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Private Stadium Financing Rebuffed

D.C. Council Members Question Feasibility

By David Nakamura
Washington Post Staff Writer
Tuesday, November 16, 2004; Page B01

D.C. Council members yesterday refused to endorse a plan to use private money to build a baseball stadium in Southeast Washington because it would require the city to reopen negotiations with Major League Baseball.

Representatives from BW Realty, which has proposed raising as much as $400 million in private funding, and nine of the council's 13 members gathered in an open meeting for more than two hours. But the meeting ended with the council expressing doubts about the plan's feasibility and suggesting that significant changes would be required.


Council member Jack Evans, left, shown at a news conference with Mayor Anthony Williams and Greater Washington Board of Trade President Robert Peck, right, says changing the terms of the deal with baseball is a "non-starter." (Robert A. Reeder -- The Washington Post)


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One of the major concerns, council members said, is that the plan would require the owners of the new Washington team to pay for cost overruns. Under Mayor Anthony A. Williams's plan, which would use mostly public money to build the stadium, the city would cover those expenses if necessary.

Council member Jack Evans (D-Ward 2), a leading proponent of the mayor's plan, said changing the terms of the deal is a "non-starter" because Major League Baseball would not go along.

Yesterday's meeting was arranged by Chairman Linda W. Cropp (D), who has called the mayor's plan too costly and too reliant on public money. Afterward, she said she was not ready to back BW Realty's proposal but added that she was pleased that council members have begun to hear new ideas.

"I'm not pushing this one," Cropp said of BW Realty's plan. "I'm pushing a concept: that we look at alternative ways of financing a stadium."

Cropp said she spoke yesterday morning to the vice presidents of two D.C.-based banks who told her that they had a coalition of banks interested in discussing other financing ideas. Asked if a better financing plan can be found, Cropp replied: "I don't know. But we ought to give it a try."

Cropp has scheduled the council's first vote on the mayor's plan for Nov. 23. But she is trying to reschedule because Harold Brazil (D-At Large) cannot attend. She said yesterday that she has not set a new date.

Williams (D) has proposed using a combination of a gross receipts tax on large businesses, a concessions tax and an annual rent payment from the team to build the stadium. Seven of the council's 13 members have said they will vote to approve his plan.

Under the pact with Major League Baseball, Williams estimated the stadium project's cost at $440 million. But more recently, the cost has been estimated at $530 million by the city's chief financial officer, and $586 million by the D.C. auditor, after infrastructure is included. A Washington Post analysis found that the cost could rise to $614 million.

The escalating cost estimates caused Cropp to rethink her initial support for the mayor's plan. She first proposed building adjacent to Robert F. Kennedy Memorial Stadium, which would have saved the city about 20 percent of the mayor's projected $440 million cost. When that idea failed to garner much support, Cropp blocked last week's council vote on the matter, saying she wanted to explore private financing options.

She has said more recently that she probably will support the mayor's plan if an amendment is added that would give the city until next summer to change the financing package by adding private money.

Yesterday, Richard A. Gross and Michael Sununu, co-managers of BW Realty, laid out details of their plan, the outlines of which were announced last week.

They said they would seek private investors to raise about $400 million, through equity and private bonds. The city would pay about $125 million to buy and clear 21 acres of land at the proposed site near the Navy Yard and South Capitol Street, as well as renovate RFK, where the team would play for the first three years.

Under the plan, the city would lease the land to the investors' group, but no rent would be collected for 25 years. After that, the development group would have the choice of paying the accrued rent or giving the stadium to the city. The group would build the ballpark by 2008 and pay back the bonds through a combination of the team's annual rent payment and revenue from parking fees and the concessions and ticket taxes already in the mayor's plan.

BW Realty, which has an office in Washington, proposes building a 5,000-space parking garage, instead of the 1,100-space lot in Williams's plan, and raising about $5 million by taxing players' income.

Investors would reap a profit by writing off the stadium's depreciation on their income taxes, Gross said. Representatives from LCOR Inc., a developer, and Lehman Brothers, a financier, were on hand to say that they backed the project.

But council members challenged the idea that players who lived in other states could be forced to pay the players' tax. And they expressed doubts that Major League Baseball would accept the new private portion of BW Realty's financing structure because it does not include the gross receipts tax. Without that consistent revenue stream produced by the city's businesses, the plan would rely on the ownership group to cover any revenue shortfalls to pay for the stadium, Evans said.

"Yes, you would have to go back" to Major League Baseball officials, Gross acknowledged. "If you think this is the best deal you can get, then let's quit and vote now and save time. But I am not averse to going to baseball and trying to do it differently."


© 2004 The Washington Post Company