D.C. to Seek More Money From Baseball Officials
Tuesday, November 15, 2005
District officials are prepared to ask Major League Baseball for a $24 million letter of credit and a $20 million payment for parking costs when high-stakes negotiations over the terms of a new stadium lease resume today, sources with knowledge of the talks said.
The city is seeking the $24 million in credit to guarantee interest payments on stadium construction bonds in case the Washington Nationals fail to meet their rent obligations because of a catastrophe, player strike or other event. The $20 million would help pay for 1,200 parking spaces at the stadium.
This would mark the first time the District has sought more money from the league since the two sides struck the stadium deal in September 2004. Over the past year, city officials have said repeatedly that asking the league for more money for the $535 million stadium project is a non-starter because league officials would consider it a violation of the agreement.
But city officials said yesterday that they believe the $24 million guarantee is a standard request to help finance the bonds. And they said the extra $20 million for parking is necessary because baseball officials have made special parking requests, asking that 400 spots for VIP ticket holders be built adjacent to the ballpark or below ground.
"The city's position is the stadium will cost $535 million, and anything beyond that is contributed by the owner and/or baseball, or it just doesn't get done," D.C. Council member Jack Evans (D-Ward 2) said.
Baseball officials declined to comment yesterday. The city had not yet made its request for the extra money.
Mayor Anthony A. Williams (D), three council members, officials from the D.C. Sports and Entertainment Commission and city financial officials met for nearly two hours yesterday to discuss the stadium costs and their strategy for the negotiations.
Although city officials believe an agreement can be reached before Thanksgiving, it's too early to know what will happen if the league does not meet the city's requests.
The negotiations over the lease agreement, which covers the terms by which the Nationals will rent the stadium from the city, are critical because the city needs the deal to be completed to go to the Wall Street bond market. And baseball officials have said they will not name an owner for the Nationals -- owned collectively by the league's 29 other owners -- until the lease is in place.
Chicago White Sox owner Jerry Reinsdorf, chief negotiator for the league, was expected to arrive in Washington last night, baseball sources said. Meanwhile, the eight groups bidding to buy the Nationals continued to lobby, with Indianapolis media mogul Jeffrey Smulyan expected to be in the District today to speak with his investors and meet with the media and politicians.
This month, city leaders said costs for the stadium were rising, in part because of inflated costs of construction materials. Sports commission Chief Executive Allen Y. Lew has said he has made as many cuts as he can to keep the project on budget.
D.C. Chief Financial Officer Natwar M. Gandhi said Wall Street bond raters have told him they will not grant the project investment-grade ratings unless there is a guarantee that rent will be paid on the stadium even if it is not used because of an unforeseen event. The rent, which will average about $6 million a year over the 30-year lease, is one revenue stream that will cover debt service on the bonds.
Gandhi has asked the league to provide a letter of credit from a bank that stipulates $24 million is available to cover the bond debt in the event of a players' strike or a terrorist attack.
That money is equal to four years' rent, the standard guarantee bond raters need to feel comfortable enough to give investment-grade ratings, Gandhi said. "They don't have to have cash locked in," he said. "What we asked for is a letter of credit."
However, baseball officials have called the request a violation of the stadium agreement, city sources said.
And the city is balking at a request from the league that the VIP parking spaces be built underground or adjacent to the stadium, the sources said. The stadium agreement requires that 1,200 parking spots be built but does not stipulate where or how the spots are to be constructed.
City officials budgeted $16.5 million for parking, but building the spots in the way baseball officials have requested could cost another $20 million, sources said.
"We'll provide parking spaces, but if baseball wants them to be fancy, then they have to pay," said one city official, who spoke on condition of anonymity because the city's request had not been made.