Private Stadium Funding Canceled
Thursday, February 2, 2006
A District government plan to use $246 million in private financing from Deutsche Bank to help build a new baseball stadium has collapsed, a political blow to the D.C. Council, which spent months pushing to reduce public investment in the project.
D.C. Chief Financial Officer Natwar M. Gandhi said the deal has been called off in part because the bank was seeking a $5 million fee to structure the financing arrangement. But another complication emerged yesterday when bank spokesman Ted Meyer said the bank had a signed contract with the District and remains entitled to the payment if the city uses the bank's strategy.
"We have an agreement with the city," Meyer said. "The fee involves over a year's worth of work in which we developed a structure that met the specifications laid out for us by the District."
Asked to respond, Gandhi acknowledged that the city had given the bank a "letter of intent."
About the $5 million fee, Gandhi added: "We'll have the lawyers figure it out."
Gandhi's decision means that the city's effort to find private financing appears all but over and that the city now plans to fund the entire stadium project -- recently estimated to cost $667 million -- through traditional public financing.
The council had spent three months in late 2004 debating the financing options before narrowly approving a budget of $535 million after Mayor Anthony A. Williams (D) agreed to seek proposals for private financing.
The decision not to use the Deutsche Bank plan could be politically damaging to Council Chairman Linda W. Cropp (D), who is running for mayor and who led the council's charge to find private financing.
Cropp could not be reached yesterday. Earlier this week, she said: "It was never my plan. It was a plan that was recommended by the CFO."
Deutsche Bank may still be involved in the stadium project as a potential large stakeholder of stadium bonds, Gandhi said. But it must compete against other banks that want to buy the bonds, he added.
Gandhi said that he will continue to seek private investment in the project after the council approves a stadium lease agreement with Major League Baseball. The 13-member council, which is sharply divided, is scheduled to vote on the lease Tuesday.
Under Deutsche Bank's plan, the city would have received a $246 million upfront payment in exchange for control of two annual revenue streams generated by the new stadium: $6 million in rent from the Washington Nationals and up to $24 million in concessions taxes.