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District Skeptical On Financing Deals

City to Look for Savings on Stadium

By David Nakamura
Washington Post Staff Writer
Wednesday, March 16, 2005; Page B01

D.C. Council members said yesterday that they are not convinced that two private financing plans for a baseball stadium would save the city money and instructed the chief financial officer to compare the proposals to the District's public financing arrangement.

After meeting with Natwar M. Gandhi for more than two hours, the council asked him to determine within two weeks which of three plans offers the least expensive way to finance the $535 million stadium project along the Anacostia waterfront in Southeast.

The plans Gandhi will study are a public arrangement adopted by the council in December and private proposals from Deutsche Bank and the Cleveland-based Gates Group. Gandhi certified the private plans Monday, rejecting six others that were deemed more expensive and risky.

"The question is, what is the best deal?" said D.C. Council member Jim Graham (D-Ward 1), who voted against the stadium package in December. "What we want from the CFO is, what is the most economical thing to do? This ought not be a shell game."

The council narrowly approved a stadium financing package with the provision that the city seek private investment of at least $140 million. The legislation does not require that the council adopt one of the plans.

In order to be certified, a private financing plan had to show that it would reduce the city's need to issue bonds and reduce the city's commitment to paying off the debt.

But Gandhi did not evaluate whether the two plans he certified would save the city money over the long term compared with the public financing plan already in place.

Over the next two weeks, City Administrator Robert C. Bobb will decide whether to recommend one of the proposals to Mayor Anthony A. Williams (D). Gandhi said he expects to work with Bobb's office to try to achieve consensus.

Gandhi also is close to releasing an analysis of the cost of building infrastructure for a stadium and acquiring 21 acres for the project. If that cost is more than $165 million, the legislation requires the city to seek another site for the ballpark.

Under the public financing arrangement, the District would rely on a gross receipts tax on large businesses, a utilities tax on federal buildings and businesses, a tax on ballpark concessions and an annual rent payment from the Washington Nationals.

Deutsche Bank has proposed giving the city up to $493 million for control of several revenue streams related to the stadium. The Gates Group has proposed giving the city up to $175 million in return for annual revenue from a curbside parking district on streets near the stadium.

Council members said they are concerned that both plans amount to the private companies' giving the city money upfront in exchange for greater revenue in the long term. In both cases, the city would be better served funding the stadium itself and keeping control of those revenue streams, members said.

For example, under the Gates Group's plan, the city could get a $100 million upfront payment in exchange for $10.6 million per year for 30 years. That amounts to paying back the Gates Group at an interest rate of more than 7 percent. Council members said the city could get a far lower rate by going to Wall Street and issuing bonds, which is what administration officials recommended originally.

"It's always cheaper for the city to borrow money on its own," said council member Sharon Ambrose (D-Ward 6), who also objected to creating a parking district because it could cause parking problems for residents near the stadium.

"I was hoping someone would step up and find a way to support this stadium with real private dollars," said council member Vincent C. Gray (D-Ward 7), who has objected to using public money for the project. "But these plans do nothing to satisfy me."

Gandhi said the benefits of the private plans are that Deutsche Bank and the Gates Group are willing to take significant risk away from the city.

Under Deutsche Bank's plan, the international banking giant would give the city the upfront payment for control of several revenue streams, including the revenue generated by the concessions tax. That revenue is not expected to be stable because it is based on consumer spending; if the Nationals are not a good team and fewer fans attend games than expected, the team will likely earn less money from concessions.

The instability of the revenue means the city would have trouble selling bonds on Wall Street, Gandhi said. But Deutsche Bank is willing to give the city money upfront and take the risk that the revenue will meet or exceed projections. The bank would use the revenue to issue loans to its customers.

Creating a parking district also would generate unstable revenue that would be hard for the city to leverage on the bond market, Gandhi said, but the Gates Group is willing to give the District a fee upfront and assume the risk.

R. Graham White, the Gates Group's chief investment officer, said in a written statement that his company's approach "can be complementary to any and all public and private financing options in order to assist the city and its taxpayers in making this world-class ballpark facility a reality."

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