Friday, November 12, 2004

Private Financing Of D.C. Ballpark Just a Tax Shelter

By Steven Pearlstein
Friday, November 12, 2004; Page E01

Wouldn't it be delicious if Washington, D.C. -- the mecca of tax lobbying -- were to mark the renaissance of Major League Baseball here by building a new stadium that was nothing more than a tax scam.

But that is exactly what would happen if the District were to take up the "private" financing proposal for the $500 million stadium project that so intrigued D.C. Council Chairman Linda W. Cropp. About the only good thing you can say for it is that it would finally resolve the question of what to call the new team. What else could you call them but the Washington Loopholes?

In truth, there is nothing private about the financing scheme that has been proposed here and in other cities.
The District would still have to impose some sort of gross receipts tax to cover the $150 million it will take to fix up RFK Stadium as a temporary home for the new team, assemble the land for the new stadium and pay for the infrastructure improvements around it.

And the District would still be expected to impose a special sales tax on tickets, parking and everything sold at the new stadium. However, under the "private" financing scheme, this money would go to the partnership to cover interest payments on the money borrowed to build the stadium at rates 3 percentage points above what the city would pay.

But here's the really beautiful part of this deal: The rent the partnership would pay the city for the land on which the stadium sits would be recorded on its books as an expense even though no cash would change hands. Instead, payments could be deferred for 25 years until the expiration of the lease, at which point the partnership would either have to cough up the rent in its entirety, with interest, or turn the stadium over to the city for "free," which is what certainly would happen.

Read the entire article here on the Washington Post website.