public good, such as a public school or a non-profit hospital or a new heavy rail line or - dare I say it? - even airport expansion.

DC United is more than capable of buying the land on its own, and DC should offer no assistance beyond its regular capacity as a concerned third party to mediate and negotiate a deal between private interests. No public money should be spent in hopes of collecting returns on "trickled down" profits or "sparked" development.

by Ryan on Feb 21, 2014 6:41 pm • linkreport

JR -

Agreed that it's not transparent, but frankly, it's in the best interest of the District and United to be even less transparent given the nature of ongoing negotiations. Mark Ein is probably holding the deal hostage since he knows that his sliver of land is the missing piece in the puzzle right now.

Given how broad the term sheet is - and the fact that several terms have already changed since the term sheet was signed - it's irrelevant to some extent what Washingtonians think about the deal. I guarantee you that <3% of the population can tell you five facts about proposed deal any way.

True that most DC United fans live outside the city, but isn't that a good thing? As a District citizen, I wish 100% of DCU fans lived outside the city . . . and came in on weekends to spend money which is taxed and goes toward the services I enjoy. The more people spending money here there merrier.

by RC on Feb 21, 2014 6:52 pm • linkreport

These arguments seem like a lot of nickel and diming that threaten to draw this process out unnecessarily.

If you want to negotiate a good deal on something (say, a car purchase) that's exactly what you do.

DC United is more than capable of buying the land on its own, and DC should offer no assistance beyond its regular capacity as a concerned third party

Negotiating in that way will almost certainly result in DC United going to a different city that provides a better deal.

True that most DC United fans live outside the city, but isn't that a good thing?

Not if you consider that a lot of the value of having DC United is having a home team to root for. As a kid, I never spent a penny being a Redskins fan but got tons of entertainment value from them. It was a great deal for me and my taxpaying parents who were MD residents...not so much for the District.

by Falls Church on Feb 21, 2014 10:19 pm • linkreport

@Falls Church

Quite frankly? I say we let them leave if the ultimatum is "get land for us or we walk." We don't need sports teams. Sports teams need us.

If DC United decided to pack up and move to some other city that wanted to waste public money on them, great. Good luck to them! I would oppose eminent domain anywhere, because it's a national crisis when eminent domain is considered for such foolishness as a soccer stadium, but other than that - by all means! Let some other city on the eastern seaboard buy into the chase of "trickled down" earnings from giveaways to franchises that are part of a major league sport taking off in the US and already seeing skyrocketing profits. (Against all odds! But, it's true. MLS is steadily on its way to getting huge.)

We can do better than this, and I'm confident in both the city's ability to survive losing its MLS franchise and in my own estimation that DC United values being DC United too much for threats to leave to have any real teeth to them. Confident enough to assert that we (a word which here means DC) shouldn't be acting like a lovestruck teenager, showering our crush with excess gifts to avoid being broken up with.

by Ryan on Feb 21, 2014 11:50 pm • linkreport

Will parking be included as part of the DC United stadium? There is a great opportunity to have a shared-parking arrangement with the Nationals stadium, utilizing those awful garages, and have a shuttle bus or Circulator between the garages and the DC United stadium during the games. This will reduce construction costs by tens of millions of dollars.

by 202_cyclist on Feb 22, 2014 8:12 am • linkreport

It is true that the DC United stadium will be used far less than the 90-100 events per year at Nationals Park but on the other hand, Buzzard Point is far less developed and more barren than the Navy Yard/Capitol Riverfront was pre-stadium. The potential for this to be a development catalyst is great, especially if this is served by a streetcar route.

Also, because this stadium is going to be much smaller than either RFK or Nationals Oark, this makes it more feasible other events will be held there.

by 202_cyclist on Feb 22, 2014 8:17 am • linkreport

@Ryan:

I would have more sympathy for your position if there were actually residents that would be displaced via eminent domain. In this case, however, much of the land was purchased specifically as investments and is sitting vacant, such as the land that Akridge or Mark Ein owns.

Pepco also isn't a little aggrieved small business. They likely have an entire staff dedicated to real estate and know how to play this game.

by 202_cyclist on Feb 22, 2014 8:24 am • linkreport

The city should be willing to cover the cost of the environmental clean up, roads, other infrastructure changes, and police OT for games. The city should also help acquire the land via threat of eminent domain.

The United need to pay for the building and the land as Abe Pollin and Jack Kent Cooke did and as any other business owner would do (except MLB, but that's on Anthony Williams). The United also need to pay the same taxes as any other business owner.

If the city ends up contributing a fixed amount, say $50 million, or providing minimal tax breaks, it would not be the worst thing in the world. But the current deal of $200 million in land with the certainty that that cost will rise isn't even worth discussing. The MLS average stadium subsidy is $77 million, so why would DC consider more than doubling that amount?

The United will claim that building the stadium will jump start development, but look at the Nats Park area, empty lots and holes in the ground, any local development is up the street and would be in place regardless of the ballpark. Of the local stadiums/arenas, only the Verizon Center has been successful at spurring development.

The United will claim that 20,000 fans will show up for every game and dozens of other events. But take a look at the pictures from RFK, their attendance numbers are greatly inflated, maybe a new stadium will change that, maybe the soccer fad in DC ended ten years ago, why should the city make that bet? As for other events, sure, except how do the existing venues feel about the government subsidizing their competition?

The United love to repeat the mantra jobs, jobs, jobs. How about taking the $200 million and hiring more cops or pot hole fixers or river cleaners? Are one time construction project jobs or low paid ticket takers justification for this expense?

by powerboater69 on Feb 22, 2014 8:36 am • linkreport

A few more comments on this "deal":

Why is the city considering such a gift when the United's ownership isn't even local to the city? With the Nats DC insisted on local ownership, the United's majority owner doesn't even live in this country. He has no interest in the general welfare of citizens of the city, only profit. What has this foreigner ever done for the District other than buying the team and demanding money?

Another big concern I have is why is there a 3rd party business in the middle the the deal? Akridge would not be involved unless they believed that the Reeves Center land was worth significantly more than their current property, so why cut them into the deal? The city holds public hearings, but how are we supposed to know what sort of private discussions are occurring between Akridge and the United? Two companies trying to maximize their profits at the cities expense are much worse than one.

And DC is really handcuffing themselves financially if they were to give away this land. They have already reached the limits of what they can tax or borrow so their only means of raising funds is selling assets. How many other nine figure parcels of land do they have available? Giving this money to the United leaves them in a very dangerous position financially, they will have nothing left for the next big need.

I really don't get the United's fans buying into this rush to move from the RFK location. Don't they realize that they are giving up their tailgating scene? That there is not much parking in the area and that Metro is not only a mile away but across a very busy South Cap Street? They will be paying higher prices for tickets and instead of bringing their own food and beer for pre-gaming they will be paying $6 a pint at the bar.

I also don't see any commitment from the United's fans to support this deal other than message board postings. How about seat licences? If 10,000 fans buy licences at $10,000 each that covers half of what is being demanded from the city. That seems more than reasonable.

by powerboater69 on Feb 22, 2014 9:55 am • linkreport

How are you going to sell 10,000 seat licenses (which are bogus anyway) at $10,000 a pop? NFL teams sell licenses for premium seats for that much; how are you going to sell out half the DCU stadium at those prices?

by MLD on Feb 22, 2014 11:40 am • linkreport

They can't sell seat licenses because they can't hardly sell tickets as it is, that's the point, if the United fan base won't commit to the project financially why should the city.

by PowerBoater69 on Feb 22, 2014 12:01 pm • linkreport

Is there any real risk DC United is going to leave the area? Where would they go? Atlanta? Phoenix? I hardly think they have better offers coming in than a 5 million potential fan base here. On the other hand the idea that SW will never develop without a catalyst is silly. That might have held water 10 years ago but not now.

by BTA on Feb 22, 2014 1:40 pm • linkreport

"The city owning the land under the stadium isn't so much about the money, it's more about about having the local government's blessing to build the stadium. Otherwise, the property taxes on all those square feet makes the stadium uneconomical. That's why the city taxes are in concessions and tickets, just like a Verizon Center"

If its uneconomical, that shows that there is a better use of the land.

by SJE on Feb 22, 2014 2:49 pm • linkreport

My sense is that the reason DC is playing ball with Akridge on the Reeves Center is because doing so allows DC to dictate certain terms on what happens with Reeves. That's what Wells wants to do with affordable housing set-asides, it's the means for achieving what the local residents have expressed as their wants (which Graham will likely be pushing) with commercial office space.

If you just sell off Reeves Center, then the winner will have the ability as a matter of right to just turn it into more luxury condos full of gentrifiers and their dogs (or whatever your boogieman is).

by Dizzy on Feb 22, 2014 7:06 pm • linkreport

"Is there any real risk DC United is going to leave the area?"

Yes. They don't want to leave given the brand value here but are losing money every year they stay in RFK for a host of reasons (rent is too damn high, racoons running around, no ancillary income, uninviting to corporate clients). The ownership group isn't going to lose money indefinitely, and the commissioner has said publicly that United will have to move if they can't find a stadium solution.

"Where would they go?"

The league is already expanding into Miami, Orlando, and Queens/Brooklyn. The next frontrunners are Atlanta, Minneapolis, San Diego, Sacramento, St. Louis, and San Antonio. Phoenix could work too. The team has had discussion with Baltimore about moving the team to that city. So bottom line -- there are plenty of NFL/NBA sized cities which are fighting tooth and nail to attract MLS franchises.

"On the other hand the idea that SW will never develop without a catalyst is silly."

SW is developing, but not this corner of it. I'm sure it will develop at some point, but at a little under a mile from the nearest metro station, it doesn't have much going for it in the foreseeable future without a stadium. For what it's worth, I finance commercial real estate projects for a living.

by RC on Feb 22, 2014 7:11 pm • linkreport

@Longtime SWer

These arguments seem like a lot of nickel and diming

We're talking about tens of millions of dollars. That's a lot of nickels and dimes.

Between the looming Greenleaf redevelopment and the streetcar, this area is prime to take off--but it needs a spark to do so

I agree with the first point, but not the second. The main reason that the area has not been developed is that PEPCO own a big chunk of the land and only recently began considering the idea of selling it. And since 2010, the city has been negotiating with the current land owners about a DC United stadium. I would say the stadium is the reason why no other spark has come along. DC could have pitched this area to the FBI, for example.

Even if it does need a spark, we could (there's that word again) just buy the land, offer it up for rent for $1 and offer to charge reduced taxes - exactly the deal we've offered DC United - and see who else is interested in that deal. Or who would pay more rent for that deal. Is DC United the only developer interested in this? Especially if DC is going to reroute the streetcar? I doubt it.

@Cavan

My criticism is that it's very strong on the "coulds," and not very strong on the getting it done aspect.

If that's your only criticism, that's not much. I'm not the Mayor. I'm not from the future. These are things the city can do. There are other things they can do. That's why I said could. If it helps, just read them as should.

It's important to remember that the current deal was crafted around what can get done with the least risk to D.C. and that all parties in the land swap arrangement will benefit from.

Even if true, and I'm skeptical, why should DC take on this much risk for this project? What are the benefits? How much are those worth?

Akridge has no interest in selling the land without some sort of trade up.

They're in the business of buying and selling land. Of course they're interested in selling.

The city has no cash/bond room to build new police/fire headquarters (the existing building is crumbling and is obsolete too) so the compensation from Akridge to make up for the difference between 14th and U and the Buzzard Point land gives cash for new facilities.

Ironically we have no bond room because of our last stadium deal. But if we need cash, we can just sell the Reeves Center and use the cash to build the police/fire HQ. No buzzard point needed.

That's why the city taxes are in concessions and tickets, just like a Verizon Center.

Does the Verizon Center not pay property taxes? Do they get to keep the concession and tickets taxes if they don't make enough money?

The deal as crafted by Mr. Lew is actually a good one because it will cause economic development in a long-forgotten corner of the city that will generate new taxes in perpetuity.

As noted above, we can get that anyway. And the reason that area was "long-forgotten" was because of the PEPCO property.

No cash will be needed except for sewers and electrical that would be needed for any office or residential building.

Not true. Read the term sheet.

They need city help with the land and this deal does just that without asking the city for money.

Well, the city is buying and rehabilitating land and then renting it for a dollar. Would you buy me some land, prep it for construction and rent it to me for $1? It won't cost you anything, right?

@RichardLayman

Stock where you just give the private owners of the team money, but you have no participation in the upside of the business isn't really stock.

I think that's kind of the point. It's more like a donation. Like giving to your alma mater's stadium, except without the tax write off.

@Ryan

The government's ability to take land through eminent domain is a powerful tool that was used against the nation to devastating effect with the construction of urban freeways and urban renewal in general

I should point out that while I mentioned eminent domain, I don't think the city is going to use and they have definitely not said they are. The plan now is to buy or trade for the land without condemning it.

We don't need sports teams. Sports teams need us.

I do think that DC United needs us more than we need them. But if they were to leave it would be a loss.

The potential for this to be a development catalyst is great, especially if this is served by a streetcar route.

No, the potential for a massive government investment, coupled with streetcar expansion, to be a catalyst is great. But a soccer stadium is probably not the best possible catalyst for such an investment.

My sense is that the reason DC is playing ball with Akridge on the Reeves Center is because doing so allows DC to dictate certain terms on what happens with Reeves.

Can't they dictate terms on the Reeves Center anyway?

It is possible that Akridge won't give DC as good a deal without the Reeves Center, that they are agreeing to sell it to DC at the appraised rate (instead of an auction rate) in exchange for being able to buy the Reeves Center at the appraised rate. But this makes me like the deal less, because the side of this swap that I suspect is better at negotiating land deals and appraising land values is the company for whom this is a core competency. The Reeves Center is worth more than the Buzzard Point land, so there is more room for error on DC's side. So I expect this to be a worse deal if that's true rather than better.

by David C on Feb 22, 2014 9:43 pm • linkreport

"RFK has been totally awesome as ec. dev. for Hill East. And Landover thrives from the FedEx stadium..."

Non-sequitur. Apples and oranges, etc. The footprint for the DC United stadium will be a small fraction of those gridiron behemoths and their surrounding parking fields.

Moreover, United will play only one or maybe two Sunday afternoon games each year. Sunday isn't exactly a party, bar-hopping, hang around for dinner and drinking kind of day.

Finally, there will be many more events at the United stadium -- and on nights that would actually attract business to local establishments...business from people who won't be stuck in their cars lined up to exit the stadium parking lots.

One thing is not like the other.

by Fischy (Ed F.) on Feb 23, 2014 9:31 am • linkreport

No surrounding parking fields means that the proposed stadium will be significantly more difficult to get to than RFK, with the United already having attendance issues, how is making the stadium less convenient for a great number of fans a good idea? It's not like Verizon Center where there are plenty of office parking garages in the area. Check out the Nats parking map, all the lots are a 3-5 blocks from the ballpark - on the far side from Buzzards Point.

Even the Metro is further away, which is being understated as a nuisance, who wants to cross South Capitol Street and walk a mile to the train after getting hammered at a bar?

by powerboater69 on Feb 23, 2014 9:52 am • linkreport

This article has convinced me that Lew negotiated a pretty smart deal.

The quibbles seem to be that the team won't be paying enough rent; that the city will be assuming some risk on the collection of sales tax; that there won't be open bidding for the Reeves property; and that the team isn't on the hook to pay for demolition of the stadium when (and I would say "if" it outlives its usefulness.

In fact, Lew's deal is much more grounded in practicalities than the one outlined in this piece.

If the city had chosen to force PEPCO and Akridge into selling their properties, there would have been years of litigation, with a very uncertain outcome. Negotiations are much preferable. Moreover, the point of the land swap is to get them a fair price, which is important to maintaining a business-friendly environment. The negative impact of using eminent domain to take property from such prominent businesses within DC would hard to calculate -- but it would be considerable, and long-lasting. Moreover, this way the city has put in a mechanism to ensure that it receives fair market value as well.

The other pieces relate more to the economics of the soccer business in the US> It isn't really profitable now, but it is anticipated to continue to grow. The league has become a profitable venture only because new investors are paying lots of money to buy new franchises. As for the stadium demolition costs -- I don't know that the team would leave in our lifetimes, but why should they be on the hook to demolish it? They don't own the land. If they want a new stadium at that site, they would be on the hook to build that, so they would demolish the old one, too. If they've gone bankrupt, then they wouldn't be paying for it anyway. Moreover, since they're not gonna own the land, it would be pretty extraordinary to require them to remove the building...and, there's no way they'd agree to that.

All-in-all, Lew negotiated a pretty smart deal.

by Fischy (Ed F.) on Feb 23, 2014 10:01 am • linkreport

@ The powerboater

Stop worrying so much about protecting the fans. Stop telling us what we should want. Really. [Deleted for violating the comment policy.]

Stop telling us we should prefer RFK. THe team isn't going to stay there. Period.

Also, next game, watch the parade of folks going to the Metro after the game. They're not tailgaters. Most DCU fans do not tailgate. For those that really want to -- there will be options. The rest will adapt.

As for crossing S.Cap after drinking some -- it ain't like crossing the Grand Canyon. People will manage.

by Fischy (Ed F.) on Feb 23, 2014 10:06 am • linkreport

Why would I watch the fans heading to Metro? I'm in lot 8 with the crowds drinking, grilling, and kicking balls around. The move to Nats Park killed the pre-game scene for the Nats, it will do the same for the United.

RFK is in need of replacement or a major overhaul, but it is the best spot in the city for a stadium, easy to get to from VA, MD, and DC. Buzzards Point is a Point, it is not as easily accessible.

My biggest problem with this deal is the foreign ownership. Why would the city even consider gifting $200 million to an owner who is not only taking the money out of the city but out of the country? $200 million is more than double what most MLS cities are contributing ($77 million). $200 million is more than what DC/PG contributed for the Redskins, Caps, and Wizards, and those teams have local ownership. Why give $200 million to some guy in Indonesia?

by powerboater69 on Feb 23, 2014 10:15 am • linkreport

"As for crossing S.Cap after drinking some -- it ain't like crossing the Grand Canyon. People will manage."

The city just denied a permit for a proposed bar to host a couple hundred people playing bocce and kickball next to Nats Park, the reason was too many pedestrians crossing South Capitol Street (and public urination). Meanwhile the United's foreign owner wants to build a stadium for 20,000 fans with parking for a couple thousand, sending 18,000 across that same dangerous street (think of the stench if this happens).

http://www.popville.com/wp-content/uploads/2013/11/Riverfront-at-the-Ballpark-Order-on-Denial-of-License-11-13-2013.pdf

by powerboater69 on Feb 23, 2014 11:51 am • linkreport

If the city had chosen to force PEPCO and Akridge into selling their properties

I don't think this is the alternative or that anyone is promoting this. PEPCO is selling their land to DC without being forced and Akridge would too if the price were right. No Reeves Center needed. And neither deal now (or later) requires no rent, reduced property taxes or risked sales taxes.

The quibbles seem to be that the team won't be paying enough rent

They won't be paying any rent. The Nationals, for comparison, pay $5.5 million a year (though even that is pretty cheap and was chosen as a substitute for a "jock tax" that DC wanted than as actual market rate rent. Normal rent-to-property yields are in the 3-7% range and the Nats pay less than 1%).

The other pieces relate more to the economics of the soccer business in the US> It isn't really profitable now...The league has become a profitable venture only because new investors are paying lots of money to buy new franchises.

Well then, by all means we should hitch our cart to this star.

Moreover, since they're not gonna own the land, it would be pretty extraordinary to require them to remove the building...and, there's no way they'd agree to that.Why would it be extraordinary? And how do you know they would never agree to it?

Regardless, the fact that they won't agree to what is a reasonable deal for the city is not an argument to pay them big subsidies. It is an argument to let them walk.

by David C on Feb 23, 2014 12:41 pm • linkreport

Why would it be extraordinary? Because it is. You can look at any such project -- whether on public or private land -- where a party is invited to build or renovate...to make use of the land or a preexisting structure with the intention of adding value for the owner with their presence (not talking about a rental property where the owner intends to make money from renting the structure prior to, during and after the leasehold) . You will not find a condition requiring the invited tenant to remove any new structures or otherwise restore the property to its prior condition. If the owner has approved the renovation or construction, then it's on the owner to deal with after the tenant goes. More so, when the owner actually is inviting the tenant to build the structure.

Yes, ti's a sweetheart rent to begin with -- allowing the team to actually recoup its costs in constructing the stadium. The city will be recouping much of its outlay in the land swap.

Also -- it ain't no $200 million being gifted to a foreign owner, The term sheet limits the city's outlay to $150 million, inclusive of the land and capital costs...none of which is actually going to the team's ownership. The city will have to do some remediation, presumably, but most of the infrastructure costs involve turning an industrial "street" into a public street that vehicles and pedestrians can use safely. That's the kind of costs that municipalities bear in providing a city that its residents and businesses can use...plain and simple. Yeah -- some businesses land on 14th st or 16th St -- and the cit doesn't have to do anything because they prepared the area a long time ago. In other areas, the city has to make changes to the infrastructure to make the area usable for something other than gravel and cement mixers. It will cost the city something, but it's an investment in the neighborhood, not in the team. The rest of the money is within the land swap. In the end, the city is simply swapping one parcel for another, with some additional outlays to purchase adjoining parcels. It probably won't involve $100 million in outlays for those adjoining parcels, but the city is likely to recoup much of it anyway because of the land swap.

by Fischy (Ed F.) on Feb 23, 2014 1:42 pm • linkreport

"The city will be recouping much of its outlay in the land swap."

Is that a joke? The District is supposed to give away one of their most valuable properties and recouping that money by gifting the United the land they get in return? Akridge and the United sure come out ahead in that deal, DC must be recouping it's losses by the warm fuzzy feeling they get for helping those guys out.

"it ain't no $200 million being gifted to a foreign owner, The term sheet limits the city's outlay to $150 million, inclusive of the land and capital costs"

Yeah sure, the term sheet limits the cost, just like the baseball agreement capped Nats Park at $450 million before it rose to $700 million. Isn't it quite the coincidence that the infrastructure and stadium costs are both $150 million so that they city and team exactly split the cost? But what about the loss of value in the Reeves Center land that is worth more than the Buzzard's Point land. And what about the environmental clean up that DC will be on the hook for that goes above the $150 million? I'm using the number $200 million because that is what is being reported by others outside of the mayor's and the United's offices, but as with the baseball stadium I expect that number to be low.

Just a land swap and some infrastructure changes that needed to be done anyway, no benefit at all to the guy sitting on the other side of the world making ultimatums about moving his team out of town unless he gets one of the top 2-3 sweetheart deals in MLS history.

by powerboater69 on Feb 23, 2014 2:08 pm • linkreport

Why would it be extraordinary? Because it is.

Well, that clears it up.

This is already an unprecedented deal and we're making this all up out of wholecloth anyway. Even if no landowner has ever required the builder of a sport-specific stadium to promise to pay for its eventual removal, that is not proof that it's a bad idea.

allowing the team to actually recoup its costs in constructing the stadium.

If the team doesn't think it can recoup the cost then why build it? What this deal does is given them protection if they do badly and lets them make a windfall if it does well. If they're bringing in $50 million a year in profit, they still pay no rent. That's not helping them recoup cost, it's just a giveaway.

The city will be recouping much of its outlay in the land swap.

No the city will

1. sell land at a profit.

2. Then they will spend that money on land for a stadium and rent that land for nothing.

So they lose money on the second part of that deal. They do not need that second part to make part 1 work. In fact they might make less profit because they are not giving it to the highest bidder.

If I sell IBM stock at a gain and then put it all in Solyndra for a loss, I did not recoup my losses on Solyndra with the IBM buy. I squandered my gains.

by David C on Feb 23, 2014 10:29 pm • linkreport

Except the city isn't left with worthless property. It will continue to own a substantial parcel that will be increasing in value over time, even as it spurs other development that will generate tax revenues... The investment itself would be expected to start generating revenue as well, but the city won't be relying on that to make the project worthwhile.

by Fischy (Ed F.) on Feb 24, 2014 1:02 am • linkreport

So the city is supposed to spend $200 million on a property for which they will have no access for 30 years, they will charge low rent and provide tax breaks for this property, but just wait 30 years until the stadium is abandoned, then this deal will really pay off. And in the meantime the 17 home games a year will jump start development around the stadium, just like Nats Park with all the empty lots and holes in the ground.

That's what you are claiming?

by powerboater69 on Feb 24, 2014 7:18 am • linkreport

The city just denied a permit for a proposed bar to host a couple hundred people playing bocce and kickball next to Nats Park, the reason was too many pedestrians crossing South Capitol Street

THE reason? Pedestrian safety was just one among several listed reasons.

Also I'm not sure the safety of South Capitol is an argument against building a stadium, rather, it's an argument for improving pedestrian safety along South Capitol.

I don't think it's a very good deal for the city but that doesn't mean we should be pulling out every hair-brained complaint in the big book and throwing them at the plan.

by MLD on Feb 24, 2014 8:47 am • linkreport

I'd agree that I got dragged down into the weeds a bit, but the point remains that getting 20,000 people in and out of the Point is going to be much more difficult than has been stated.

In any case, that is an issue for the United to worry about, assuming that they've purchased the land and built their own stadium.

by PowerBoater69 on Feb 24, 2014 10:04 am • linkreport

Crossing South Cap is not even necessary to get to the stadium from the metro. Did everyone just forget that Waterfront station is about the same distance from the stadium site as Navy Yard? Seeing as how most people attending will be coming from points north, and Waterfront station comes before Navy Yard station, I think it stands to reason that many, if not most, will use Waterfront station to access metro. Which is nowhere near South Capitol Street.

Additionally, South Capitol Street is about to undergo a major transformation into more a boulevard-like street, rendering even that issue moot in a decade.

by JES on Feb 24, 2014 10:25 am • linkreport

Except the city isn't left with worthless property.

No they aren't and I never said they were. But they are still likely to lose money. Here's how it works. The Price Today = The Net Present Value of the price after xx years + the rent earned over xx years - the expenses over xx years.

This is what Akridge will sell it for. When the time comes to sell, the city will still have the first piece of that equation, but they will have chosen to forego the second part (the rent). Akridge is not going to sell the property to the city for less than it is worth so they don't care that DC is foregoing the rent. That's what the city loses. It's like buying a two-piece furniture set, walking out of the store and throwing one piece in the dumpster.

On top of that, DC is currently collecting property tax revenue on the site. That will stop once they buy it. So that is more money they have to make up somewhere else in this deal.

Here's another way to think of deal. It would be financially the exact same deal if DC United leased the land from Akridge et. al. and DC paid the rent and waived property taxes (except DC isn't doing any land speculation in that deal). There's no way you can argue that DC isn't losing money on that part of the deal. Noone suggests doing it this way because voters would hate it. The current deal lets DC mask the transfers, but this is exactly the same thing. We aren't writing any checks so it looks like we aren't putting anything in. But we are. It's disheartening, if not surprising, how many people fall for this.

It will continue to own a substantial parcel that will be increasing in value over time,

It may increase in value, but it may not. The world is full of people who lost fortunes speculating on land. And Akridge will certainly price the expected increase in value over time into the price.

even as it spurs other development that will generate tax revenues...

People keep saying that, but no one is willing to try and prove or quantify it. And as I've said before, for the kind of money DC is putting in, there are likely better ways to spur development.

The investment itself would be expected to start generating revenue as well

What revenue is that?

by David C on Feb 24, 2014 11:45 am • linkreport

The soccer stadium will be a welcome addition to the city and I am looking forward to buying season tickets. This deal creates something fantastic in SW, catalyzes Anacostia by moving city govt services/workers there and creates the opportunity for something productive to be built in place of the awful Reeves building site. This article provides a lot of interesting ideas re financing options. I especially like the idea of fans raising a milllion dollars and to become "share holders". Let's get the stadium built as fast as possible and that is a fair deal for the team and the city. The current deal is a good one it appears but maybe some of these ideas could provide options to other sticking points.

by Ward1United on Feb 24, 2014 2:58 pm • linkreport

All this discussion is great! I love the deal DC has worked with the team and hope the deal gets done this year (:

by DCLee on Feb 27, 2014 6:38 pm • linkreport

Add a Comment

Name: (will be displayed on the comments page)

Email: (must be your real address, but will be kept private)

URL: (optional, will be displayed)

Your comment:

By submitting a comment, you agree to abide by our comment policy.
Notify me of followup comments via email. (You can also subscribe without commenting.)
Save my name and email address on this computer so I don't have to enter it next time, and so I don't have to answer the anti-spam map challenge question in the future.

or

Support Us