Population Statistic: Read. React. Repeat.
Sunday, December 18, 2021

runneth over
The big-league stadium game should be familiar by now. Team owners lobby for a brand-new publicly-funded facility that they’ll own in all but name; the city gets to keep their major league team as a resident, thus maintaining a significant civic status symbol (even as the concrete halo benefits of economic vitality rarely materialize, as I think the city of Cleveland’s situation demonstrates).

By design, a city pays dearly in such deals. But to date, an important financial hedge existed: The issue of cost overruns for these large projects, which customarily have been assumed by the team. Now, the assumption of cost overrun payments for the new Washington Nationals ballpark by the government of the District of Columbia likely represent a precedent in future stadium deals, thus upping the ante for municipalities that try to attract or retain teams.

The way big-ticket real estate development works, overruns are far from contingency factors — they’re reliable ledger items. These items are basically positioned as hidden costs for PR purposes:

Rising estimates are not unusual in stadium construction, given difficulty in predicting fluctuating material costs, interest rates and land prices. Initial estimates are often kept low to bolster political support, said Andrew Zimbalist, a sports economist with Smith College.

The early projection for Seattle’s Safeco was $320 million when Washington state lawmakers approved that stadium in 1995. By the time bonds were issued to pay for it, the estimate had swelled to $417 million. The final cost to complete it was $514 million, said Mariners spokeswoman Rebecca Hale.

If the entire bill is going to be footed by the government, there’s little incentive to keep the building costs down. It’s effectively a blank check being handed to the team.

Obviously, if it works for the Nationals, the passing-on of cost overruns will find its way to the negotiation tables of every other Major League Baseball team looking for a new house, and from there, to every other NHL, NFL and NBA situation. Cities and states will have one less bargaining chip, because if they refuse to take on the overruns, a competing region surely will do so as part of a standard relocation package.

I guess sports as a regional status symbol will have to be perceived as that much more valuable, since the real-dollar pricetag is about to go up significantly.

- Costa Tsiokos, Sun 12/18/2005 02:22:12 PM
Category: Politics, Baseball, SportsBiz | Permalink |

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