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Extent of Savings On Deal Unclear

Changes Limit District's Risk on Stadium

By Debbi Wilgoren and Serge F. Kovaleski
Washington Post Staff Writers
Wednesday, December 22, 2004; Page B01

The baseball deal approved by the D.C. Council yesterday significantly limits the penalties the District will face if construction of a stadium takes longer than expected. And it encourages adoption of financing options that could pump $100 million or more into the stadium project from private-sector sources.

But the only guaranteed savings for the city, compared to what was submitted to the council by Mayor Anthony A. Williams more than two months ago, is an agreement to split the cost of insurance premiums -- estimated to be at least $4 million -- with the owner of the Washington Nationals, according to officials involved in the negotiating the deal.

Council member Harold Brazil receives a hug from Kathy Chamberlain, an ANC member, after the deal's passage. (Preston Keres -- The Washington Post)

_____Baseball Answers_____

Who is paying for the new baseball stadium under the legislation approved yesterday by the D.C. Council?

Even after almost three months of public debate, those details have not been resolved. It's clear that much of the funding will come from a gross receipts tax on the largest D.C. businesses, a utilities tax on D.C. businesses and federal offices, a tax on tickets and concessions, and rent payments from the team's owner. City officials also are looking at private financing options, including a private company's proposal to charge for curbside parking near the stadium. If any of the private financing plans turn out to be viable, the city would use that revenue to reduce the gross receipts tax on businesses.

Why were Major League Baseball officials pleased with this outcome, after they objected so strongly to the legislation approved by the council a week ago?

From baseball's perspective, the key difference is that the council dropped language saying that the stadium legislation would expire if private financing could not be found. Baseball officials wanted a guarantee that the city would build the stadium even if no private money was available.

A new council takes office Jan. 1, with three members who voted for the stadium bill being replaced by people who oppose the agreement. What is to prevent the new council from changing the legislation, which passed on a vote of 7 to 6?

Because of the parliamentary procedures followed at yesterday's meeting, the new council cannot reconsider yesterday's action. Members could try to block individual contracts for stadium construction work, but the city would eventually face penalties for project delays.

What about Baltimore Orioles owner Peter G. Angelos? Could he take legal action to stop Major League Baseball from moving the former Montreal Expos to Washington?

Baseball officials are trying to reach a deal with Angelos that would compensate him for having to share the Baltimore-Washington market with another team. The deal would probably give Angelos a large percentage of revenue from a regional sports network. Angelos could decide to file a lawsuit if those negotiations break down, but independent legal experts say it's unlikely a court would rule in his favor.

City officials secured the changes in last-minute talks with Major League Baseball that stretched late into the night Monday, reviving the deal after D.C. Council Chairman Linda W. Cropp amended the package to require private financing for half the stadium cost -- an amendment that baseball officials had angrily called a deal-breaker.

Yesterday, Cropp's office released a chart claiming that the city could save at least $193.5 million because of the final changes to the legislation. But other officials said that figure was based on estimates that seemed vague or highly speculative. They added that it was hard to quantify the potential cost savings without knowing the eventual date of the stadium's completion or whether private financing will come through.

Critics of the deal, which passed the council on a vote of 7 to 6, applauded Cropp for wresting some concessions. However, they said they were disappointed that neither Major League Baseball nor the future team owners would have to pay a significant portion of the project costs.

"These are relatively minor savings in a bill that could cost upward of $600 million," said Ed Lazere, director of the D.C. Fiscal Policy Institute and a leading opponent of a publicly financed stadium. "The new concessions from Major League Baseball were not enough to persuade the six reluctant members of the council that this was a good deal for the District."

Under the new legislation, Major League Baseball agreed to pay half the cost of insuring the stadium project against most construction delays and problems arising from weather-related or other natural events. Baseball officials also will split the cost of hiring a consultant who will advise the District on how to limit cost overruns. But the city will be responsible if construction costs soar because the price of materials goes up or because labor costs increase in order to get the project done on time.

Baseball also agreed to sharply limit the amount of damages it can demand from the city if a new stadium on the Anacostia waterfront is not completed by 2008. Previous cost estimates for the project, which ranged from $440 million to $584 million, did not include potential damages.

"In the end, there is less of a financial burden on the District," said Robert A. Bade, a professor of economics at Lake Forest (Ill.) College who has studied stadium financing. "But I would hasten to add that when we consider city deals with major league sports teams, a better deal does not make it a good deal."

Although private financing could reduce the amount the District borrows to pay for the stadium, city officials and outside experts noted that most of the proposals offered so far from the private sector require the District to give up something of value in return -- control of street parking, for example, or the ability to allow developers to increase the size of apartment buildings beyond zoning limits in exchange for including affordable housing in their projects.

"There is no free money here," said City Administrator Robert C. Bobb. "These are not grants. These are all business deals."

The final agreement began to come together Sunday, when Major League Baseball officials told aides to Williams that they were willing to split the cost of insurance premiums. They also agreed that if the new stadium was not completed in time for the 2008 season, their only demand would be that the team not have to pay rent to play at Robert F. Kennedy Memorial Stadium that year.

On Monday morning, D.C. Council member Jack Evans (D-Ward 2), on his way back from a skiing weekend in Aspen, Colo., arranged a secret phone call between Cropp and Major League Baseball President Robert A. DuPuy -- the second such call in three days. The council chairman assured DuPuy that she was pleased with the progress that had been made. The call ended with no commitment from either side.

Cropp then met with Bobb and Mark Tuohey, chairman of the D.C. Sports and Entertainment Commission, and briefly with Williams, who earlier that morning had made public appeals for the stadium deal on radio and television stations. She agreed not to let the stadium agreement expire if private financing options did not materialize.

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