Build It and They Will Come

After the excitement of the press conference for DC United’s move to Maryland, there’s been quite a bit of negative feelings this week about United moving to PG Co. Even our own Jimmy Laroue seems to be skeptical, so let’s see if we can’t put a bit more positive spin on the move.

Unfortunately, this week got away from me and in 6 hours I’m leaving for 10 days, so I’ll make this short and sweet. I can’t just let it go as it would nag at me to leave so much negativity on the front page of the site. So here goes.

First of all, to address the majority of Jimmy’s concerns about the viability of the bill and its actual value towards DC United. A lot of those questions are answered by team President Kevin Payne himself in an online chat this week. Check out the full text at Behind the Badge I think he shows that a lot of these concerns are valid, but that the team is aware of them and that this deal is a good one for the team moving forward.

As for my take on the situation. It would seem to me DC United and PG County are both going to come out well on this whole situation. DC United will have the Maryland Stadium Authority finance the majority of the stadium with bonds to be repaid out of tax revenue, in exchange for overseeing the project and owning a 75% stake in the building until the bond debts are retired. While PG Co. gets to create gobs of economic activity and jobs in an area that is currently producing zero dollars of any kind and needs jobs desperately.

Seriously, that’s win-win for everyone which is why the press conference was so positive and had so many leading county figures saying it’s a no brainer to accept this deal based on the projections of the MSA’s study of the entire project and the deal they’ve put together which seems almost too good to be true.

So, that’s the rub for the skeptics out there. Is this deal just a pipe dream? You’ll have to decide for yourselves as I’m no economist for sure, but I think it’s important to note that MSA is truly an independent agent in this deal. They do work for the state in the sense that they are the experts on “stadium” type projects and their goal is to protect the state from boondoggles, but they have no vested interest in being optimistic and possibly putting the state at risk through reckless studies either. They also supervise the construction both to ensure the state gets what they bargained for, but also to protect the stadium users from trying to over-reach and do things not economically viable.

Both Victor McFarlane and PG County executive Jack Johnson pointed out that having the stadium Authority is an enormous resource to make sure things go right. Their projects typically come in under budget and acceptable to everyone concerned, as well as having excellent credit ratings and business connections so their bonds should sell no problem. Especially in an economy where investors are fleeing the stock market in droves.

McFarlane and county officials also both pointed out MSA was probably conservative in all their estimates to be on the safe side. The state’s bill based on MSA estimates states 1,200 jobs. Jack Johnson put that figure closer to 2400 in another quote that came out this week for example. Economic activity of 65-80 million is not unreasonable when you’re talking event day revenue alone approaching a cool million dollars (18,000 people spending 55 bucks on average buying tickets, food, beverages, merchandise, parking, etc at 60 events a year), without even factoring in ancillary things like hotel bookings and restaurant meals, job taxes, etc.

Plus, 60 events a year is doable for sure. 20 DC games, international games, women’s games, college games, concerts, county fairs, whatever. Some will be sell outs, some will be lightly attended, but an average of 18,000 per event should be pretty reliable. And even better, it will be a ton of people heading to PG Co. from neighboring jurisdictions to spend their money here. That’s new money flooding into an area that is now essentially empty of any economic activity.

Which brings up another concern. The dreaded loss of fans from NOVA. Sure, there will be some loss, but it likely will be picked up by gains from Maryland. Most estimates put NOVA fan base for DC United at 15-20% of their 20,000 total average fan base. Surely half those fans will still attend games in Maryland. Soccer fans are extremely loyal. So, even if United loses 10% from NOVA, it’s not hard to think they will pick up 2,000 fans from the new local area in PG, or Baltimore, Annapolis, etc.

As for the bill itself which is the first step in this process. Yes, it doesn’t take effect until June 1st. Big deal. All legislation in Maryland is subject to multiple readings and agonizing hand wringing. Makes no difference, they pass those bills toot suite when it means they can collect more moola from the general public. No one will start digging until the end of this year at the earliest anyway. Certainly this bill won’t hinder those shovels hitting dirt if it means putting off collecting revenue and taxes the state and county desperately wants, much less jobs and stimulus they desperately need.

As a Marylander, I wrote all my representatives about the stadium deal and the reply I got indicates that the deal only has to make it through the appropriations committee as large bond deals are subject to initial oversight, but then it’s in free and clear as individual bond deals are not under legislative control. Essentially, if I understand their answers correctly, the legislature has to allow MSA to issue the bonds, but once that permission is given, the legislature is out of the picture as it becomes a straight up business deal among MSA and various investors in those bonds.

Also, the bill has some interesting language that could be extremely beneficial to DC United if I’m reading it correctly and circumstances favor the team.

It states the stadium site is to be used primarily for Pro, collegiate, and amateur soccer games, concerts, community events, or other athletic or cultural events, so there doesn’t seem to be too many surprise events that might take precedence over soccer games. In fact, DC United is to have total control over the site usage except in the case of a lien against the original construction bonds. So, if United decides they need a tractor pull to make ends meet, at least they will be the ones making that call. Not anyone else.

Also, “Stadium” in context of bill is to include parking lots, practice facilities, access roads, infrastructure, and any other property, structure, etc. that is functionally related to the stadium itself. So it looks like there will be at least the possibility of parking lots for tailgating, and space for practice fields, etc.

It also appears the Stadium Authority will oversee the project; and own a 75 percent stake in the stadium itself for the duration of the bond term. But that DC United has authority over design, construction parameters, and equipment installed in said stadium. I take that to mean the stadium authority will be the supervisor of the project, but DC gets the final say on design and amenities as long as it makes fiscal sense. But, also that language about MSA’s stake only lasting until the bonds are retired is interesting and might mean United actually owns the building itself at some date in the future.

Another interesting aspect is that MSA is responsible for getting a lease on the land in order to build the stadium from the County OR from DC United’s owners if the owners actually buy the land outright before hand. Now, wouldn’t that be nice if McFarland and Chang actually buy up property in advance and lease it to MSA in order to get their own stadium built. For sure, it would be a sweetheart deal for both parties, United would have no incentive to gouge MSA, but it would certainly cut out any potential third party difficulties AND maximize the ownership group’s money flow.

However, either way, DC United is to pay sufficient rent for the stadium to contribute to building costs and infrastructure operating costs. This will be interesting to see how it plays out. DC pays rent at RFK, and only collected ticket profits, so that deal was staggeringly bad. However, Payne in the chat noted that even with rent at the PG CO. stadium, DC United will control all the operating costs and collect all the operating profits, so rent or leasing fees would be negligible. It might even be paid by tax revenue if the stadium meets expectations.

Also, opening a stadium by 2012 has been scoffed at. But, everyone concerned has said, they can be digging by the end of this year. There’s few legislative hurdles, there’s few opponents of the deal by people in power. If that’s truly the case, two years is easily enough time to build a stadium, especially at a time in America when construction costs are plummeting and most construction companies are scrambling for projects to do in order to stay in business. Two years ago, when everybody and their mother was building something, no. But now that 60 percent of construction workers in Maryland are laid off? I’ll bet there’s some companies that would love to hire back some workers and get the bulldozers rolling.

Finally, let’s allay the concerns about a name change. DC United will remain DC United. They may end up playing on Volkswagen field at Prince George’s County stadium, but the a name change for the team is not in the plans as team president Kevin Payne made clear in that chat this week.

“We have no intention of changing the most recognized name in American soccer. We have always thought of ourselves as a regional team — the fact we have season ticket holders from so many states proves that point! We will be very much a part of the community in Prince George’s County, but we will be D.C. United.” Payne emphatically pointed out.

Alright, enough for now. I’m getting on a plane in five hours now, and this is rambling on too long anyway. Bottom line for me is that DC United’s owners and organizers think this move is a good deal, and the power brokers in Maryland want this to happen. Fenty and DC Council apparently didn’t want the team, Maryland does. That’s enough for me. Let’s get it built and see who was smarter in the end.