By Ray Rivera and Thomas Heath
Washington Post Staff Writers
Sunday, December 18, 2005
Workers had barely broken ground on Safeco Field in 1997 and already construction costs were spiraling upward. By the time the first pitch was thrown two years later, the Seattle Mariners' new retractable-roof stadium had become the most expensive ballpark ever built, swelling nearly $100 million over budget to more than a half-billion dollars.
Cost overruns were hardly unique to Safeco, which was completed in 1999. And neither was the solution of who would pay them: As with most recent deals, the team was contractually bound to cover overruns as part of its agreement with local and state officials to get a stadium financed largely by taxpayers.
Washington won't be so lucky. Under last year's agreement with Major League Baseball that returned professional baseball to the city, the District said it would absorb all overruns in building a ballpark for the Nationals, unless the extra cost was caused by last-minute enhancements demanded by the team or baseball.
The debate over the ballpark's price has focused on whether it should be built on the Anacostia waterfront or adjacent to Robert F. Kennedy Memorial Stadium, and it has been based on rising cost projections for the stadium and surrounding infrastructure. The D.C. Council approved $535 million for the project, not counting financing fees -- more public money than has ever been spent on a professional sports stadium. Mayor Anthony A. Williams (D) has promised to limit the city's investment to the amount approved by the council, even as estimates have risen to $667 million or higher if underground parking is included.
Thus far, little has been said about how the District would pay for overruns should costs exceed projections. And history shows that overrun costs of major construction projects can be staggering.
The Washington Post reviewed the nine most recent publicly financed Major League Baseball stadiums. Six had overruns ranging from $30 million, for the Philadelphia Phillies, to $115 million, for the Arizona Diamondbacks. In all but one of the six cases, the team was obligated to pay the extra costs.
"That was a huge consideration," said Les Girard, former San Diego assistant city attorney who led the city's negotiations over the Padres' new stadium, which went $39 million over budget. "We knew in advance that there would likely be cost overruns, and we were not going to let the city have an open checkbook."
Washington's concession on the overruns was just part of a deal that some baseball officials have privately said is among the most generous they've seen -- even by the standards of an organization that, by virtue of its monopoly status, enjoys extraordinary leverage over cities trying to get or keep franchises.
District officials, determined to return a baseball team to Washington and led to believe that the league might relocate the Montreal Expos elsewhere, gave baseball virtually everything it wanted -- naming rights and stadium, parking and concession revenue. And by initially offering to fully finance the stadium, the District bucked a 14-year trend in which cities were demanding that teams pay a significant share of building costs.
The generous terms of the deal were set against three decades of frustration in which the city had twice failed to lure teams to the District after losing the Washington Senators in 1971.
"We went to great efforts to establish the District's credibility as a major sports venue for baseball," said Mark H. Tuohey, chairman of the D.C. Sports and Entertainment Commission, one of the city's negotiators. "The District had lost too many teams. We were not going to lose this one."
The deal has left the District with few bargaining chips as estimates for the stadium cost increase. Baseball, in its biggest concession since the stadium agreement was signed, agreed this month to pitch in an additional $20 million toward construction. But in return, the District gave up a percentage of off-game day parking revenue, which over the life of the 30-year lease will about equal that contribution.
That $20 million makes baseball's contribution toward the total cost about 3 percent, or 12 percent with the rent the team will pay, which averages to about $6 million a year over the lease's life. District officials disagree on whether rent should be considered a contribution.
Since the D.C. Council approved a $535 million budget last December, stadium project estimates have risen in every major category -- buying land, building the stadium and paying for such infrastructure upgrades as new roads and an expansion of the Navy Yard Metro station.
Williams's initial estimate for the stadium project was $435 million. Of that, $244 million was for the ballpark structure and $65 million to buy land. That budget did not include infrastructure money.
But on Monday, Natwar M. Gandhi, the District's chief financial officer, said the ballpark alone would cost at least $315 million, in part because of higher-than-anticipated inflation on the costs of steel and other building materials. Furthermore, the architectural designs the D.C. Sports and Entertainment Commission received last summer were more ambitious and costly than anticipated when the budget was created two years ago, said Allen Y. Lew, the commission's chief executive.
Infrastructure costs are now projected to be an additional $36 million, which Williams said could be paid through a combination of private and federal funds.
Rising estimates are not unusual in stadium construction, given difficulty in predicting fluctuating material costs, interest rates and land prices. Initial estimates are often kept low to bolster political support, said Andrew Zimbalist, a sports economist with Smith College.
The early projection for Seattle's Safeco was $320 million when Washington state lawmakers approved that stadium in 1995. By the time bonds were issued to pay for it, the estimate had swelled to $417 million. The final cost to complete it was $514 million, said Mariners spokeswoman Rebecca Hale.
In examining overruns at other ballparks, The Post looked at the final estimate for the stadium and infrastructure at the time of groundbreaking or at the time bonds were issued to pay for it.
Gandhi has said he will not issue bonds until the council approves the lease. The council is scheduled to vote on the lease Tuesday.
The only other team in the analysis not required to pay overruns was the Milwaukee Brewers -- a stadium deal negotiated by then-Brewers owner Bud Selig, now baseball commissioner, who controlled where the Expos would be.
At the Nov. 9, 1996, groundbreaking for what is now Miller Park, the state still believed the project budget was within the $322 million lawmakers had approved -- $250 million for the stadium and $72 million for infrastructure -- according to a 2002 state audit. After numerous delays, including a crane accident that killed three ironworkers, the stadium was completed in 2001, and four years later a dispute over the final cost continues. The Miller Park Stadium District puts it at $392 million; the Wisconsin Legislative Audit Bureau says $414 million.
Either way, the sting of the overruns was long-lasting. For years after it opened, former governor Tommy G. Thompson, who initially championed the stadium, wouldn't step foot in it, he told The Post last year.
D.C. Auditor Deborah K. Nichols estimated costs for the District's ballpark could go up by 40 percent, based on experiences with sports stadiums across the country. At that rate, potential overruns would far outstrip the $43 million the District has built into its budget for contingencies.
"The question regarding the source of funds for the commission to pay for any cost overruns has not been answered," Nichols wrote in an analysis for the council.
Tuohey said the city has taken steps to offset overruns, including setting price caps with contractors.
"We believe that we have carefully planned a program that will be done on time and within the budget," he said.
But some council members are skeptical.
"The cost overruns is the heart of the issue," said Jim Graham (D-Ward 1), a critic of the project. "In the final analysis, we have no idea what the final cost is going to be, and we're responsible for every nickel. It's a blank check."
Hamilton County, Ohio, learned a bitter lesson when it paid $51 million in overruns building the Cincinnati Bengals' $459 million Paul Brown Stadium. By agreement with the team, which financed 5 percent, the county was responsible for all overruns, said Eric Stuckey, interim county administrator.
Reasons for the spiraling costs included increases in land valuations as community officials debated site locations. A similar situation in the District has caused its land acquisition estimates to rise from $65 million to $98 million.
The delay in choosing a location forced Hamilton officials to step up the construction schedule, causing labor and other prices to go up, Stuckey said.
The county had signed a "guaranteed maximum price" clause with the contractors, but an auditor hired by the county found it was liable for overruns because the project had begun with inadequate designs.
When Hamilton County built a new baseball stadium, which opened in 2003, the agreement was starkly different. This time the county put a cap of $280 million on public money, Stuckey said. Every dollar above that was the Cincinnati Reds' responsibility. The final cost came in at about $336 million, Stuckey said, largely on budget except for enhancements requested and paid for by the team.
The story of the two stadiums was a lesson in bargaining power, Stuckey said. At the time the football deal was being negotiated, the Bengals' lease at Cinergy Field was nearly up, and the threat of the team relocating to a different city was real, Stuckey said. When the county negotiated the Reds' new stadium deal, the team had more than 10 years remaining on its lease at Cinergy.
"A lot of it had to do with leverage," Stuckey said. "And the Bengals, quite frankly, had a lot."
In Seattle's case, stadium officials knew they were building on a former tidal marsh that had been covered with landfill -- by itself too unstable for a major project in the seismically active Pacific Northwest. They also knew the soil had been contaminated from decades of driving timber pilings soaked in creosote, a potentially harmful wood preservative, into the marsh to build platforms.
Even so, the land held costly secrets. New pilings had to be driven deeper than expected -- an average of 90 feet -- to find bedrock. Crews removed 200,000 cubic yards of soil after determining the contamination was too extensive to sift out. And concrete costs were $22 million more than anticipated.
"Until you do the drilling and testing, it's hard to know exactly what you're going to end up with, and sadly there are often unpleasant surprises," said Rebecca Hale, the team's director of public information. "And not just with this project but with most any construction project."
The District won't have to deal with seismically unstable land, but the Anacostia waterfront site holds plenty of other uncertainties.
The 14 acres the District will need to acquire is home to an asphalt plant, a waste-transfer station and a Metrobus maintenance and vehicle yard. Until the District owns the land, it cannot do a complete study to determine what environmental hazards might be underneath it.
The District has started eminent domain proceedings against 16 owners. Although the process is not expected to slow construction, it could take years to resolve.
The Detroit-Wayne County Stadium Authority has yet to acquire about four of 30 parcels it took over through eminent domain to build the Detroit Tigers' Comerica Park, which opened in 2000.
The process added about $5 million to the land acquisition costs, which like all overruns were borne by the team, said Steven Collins, special counsel for the stadium authority.
"We limited our liability," Collins said.
Staff writer David Nakamura and staff researcher Julie Tate contributed to this report.