By David Nakamura
Washington Post Staff Writer
Saturday, May 14, 2005
A managing director of Deutsche Bank told D.C. Council members yesterday that his company is willing to assume financial risk that Wall Street would not to help the city build a baseball stadium.
But several members questioned whether the proposal -- certified by the city's chief financial officer, Natwar M. Gandhi, and recommended to the council by Mayor Anthony A. Williams (D) -- would be beneficial to the District.
For the first time in public, a Deutsche representative, Michael Gangemi, laid out details of the international banking giant's stadium financing proposal, worth $246 million toward a stadium project along the Anacostia waterfront in Southeast.
"The Deutsche Bank proposal achieves what the city set out to do," Gangemi said during an afternoon hearing before the council's Committee on Finance and Revenue. "It allows the city to raise the funds necessary in the most economical and efficient and speedy fashion."
But some council members said they do not believe that the Deutsche Bank plan would save the city money or financial risk.
"There's no such thing as free money," council member Marion Barry (D-Ward 8) told Gangemi. Earlier, Barry said he would not support any financing plan unless Williams agrees to build the ballpark adjacent to Robert F. Kennedy Memorial Stadium.
"What we have before us is not private financing," Barry said. "What can we do? . . . I say to all of us: 'Let's change our minds. Let's go to RFK.' "
The hearing was the first of two in the council's search for private financing for a stadium. The general public will be invited to testify Monday.
In December, a sharply divided council approved public financing of a $535 million stadium with the provision that the mayor find $140 million in private money for the project.
If the council does not authorize a private financing plan, the stadium will be financed through a gross receipts tax on businesses, a utility tax on businesses and federal offices, an annual rent payment by the Washington Nationals and a concessions tax at the stadium.
Eight companies submitted financing proposals, but Gandhi certified just two. In March, he recommended that the city fund the stadium with $313 million in publicly financed bonds and the $246 million payment from Deutsche Bank. Depending on interest rates, the city might be able to further reduce its public borrowing, city officials said this week.
Gandhi said yesterday that the plan would reduce the debt for a city already burdened with the highest per capita debt in the nation ($8,200 per person). After 10 years, the bank's plan could reduce a gross receipts tax on business from $14 million to $8 million a year, he added.
In return for the payment, the District would give Deutsche Bank revenue from the annual rent payment and the concessions tax.
Gangemi said the city would benefit from the bank's involvement because it is difficult to sell unstable revenue sources, such as the concessions tax, on Wall Street. If the Nationals perform poorly and attendance plummets, concessions sales taxes will fall accordingly, he said, but Deutsche Bank is willing to give the city the $246 million upfront payment.
Some council members, however, pointed out that Deutsche Bank's proposal requires the city to provide a guarantee of $18 million in revenue to the bank each year. If the concessions tax and rent payment do not reach that mark, the city would possibly have to raise the business tax or a utility tax.
"Why should we do this?" committee Chairman Jack Evans (D-Ward 2) asked Gangemi. "What is the benefit to the District? What is the risk you are taking?"
Gangemi reiterated the difficulty the city would have selling the concessions tax on the bond market. He added that if the city's economy deteriorated and businesses could not pay the gross receipts tax, then Deutsche Bank would suffer a loss because the plan forbids the bank to tap the city's general fund.
Earlier in the hearing, council member David A. Catania (I-At Large) blasted a Gandhi report that said the cost of buying land, building infrastructure and conducting environmental cleanup at the site would be just under the council's spending cap. Gandhi responded by saying that he hired the best consultants in the business and conducted the study independently of the mayor's office.
After Deutsche Bank officials testified, five other groups that proposed private financing plans began making their presentation, including several seeking development rights around the stadium. The council could choose to support one of those plans, but without Gandhi's support it might be difficult politically, some council members said.