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Baseball Consents To Revised Lease Deal
Rising Costs Still Worry Key Council Members

By David Nakamura and Thomas Heath
Washington Post Staff Writers
Saturday, January 28, 2006

District leaders reached an agreement on a revised stadium lease with Major League Baseball yesterday that includes a commitment from baseball for a $3.5 million youth academy but fell short of fully answering the concerns of some key D.C. Council members.

The lease was submitted to the council with a letter that offered several promises that were not contained in the lease, including capping the cost of the stadium project. The letter was signed by Mayor Anthony A. Williams, MLB President Robert A. DuPuy, Mark H. Tuohey, chairman of the D.C. Sports and Entertainment Commission, and Dennis W. Archer, who is acting as mediator.

The council is expected to vote Feb. 7 on the lease, and Williams (D) met for two hours late yesterday with council members Kwame R. Brown (D-At Large) and Vincent C. Gray (D-Ward 7), considered key swing votes on the 13-member council, to explain the deal.

Brown and Gray, however, emphasized that the mayor did not present them with documentation on the most critical of their concerns: how the city would pay for potential cost overruns on the stadium and make good on other promises in the letter.

"If the discussions bear fruit with respect to documentation, then very substantial progress has been made," said Gray, who had requested the youth academy. "But we haven't seen the documents. . . . I'm not sure we settled anything."

Meanwhile, some changes to the lease drew strong objections from Natwar M. Gandhi, the city's chief financial officer.

"The lease agreement as it is submitted, I have serious reservations about," Gandhi said. "I cannot take it to Wall Street."

Gandhi noted that the new document deleted a monetary reserve account that Wall Street bond raters had requested. Gandhi is seeking investment-grade bonds for the stadium project to get a lower interest rate for the city.

In a written statement, the mayor said he hoped the council would approve the lease. "This package was hard-fought but worth it, because we've addressed and answered every possible concern District residents could have with the baseball agreement," Williams wrote. "We forced Major League Baseball to come up with additional concessions."

Brown and Gray acknowledged that the city has won some significant concessions. In addition to the academy, which would teach children about baseball and provide academic tutoring, the city would get 2,000 additional free tickets for disadvantaged youth.

And the Washington Nationals would have to pay $2.65 million in rent at Robert F. Kennedy Memorial Stadium for the 2008 season if the new stadium did not open on time. Previously, the agreement specified that the Nationals would pay nothing, penalizing the city if it failed to complete the new stadium.

Williams promised to send more documentation about capping stadium costs in a separate document called the Construction Administration Agreement, Brown and Gray said. That agreement, which is expected to specify how the construction companies contracted by the city would build the stadium, will be voted on separately by the council, setting up the possibility of another tough political fight for the mayor.

The stadium, to be built near the Navy Yard and South Capitol Street along the Anacostia River in Southeast, has been held up because the council has expressed concern about rising cost estimates. The council approved a $535 million stadium budget in 2004, but recent estimates by city financial officials have put the cost at $667 million.

The city cannot issue construction bonds for the stadium until the lease is approved. The council was scheduled to vote on the lease last month, but Williams asked Council Chairman Linda W. Cropp (D) to withdraw it from consideration because he did not have enough council support.

Archer, a former mayor of Detroit, was named by the American Arbitration Association to mediate the deadlock. The letter sent to the council yesterday was in response to a letter Cropp sent to Williams last week, asking that he meet 12 provisions from the council related to capping costs and winning new concessions from baseball.

The letter addressed each of those provisions, explaining how they would be met. Cost overruns would be dealt with in several ways, including negotiating a "guaranteed maximum price" contract with the three construction companies, it stated.

Under such a contract, , the construction companies would guarantee that the price of the ballpark structure would not exceed $320 million -- which includes a $20 million payment that Major League Baseball agreed last month to make, according to construction sources who asked that their names not be used because the agreement has not been finalized. In return, the District would cede control of the project to the companies.

The construction companies would have to follow the negotiated agreement between the city and baseball, but they could make decisions about how to keep costs down, the sources said.

The Anacostia Waterfront Corp., established by Williams to oversee development of the waterfront area near the ballpark, would cover any cost overruns on acquiring the needed 14 acres by selling development rights on the stadium site, the letter stated.

The city also is negotiating with the federal government for assistance with a $20 million renovation of the Navy Yard Metro Station. The mayor's statement said only that the city had "made headway" in talks with federal officials.

"There has been an attempt to address most of the concerns that the council had," Cropp said in an interview. "We need to look at the documentation to make sure it has been addressed completely and adequately."

Council members also had asked baseball to select an ownership group for the Nationals that has strong local ties. But the letter simply said the "MLB Constitution, the ownership guidelines and the best interests of the sport will guide the selection."

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