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Testimony of the District of Columbia Building Industry
Association Bill 15-1028, "Ballpark Omnibus Financing and Revenue Act of 2004" Public Hearing: Thursday, October 28, 2004, 10:00 AM Before the DC Council's Committees on Finance and Revenue and Committee on Economic Development Councilmembers Jack Evans and Harold Brazil Presiding Wilson Building, 1350 Pennsylvania Avenue, NW, Council Chambers, Room 500 Good afternoon, Councilmembers Evans and Brazil and other distinguished Members of the Council of the District of Columbia. I am James S. Williams, president of CarrAmerica Development. I am appearing here today as president of the District of Columbia Building Industry Association, a non-profit trade organization representing the real estate development industry in the District of Columbia. Thank you for giving us this opportunity to present our views on Bill 15-1028, the "Ballpark Omnibus Financing and Revenue Act of 2004." The District of Columbia Building Industry Association has previously and consistently expressed its support of the Mayor's plan for financing the renovation of RFK Stadium and the building of a new ballpark. The plan imposes- a substantial new tax burden on larger District businesses in the form of a ballpark fee explicitly reserved to support stadium financing. We have further expressed the willingness of our membership to assume this additional tax burden as the essential pre-requisite for bringing baseball back to the District. We take that position because, in our judgment, Major League Baseball can contribute importantly to the long-term economic vitality of our city by serving as a catalyst for improved infrastructure, residential and retail development, creation of jobs, and contracting opportunities in the neighborhood - while enhancing our City's position as the magnetic core of our region. I emphasize long term economic vitality as a point worth careful consideration. Over the past few decades, the District has seen its relative economic position within the region shrink - until recently, that is. The development of MCI Center, the new Convention Center and other major developments have produced significant economic gains for the city and its residents. In our view, baseball can play an important role in continuing the economic resurgence of our City. We recognize that the Mayor's financing plan necessarily rests on a number of projections and estimates. As representatives of the real estate industry, we are well aware of the uncertainties inherent in any major development project. We understand that other uncertainties also apply to how the economics of Major League Baseball evolve over time. Nevertheless, we are prepared to join the local business community in support of the legislation now before you - that is, to provide $24 million annually in a ballpark fee as the lion's share of the financing for the issuance of 30-year bonds in the amount of $500 million. We feel it is necessary to mention, however, that we are concerned about a ballpark fee that is open-ended in amount and duration, serving as the sole source of funds to cover any and all eventualities in the development and maintenance of the baseball stadium. The proposed legislation, for example, commits the District (and I quote) "to directly pay or finance all or any of the costs of any future renovations, improvements, maintenance or up-grades" to the new ballpark after its completion. This provision could be read as authorizing considerable future costs without limitation. While future maintenance will undoubtedly be necessary, we urge the Council and the Administration to examine ways to manage any desirable improvements and upgrades in a manner that clearly defines and narrows the District's cost exposure. Clearly, cost containment will have to be a primary focus of the development team if the stadium is to be built within plan estimates. Recent press reports have cited proposals to modify the Mayor's plan with additional spending for what is being referred to as community enhancements - in response to critics and to gain wider public support. Our position on this is clear and, we feel, fair-minded. The business community is stepping forward to assume the majority of the cost of bringing baseball to our city; however, they are not agreeing to be taxed further for unrelated spending. It should be kept in mind that the business community's commitment to fund a new ballpark does not in any way diminish its ongoing and substantial support of District government programs and initiatives. As you know, it is the increase in business-related tax collections that have powered the growth of General Fund revenues over recent years. That, in turn, has allowed District government expenditures to increase substantially in support of those programs and initiatives. Finally, I would reiterate that the DC Building Industry Association supports the ballpark fee specified in the Mayor's legislation, which can bring baseball back to our city and importantly, serve its long term economic interests. It is also important that we make that plan work. In that effort, we stand ready to help. Thank you for allowing me to present some of the views of the District of Columbia Building Industry Association. I would now like to introduce my colleague - Merrick Malone. Merrick MaloneGood afternoon, Councilmember Evans, Brazil and other members of the Council. I am Merrick Malone, a partner in the firm of Metropolis Development Company. I am appearing hear today as vice president of the DC Building Industry Association. My colleague has noted our confident belief that Major League Baseball can be a tangible contributor to the long term economic vitality of our city. I would like to comment further on that point, as the economic benefits of stadium development have become a much debated issue. Some academic studies have questioned the degree and amount of benefits, suggesting that much of the recreational spending generated represents only a re-allocation of existing purchasing-power. These same questions were raised in academic studies concerning the potential benefit of building MCI Center. That so-called "substitution effect" does not apply to new spending captured by a stadium (or any economic activity) from outside its immediate jurisdiction. For example, the purchasing retail dollars that leak out of the District to suburban shopping malls may not represent an increase in regional sales - but they do represent a real and tangible economic gain to those suburban jurisdictions where our District residents are purchasing goods and services in the form of increased sales tax revenue. Conversely when suburbanites purchase tickets, associated merchandise, food and drink from attending a basketball game at MCI Center, it does inure to the benefit of the City in real, tangible revenue that can be used to spur and support ancillary economic benefits to the District. Given the District's position as a moderate-sized city, surrounded by far more populous, affluent suburbs, a contemporary baseball stadium will attract and capture new revenues in the form of fans from throughout the region. Academics and others can differ on the degree and amount of new revenue that will be generated. However, we know from our extraordinary and demonstrated success of MCI Center that new revenues will be captured from the suburbs. Those revenues, in turn, can support additional economic spin-off activity for the city. Critics claim that such spin-off will be limited for existing District businesses - because the stadium will create its own facilities for serving its fans. Again, critics and opponents of MCI Center made similar assertions. MCI Center was not plopped in the middle of restaurants like Zola, Legal Seafood, Fuddruckers, Hooters and destinations like the Hotel Monaco, the Spy Museum, Gallery Place and Terrell Place. THESE RETAIL, RESIDENTIAL AND COMMERCIAL PLACES DID NOT EXIST prior to the development of MCI Center. This is not academic theory - it is real! When a commuter decides to stay in town for dinner before a game, or in some cases overnight, the District generates real spin-off dollars. Further, the presence of Major League Baseball can only enhance the competitiveness of the District's convention and tourism industry. Just as MCI Center and the New Convention Center have sparked the remarkable revitalization of the city's East End, a new stadium can act as a further catalyst for establishing the District as a destination core for the entire region. MCI Center and the Convention Center had the same critics - but the Executive and the Council worked together to figure out how it could be done. The job ahead is to get the ballpark built = on time and on budget. The DC Building Industry Association is prepared to assist in any way it can. The District of Columbia is a Major League City and deserves a Major League Team. I thank you for giving us the opportunity to express DCBIA's membership's full support for bringing baseball back to the District. |
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