Gray officials propose forgoing taxes for D.C. United stadium in exchange for revenue cut


District Mayor Vincent Gray’s deal for a new Major League Soccer stadium requires approval by the D.C. Council. AFP PHOTO/Paul J. RichardsPAUL J. RICHARDS/AFP/Getty Images (PAUL J. RICHARDS/AFP/Getty Images)

A planned new D.C. United stadium could receive extensive breaks on sales and property taxes over the next three decades, and in return the team could share some of its revenue with the city, under a deal presented to District lawmakers.

City Administrator Allen Y. Lew began meeting with members of the D.C. Council late last week to brief them on the status of deals he is arranging among the city, the team and landowners on Buzzard Point, in Southwest, where Mayor Vincent C. Gray (D) envisions a 20,000-seat stadium for the soccer team.

Three members of the council and a Gray administration official, who spoke on the condition of anonymity because the briefings were intended to be private and negotiations are ongoing, outlined the preliminary deal.

Two members were told that D.C. United would owe no sales tax on any commercial activity on the stadium footprint — including tickets, concessions and even such businesses as restaurants that might locate adjacent to the stadium — throughout the team’s 30-year lease.

Property taxes would also be abated on a rolling schedule, according to two council members. For the first five years of the 30-year lease, the team would pay no property tax. For each subsequent five-year period, the team would pay an additional 25 percent of the tax normally due, with 100 percent owed for the last 10 years of the lease.

A Gray administration official confirmed that the mayor’s stadium proposal includes a sales tax break and phased-in property tax break but said that in exchange, the city would be given 50 percent of the team’s revenue beyond a certain threshold, which is still being negotiated.

A council member said Monday that that provision remains in flux, with some pressing Lew to negotiate more guaranteed tax dollars for the city rather than engage in a revenue-sharing agreement whose benefits are more speculative and could be evaded through team accounting maneuvers.

Lew is attempting to assemble enough land for the team to open not only a Major League Soccer stadium, but also restaurants, retail and housing or a hotel between Half and First streets SW, south of Potomac Avenue.

In July, Gray proposed a deal in which the District would provide land, infrastructure and tax incentives to the team valued at around $150 million, about half the cost of the stadium. Lew said at the time that the deal could include a sales and use tax abatement worth as much as $2.6 million in its first year.

The scope of the tax abatements now under discussion stretches throughout the 30-year stadium lease and have raised questions among council members about the returns the city can expect on its $150 million investment.

The stadium proposal requires approval from the council because it calls for the District to trade away at least one property owned by the city — the Frank D. Reeves Center on U Street NW — and to give the team tax breaks. Lew said he would send legislation to the council by November, then pushed the deadline to Christmas.

Council member Mary M. Cheh (D-Ward 3) said that Lew told her that negotiations with Buzzard Point landowners were ongoing.

Although deals with Akridge, a Washington developer, and Pepco appeared to be near consummation, she said, talks with businessman Mark D. Ein and the owners of an adjacent salvage yard were not so far along.

None of the council members said Lew mentioned any city properties besides the Reeves Center that stood to be traded away.

Cheh said she was led to believe that the proceeds from the Reeves swap would be sufficient to fund the deal.

Lew and Akridge have not yet made public their appraisals of the Reeves Center or the Buzzard Point sites.

In response to a request for comment, Lew spokesman Tony Robinson issued this statement:

“While the city administrator is sharing aspects of the soccer stadium transaction with council members, he is indeed still in the midst of final negotiations on key aspects of the deal with all parties and will not make any public comment until the definitive legislative package is complete and submitted to the D.C. City Council.”

Jonathan O'Connell has covered land use and development in the Washington area for more than five years.
Mike DeBonis covers local politics and government for The Washington Post. He also writes a blog and a political analysis column that runs on Fridays.
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