The District's chief financial officer has certified two proposals that would provide private financing for a new baseball stadium along the Anacostia waterfront and reduce the public costs for the project, government sources said yesterday.
According to a report prepared by Natwar M. Gandhi, the city could expect to lower its financial commitment using a proposal by Deutsche Bank, which has offered as much as $493 million in exchange for control of some revenue sources related to the ballpark, or one from the Cleveland-based Gates Group, which offered up to $175 million in exchange for revenue generated by a special parking district.
The financing plans that did not receive certification failed to meet the benchmarks set by the D.C. Council's baseball legislation, which stipulates that the proposals must reduce the amount of bonds the city must issue and decrease the tax burden on city businesses. The Deutsche Bank and Gates Group proposals satisfy the requirements.
Five of the six proposals that were not certified sought rights to land adjacent to the stadium site near the Navy Yard and South Capitol Street in Southeast so developers could build an entertainment district with retail shops and restaurants. For the most part, those plans would increase the amount of the bonds needed for the project and the city's obligation to pay off those bonds.
Gandhi's report was obtained by The Washington Post. He plans to make it public today after meeting with the D.C. Council, government sources said.
The council and Mayor Anthony A. Williams (D) argued bitterly for months last fall over the amount of public investment the city would make in the stadium project. It is estimated to cost $535 million, including infrastructure and land acquisition.
Under terms of the legislation approved by the council in December, at least $140 million -- roughly half of the construction cost of the ballpark -- must come from private money. Both of the certified proposals meet that requirement, and the council could vote to accept either of them or seek to combine aspects of the two.
Council Chairman Linda W. Cropp (D), who led the push to seek private financing, was briefed by Gandhi yesterday.
"I do not want to comment too much because my colleagues have not seen it," Cropp said of Gandhi's report. "But when you look at the whole package, we will have something more beneficial to the District as a whole. Anything that can relieve the District, and the business community that had to foot the bill, is obviously something that's better."
Under the terms of the financing plan offered by Williams last fall, the city's largest businesses would pay a gross receipts tax to help pay off bonds. The total amount to be raised from the businesses is estimated at $14 million a year for more than 20 years.
The city plans to raise an additional $12 million annually from a utility tax on federal buildings and businesses, plus up to $18 million a year from rent payments by the Washington Nationals and a tax on ballpark concessions.
Gandhi's study found that the Deutsche Bank plan could eliminate the business tax after three years. The international banking giant would provide $493 million up front in exchange for control of many of the revenue streams related to the stadium . The bank would assume the risk that the concessions tax might not make as much money as projected, but the bank can more easily leverage the concessions revenue on the bond market than the District can because such money, based on consumer spending, is not guaranteed.
The Gates Group's plan could reduce the gross receipts tax collected from businesses to $6.9 million a year over a 24-year period by giving the District an up-front payment of $100 million, an amount that Gandhi determined was most feasible. The plan would reduce the amount of bonds the city would seek, and the District would pay the Gates Group about $10.6 million a year from the parking revenue.
"This should satisfy enough people so we can move on," said one city government official with knowledge of the report who spoke on condition of anonymity because Gandhi has not made it public.
The financing proposals that Gandhi did not certify included one from developer Herbert S. Miller, who sought to construct an entertainment district around the stadium. His plan would have required the city to issue $845 million in bonds, increasing the business gross receipts tax to $35 million annually, the report found. A proposal by a Virginia group would have given it control of a 52-acre area, including the ballpark site, that the District would own.
A proposal offered by BW Realty Advisors, a financing company, sought to have private investors build the stadium and write off depreciation on their taxes. But that plan would have increased the bonds supported by District revenue to $607 million and was deemed too risky because the Internal Revenue Service has looked skeptically at such tax write-off arrangements.
