I have often criticized government subsidization of sports stadium construction, including the biggest such boondoggle: the record expenditure of over a billion dollars in government money on the new Yankee Stadium (see here for my most recent post on the subject and links to earlier ones). As I pointed out in my very first post on this issue, such subsidies almost always fail to produce economic benefits that justify their exorbitant costs.
New York, however, is not the only city that has indulged in this particularly egregious form of corporate welfare. Washington, DC spent a great deal of public money to build a stadium for the Nationals. Now, however, the city is extending the life of a tax originally intended to pay for the stadium so that they can divert the funds to other projects [HT: Taxprof Blog]:
A citywide business tax the D.C. Council passed to help to help pay for the $611 million Washington Nationals ballpark has become such a cash cow that the city is now using it to help close its nine-figure budget gap.
D.C. passed a tax on businesses’ gross receipts to help finance the construction of the stadium. From fiscal 2005 until the end of this fiscal year, more than $129 million will have been collected, finance office records show. Overall, the city will have netted more than $135 million in all taxes and rent above what the city is paying back in bond payments from fiscal 2005 to 2010.
But instead of using the surplus funds to pay the stadium off, Mayor Adrian Fenty and the city council are using the money to plug monstrous holes in the District’s budget.
“They took all the money,” Councilman Jack Evans, D-Ward 2, said of his colleagues. “They’re spending every dime.”
Many business leaders are crying foul.
“The deal that we had ... was that any excess monies would be used to pay down the bond,” said D.C. Chamber of Commerce Chief Executive Barbara Lang. “We would like to see those bonds paid off earlier to relieve us of that tax. I’m very concerned that it will become part of the city’s operating budget.”
Evans, who helped engineer the ballpark deal, said the tax “was the biggest mistake that this government has made.”
Imagine that! A “temporary” government program intended to serve a narrow purpose has become permanent because it has turned into a cash cow for politicians. Everyone knows that when government power expands during a crisis, that expansion is always limited to measures strictly necessary to address the problem at hand and is terminated as soon as the crisis is over! Unfortunately, past and present experience shows that that is very far from being the case.
The DC businesspeople who apparently expected the city government to stick to the “deal” they had worked out should not have been so naive. No city government is going to give up a massive revenue source merely because the initial justification for creating it is no longer valid. To borrow a line from Instapundit, this may be a case of “rubes self-identifying.”