Economic Research Associates
Summary of the Fiscal and Economic Benefits of a MLB Team and New Stadium to the District of Columbia
May 7, 2003

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Summary of the Fiscal and Economic Benefits of a MLB Team and New Stadium to the District of Columbia

This section summarizes the economic and fiscal benefits of a Major League Baseball team and new ballpark to the District of Columbia (the District). Economic Research Associates, based on ballpark financial projections developed by Brailsford & Dunlavey, completed all analyses and provided the results in a March 7, 2003 report. For the purposes of this exercise, it is assumed that a Major League Baseball club will locate to the District in 2004 and play all home games at RFK Stadium before moving to a new ballpark in 2007. It is projected that the new, 41,000-seat ballpark will attract 3 million fans during the first year of operation, before subsiding over the following four years to an annual stabilized attendance of 2.4 million. All data, unless otherwise noted in the construction benefits summary, are quoted in 2007 dollars for the first year of operation.

Construction of the proposed ballpark will have an immediate, one-time impact on the local economy and the District’s tax collections. The $272 million ballpark will be built by a private contracting entity tasked with completing the ballpark over a three-year period. Within the contract value, the contractor will spend $136 million on building materials and pay $81.5 million in payroll to workers during the construction period. The projected payroll earnings will support over 2,200 construction jobs while the building materials spending will indirectly generate an additional 1,300 jobs with a total payroll over $47.7 million. Discounting leakages to outside jurisdictions,¹ the spending on materials, the local income tax levy on the construction payroll, and the business franchise tax on contractor earnings will generate nearly $5 million in tax revenues for the District. (Additional property, retail and auto taxes will likely result from the activities and spending of those holding construction jobs. These amounts have not been estimated in this study.)

Jobs associated with the new ballpark include most obviously baseball players and coaches, but also include team administrative staff working in sales, marketing, and administration; ballpark operations staff working in maintenance, management, and security; and contracted staff working in concessions, catering, merchandising, and selected maintenance capacities. With full and part time employment opportunities, the operations of the team and the ballpark will create 360 full time equivalent positions, 100 of which are projected will be filled by residents of the District.² Total earnings for the new jobs will be $94 million, with $38.8 million payable to employees residing in the District. Assuming the implementation of a transient entertainer income tax, allowing for the collection of income taxes on income earned by visiting players and coaches and the crediting of their resident state income tax bill, the earnings of District residents and visiting teams would generate $6 million in income tax collections. The 100 employees residing in the District are also likely to own property, purchase consumer goods, and own a car in the city, creating an additional benefit to the District. It is estimated that additional property, sales and use, and motor vehicle tax revenues will amount to an additional $1 million in revenues.

The operation of a ballpark includes a number of services and activities that are the basis for generating several tax revenue streams. Multiple entities, including the baseball club, media rights holders, concessionaires, caterers, merchandisers, and selected maintenance operations will conduct business operations in the ballpark, generating a $41.5 million annual basis for the business franchise tax. These same companies will also spend money on supplies and goods sold, creating an additional $16 million per year in spending that will benefit sales and use tax collections. For example, it is estimated that annual alcohol sales in the ballpark will require operators to purchase 25,500 barrels of beer and 7,000 gallons of liquor and wine from local distributors, generating $75,000 in alcoholic beverage taxes. Sales and use tax collections will also benefit from the sale of tickets, concessions, and merchandise, as will the parking tax collections from fees collected on game days. Assuming a ticket tax rate of 10% and business franchise, sales and use, alcoholic beverage, and parking tax rates consistent with current policies, team and ballpark operations provide the taxable basis for $15.6 million in annual tax collections for the District.

The District will play host to 81 home games a year and benefit from the spending of each of the visiting teams. The players, coaches, staff, and media traveling with each club will generate a demand for over 7,900 room nights on an annual basis, all the while spending money on meals, shopping, and transportation. Total hotel revenue is expected to exceed $1.1 million while restaurant, retail, and transportation spending will amount to an additional $750,000. This new direct spending will generate a combined $230,000 in tax collections for the District.

Fans attending games from the District, the Washington metropolitan area, and outside the Washington metropolitan area will support the local economy with spending on hotel rooms, meals, transportation, and retail purchases both before and after games. With 80% of attendees expected to originate from outside the jurisdiction, a great deal of the spending will be net new to the District. The restaurant industry is expected to be the largest beneficiary with over $17 million in spending on food and beverages, followed by the hotel industry and nearly $14 million in spending. Visiting fans will create a demand for over 105,409 room nights a year. (Combined with the demand from visiting teams, total room nights a year will come to 113,225.) Over $11.5 million will be spent on ground transportation and $5 million on retail sales, bringing the total impact to nearly $48 million.

The nearly $50 million spent outside the ballpark each year by visiting teams and fans for taxis, hotel rooms, meals, parking, and shopping will support 675 jobs³ in the District, 200 of which it is estimated will be filled by District residents.⁴ Total earnings for employees in the hotel, restaurant, retail, and ground transportation industries will be over $14 million, with $4 million supporting the 200 new District jobs. The new employees will have further benefits to the District through the payment of income, property, sales and use, and motor vehicle taxes totaling $900,000 per year.

Considering the benefits collectively, it is estimated that the construction and operation of a Major League Baseball park in the District will create 2,300 jobs during the construction process and 1,035 upon opening the facility. This new employment will generate $82 million in earnings while the ballpark is built and $109 million for every year the ballpark is in operation. Spending on building materials, payroll costs, and employee expenditures will generate $5 million in fiscal benefits for the District. During operation of the ballpark, spending by visiting teams, fans, the baseball club, and ballpark operators will contribute $28.5 million in tax collections accruing to the District. The ongoing benefits would total over $1.1 billion over a 30-year period, or $526 million in current dollars over the same period.

I. Indirect Benefits

A MLB team and new stadium will have significant impacts on the District of Columbia and the neighborhood surrounding the new stadium. As a comparison, in the five blocks surrounding the MCI Arena, 62 new projects will be built by 2007 and will provide the District $141M a year in taxes. Other cities where new baseball stadiums were recently built have seen dramatic economic activity, as well.

A. Example: MCI Arena

The MCI Arena opened in the East End of downtown in December 1997. The Downtown BID analyzed the five blocks surrounding the new arena and found that:

• As of December 2002, 25 projects, worth $1.2B in development costs, provide the District $54M a year in taxes. They also found that 15,600 jobs were created.

• By 2007, 62 projects, worth $4.4B in development costs, will provide the District $141M in annual taxes. They also found that 34,500 jobs will be created.

The Downtown BID also analyzed the impact of the MCI Arena on the development of underutilized assets in the neighborhood. In December 1997, there were 43 surface parking lots, 10 large unused buildings, and 72 small unused buildings. By February 2003, there were only 13 surface parking lots, 2 large unused buildings, and 49 small unused buildings. And by February 2007, they project there will be fewer than four surface parking lots, zero unused large buildings, and fewer than 27 small unused buildings.

A. Example: Other Cities’ Experiences

Other cities’ experiences with building baseball stadiums exemplify the potential impact of a new stadium on a city’s and neighborhood’s economic development.

1. Bank One Ballpark in Phoenix, AZ⁵

Bank One Ballpark is located in downtown Phoenix in the County of Maricopa. Stadium construction began in 1995 and was completed in 1998.

Direct Revenue: In 1998, the stadium generated $129M in revenue, including ticket sales, concessions, and other revenue.

Indirect Revenue: In 1998, fans and the visiting teams spent $38M outside of the stadium at restaurants, retailers, and parking.

Jobs Created: The stadium helped create 4,100 jobs, of which 1,700 jobs were in the stadium and 2,400 were supported by spending outside of the stadium.

Government Revenue: State, County, and Local governments collected $4.4M in taxes from the stadium, which includes local and tourist fan spending, visiting baseball team spending, and use of the stadium for other events. As well, the jurisdictions collected $3.5M in taxes from employees of the stadium and team.

2. Coors Field in Denver, CO⁶

Coors Field is surrounded by three neighborhoods: "Lower Downtown (or "Lo-Do"), "Ballpark," and "Central Platte Valley." The stadium was first announced in 1991, construction started in 1994, and it opened in 1995.

Sales Taxes: Between 1991 and 1998, in the LoDo neighborhood, food and beverage sales tax collections increased 651 percent and merchandise sales tax collections increased by 96 percent.

Residential development: Between 1991 and 2000, 3,200 units of housing were built in the three neighborhoods around the ballpark, of which 90 percent were built since the park opened. Between 1994 and 2000, residential property values increased by $100 per square foot, to $220 per square foot.

Restaurants: Between 1993 and 1996, the number of restaurants in the surrounding neighborhoods increased by 140 percent.

Hotels: Between 1994 and 1999, the hotel room occupancy rate increased from 66.1 percent to 72 percent. Between 1994 and 1995, the room rate increased 7 percent, in 1996 it increased another 8.7 percent, and in 1997 it increased another 8.7 percent. In response to the increased demand, the hotel industry built 1,332 more hotel rooms in downtown (25 percent more) between 1995 and 2000.

3. Camden Yards in Baltimore, MD⁷

Camden Yards is located in downtown Baltimore, a short walk from the new inner-harbor neighborhood. Construction on the stadium began in 1989 and was completed in 1992.

Out-of-Stadium Expenditures: In 1992, the out-of-stadium expenditures were $52.8M, more than twice their prediction.

Restaurants and Bars: In 1992, fans spent $12.7M before and after games in the downtown neighborhood surrounding the stadium.

Parking: In 1992, fans spent $0.9M in parking.

Tourist Fans: In 1992, it was estimated that approximately 12 percent of the fans were out-of-town tourists who spent the night in a downtown hotel. The tourist fans spent almost $40M renting 85,000 hotel rooms and the City of Baltimore and the State of Maryland earned $0.8M in hotel taxes. The fans spent $19.8M renting 45,000 hotel rooms in downtown alone. On a typical sell-out ballgame, fans occupied 660 downtown hotel rooms.

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1. Assumes 75% of the business franchise taxable basis, 75% of spending on construction materials, and 65% of payroll earnings will leak outside of the District. First Source Agreements, however, will be required and may impact these projections.

2. On average, 28% of the jobs supported are assumed to be new to the District. First Source Agreements that carry a 51% DC resident hiring goal will be required.

3. Hotels 241 jobs; Retail 175; Restaurants 174; Transportation 114; Parking 71.

4. On average, 28% of the jobs supported are assumed to be new to the District.

5. Economic and Fiscal Impact of Bank One Ballpark and Arizona Diamondbacks, Maricopa County Stadium District, March 2001.

6. The Sports Facility as Accelerator, HOK Sport, undated presentation.

7. The Economic Impact of Oriole Park at Camden Yards: Results of a Fan Spending Survey for the 1992 Season, City of Baltimore Department of Planning, December 1992.