A few months ago, Republican Virginia Gov. Glenn Youngkin announced a $2 billion handshake deal to bring the Washington Capitals and Wizards to Alexandria, Virginia, about five miles southwest of their current central D.C. home. The proposed stadium complex would also house a performing arts center, an e-sports center, and corporate and practice facilities for the two teams.
Under the terms of the deal, Virginia taxpayers would be on the hook for more than three-quarters of the $2 billion total, mostly in the form of taxpayer-funded bonds that will be “paid back” through lease payments by the teams’ ownership group, as well as taxes and fees paid on site. Additionally, the ownership group will contribute $400 million, while the taxpayers of the city of Alexandria will directly contribute $100 million. This would break the previous record for the largest public stadium subsidy in U.S. history.
And while most of those bonds are due to be “repaid,” taxpayers should not overlook the fact that these still represent a major liability they’ll have to carry. Not only will a significant portion of these bonds be repaid through taxes and fees generated on-site — revenue that would be due to the state anyway — but even those repaid through lease payments leave taxpayers on the hook should anything go wrong.
Proponents of the deal have touted the potential economic benefits from the new project. The Alexandria Economic Development Partnership released a report estimating that the new campus would generate between $3.5 billion and $8 billion in annual economic output.
That might sound great, but taxpayers shouldn’t be fooled. It’s a common tactic for the groups pushing “economic development” subsidy deals to commission studies that consistently predict enormous economic benefits. But those studies are rarely worth the paper they’re printed on, and bear no resemblance to the actual impact once the deals go through.
More sober, retrospective studies of the effects of sports franchises on local economies find that they result in fairly insignificant impacts on economic growth. One survey found that sports franchises leaving a city had a beneficial impact on wages and personal income as often as they had a negative effect, and what positive impacts there were tended to be minimal.
In fact, another study found that the impact of Chicago losing each of its five major sports franchises to other cities would have an effect on the city’s economy of a fraction of a percent, with a baseball team roughly equivalent to a “mid-size department store.” States rarely propose hundreds of millions of dollars in state-issued bonds to build a new Bloomingdale’s.
Part of the reason that these sorts of studies so consistently overstate economic impacts is their failure to consider that the mere existence of new entertainment options does not magically expand people’s entertainment budgets. Money locals spend on the new sports campus often takes away from money they otherwise would have spent on going to bars, restaurants, or other nearby events.
But while the stadium deal looks bad enough for Virginia taxpayers, it is at risk of becoming part of a deal that would be even worse. Facing opposition from the legislature, the governor may be tempted to buy his stadium deal by compromising on real relief for Virginia taxpayers.
Neither chamber of the Virginia General Assembly included in its budget proposal language incorporating Youngkin’s proposed 12 percent across-the-board income tax cut, opting instead to direct more tax dollars into Metro and education. A compromise on relief from tax-and-spend policies in order to pour more taxpayer dollars into a stadium boondoggle would be the worst case scenario for Virginians.
Taxpayers need real relief, not another scheme to move a couple sports franchises a few miles. Youngkin should prioritize that relief for regular taxpayers — not for billionaire sports franchise owners.
Andrew Wilford is the Director of the Interstate Commerce Initiative with the National Taxpayers Union Foundation, a nonprofit dedicated to tax policy research and education at all levels of government.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller.