Stadium Pact To Be Revised For Financing
Fiscal Chief Stressed Effect on Bond Ratings

By David Nakamura and Thomas Heath
Washington Post Staff Writers
Wednesday, February 1, 2006

D.C. Chief Financial Officer Natwar M. Gandhi said yesterday that Mayor Anthony A. Williams has agreed to alter a new baseball stadium lease agreement to make it acceptable to Wall Street bond raters.

After seeing an amended lease agreement between the District and Major League Baseball, Gandhi said Friday that he would not issue stadium construction bonds because a reserve fund had been omitted, along with two other fiscal provisions that he considered critical. Gandhi said the provisions are necessary to secure an investment-grade rating on the bonds and obtain a lower interest rate for the city.

District officials met for 3 1/2 hours yesterday with former Detroit mayor Dennis W. Archer, who is mediating a dispute over the lease between the city and Major League Baseball. During the meeting, Williams (D) agreed to reinsert the three provisions into the agreement before the council votes on the deal, Gandhi said.

Asked whether he was satisfied, Gandhi said: "I think so. I'll wait to see the final paperwork."

Council Chairman Linda W. Cropp (D) said she did not know why the provisions had been removed from the lease. Baseball officials had resisted the provisions last fall, but they agreed to them after Gandhi insisted in December.

"It was news to the council also," Cropp said of the removal of the provisions. "We want them back in the lease."

After yesterday's meeting, Williams still faced questions from the D.C. Council over how the city will cap the costs of the stadium project.

Although the council is scheduled to vote on the lease deal Tuesday, Cropp said it is possible that she will postpone the vote if Williams does not deliver additional documents in a timely fashion and if council members request more time to review the package.

Williams promised to provide the council with a complete package of construction contracts -- known as the construction administration agreement -- by Friday. City officials said the package is expected to include a "guaranteed maximum price" contract with construction companies to cap the cost of the ballpark structure at $320 million, which would include $20 million that Major League Baseball promised in December.

Cropp said the council will hire its own consultants to review the lease agreement before the vote.

Council member Vincent C. Gray (D-Ward 7) is considered a swing vote by the Williams administration, which needs a majority of the 13-member council to approve the lease. Gray said he and others are waiting to see further documentation of the mayor's promises.

"I'm not there yet, period," Gray said, when asked if he supports the lease deal.

"We're still trying to understand the details. We want to see the documents."

Williams declined to comment as he left the meeting, saying only, "Ask the council."

The lease agreement is crucial to the project, which would be built near the Navy Yard and South Capitol Street along the Anacostia River in Southeast Washington. Gandhi said he will not issue construction bonds without a final lease.

The council had been scheduled to vote on a lease in December, but Williams asked Cropp to withdraw it from consideration because it did not have enough support.

Council members are concerned about the project's rising cost estimates. The council approved a $535 million budget in 2004, but recent estimates by city officials put the price at $667 million.

After a month of additional negotiations with baseball officials, city officials resubmitted the lease Friday with several changes. Under the new terms, baseball agreed to spend $3.5 million on a new youth academy in the city, to give the city 2,000 more free tickets a year and to pay $2.65 million in rent at Robert F. Kennedy Memorial Stadium during the 2008 season if the new ballpark does not open on time.

"What has been committed to would allow the council to move forward to approve the lease," Archer said.

Archer, who was named mediator by the American Arbitration Association last month, said he hoped the council would approve the lease so stadium construction could begin and baseball officials could go forward with selling the team to an ownership group.

The new owner, Archer said, would then be able to talk directly with city officials about other concerns.

Among the ways that costs would be contained, according to Williams, are the guaranteed maximum price contract and the sale of development rights on land near the ballpark.

Under the terms of the construction administration agreement that is being negotiated by the District and the construction companies, the companies would obtain greater authority over the project in exchange for ensuring that the price of the structure would not exceed $320 million.

Meanwhile, the Anacostia Waterfront Corp., created by the mayor to oversee development of the Anacostia riverfront near the stadium site, has pledged to cover all potential cost overruns related to the city's purchase of 14 acres for the stadium.

The corporation would cover such costs by selling development rights on the south side of the stadium site. Under the lease agreement, the city would receive 57.5 percent of the profits, and Major League Baseball would receive 42.5 percent.

But council member Marion Barry (D-Ward 8) said he believes that the city should receive all the profits because the District is buying the land and building the stadium.

"They still have a distance to go," Barry said of Williams administration officials. "There are seven or eight of us who are not comfortable to approve the lease as they described it."