Stadium Fever

In February 2000, when Miami-Dade’s Performing Arts Center was a field of dreams in architect Cesar Pelli’s mind, he told county commissioners it could be built for $186 million. The final tabulation was $446 million. Scholars who study overruns term this kind of low-ball estimating a strategic misrepresentation. In baseball, one form this phenomenon takes is the curveball. In other words, Pelli and the folks who managed the PAC’s construction threw the public a lot of curveballs.

Miami-Dade County Manager George Burgess and his statisticians have calculated that the proposed 37,000-seat, retractable-roof ballpark slated to debut in Little Havana in 2012 will cost approximately $644 million. (That’s $515 million for the stadium, $94 million for parking garages, and about $35 million for infrastructure improvements like new water and sewer lines.) Florida Marlins, L.P., the private corporation that runs the baseball team, has signed on for about $155 million, or 24 percent, of it.

Only the manager’s most delirious fans could believe the project will stay inside that budget. Reasonable people, including him, know it’s just a ballpark figure. A baseline, if you will.

“The County’s exposure to overruns and other unexpected costs—while impossible to eliminate completely—has been dramatically reduced,” Burgess wrote to county commissioners in a March 23 memo that accompanied the stadium plan. They approved it the next day, 9-4. (The Miami City Commission also voted 3-2 in favor.)

Put more bluntly, the stadium project will cost more than $644 million. But how much more? Baseball devotees are always inventing obscure but somehow telling statistics, like SLG (Slugging Percentage), QS (Quality Starts), or CS (Caught Stealing). Here’s a new one that stadium finance enthusiasts may enjoy: GOF (Gross Overrun Factor).

The PAC’s GOF was 2.3978—meaning it cost 2.3978 times more than Pelli’s 2000 estimate. If that level of play were repeated, the stadium’s real cost would be approximately $1.5 billion.

Cost overrun scholars have identified another cause of budget lowballing besides strategic misrepresentation. They call it optimism bias and it involves the human tendency of public works project managers to highball their ability to prevent screw-ups.

Indeed, there are more optimistic GOF performances to emulate. Despite a city council-imposed spending cap of $535 million, the budget for Nationals Park in Washington, D.C., which opened last year, grew from $471 million to $611 million—a GOF of 1.2972. If the Marlins’ stadium project fares that well, it will cost about $835 million—a $191 million overrun.

Those with an even bigger optimism bias will like the St. Louis Cardinals’ Busch Stadium, which was completed in 2006. Its budget surged only $21 million, from $344 million to $365 million. With a GOF like that (1.0610), the tally for Miami’s new ballpark would be $683 million, a mere $39 million worth of pessimism.

Miami-Dade County’s agreement with Florida Marlins, L.P. obligates the corporation to pay for all “non-governmentally caused overruns.” It requires the team to hold a $20 million line of credit specifically for that purpose. Taxpayers guilty of pessimism bias have to wonder who would pay for the next $20 million.

“While I cannot assure that there will never be an overrun, or a contractor will never accuse the County or City of having caused them a delay, we have significantly minimized the risk to a level that I feel is manageable,” Burgess wrote in his March 23 memo.

Of course, concerned citizens were already yelling “Foul!” over the decision by city and county leaders to pump any antipoverty and community development tax dollars into a professional ballpark. When Marlins executives or county administrators deliver the first pitch for stadium overrun money, even citizens who never took an interest in baseball may feel like picking up a bat.