By David Nakamura
Washington Post Staff Writer
Friday, September 19, 2008
The Washington Nationals' new ballpark is on pace to generate about $13.5 million in sales taxes for the District government in its inaugural season, well below the $16.1 million city officials had projected when the ballpark was under construction.
Meanwhile, as the Nationals continue their final homestand of the season, the team owners still have not paid $3.5 million in rent that was due in the spring, contending that the ballpark is not "substantially complete."
The tax revenue and rent money are used by the city to help pay down debt on the stadium project near South Capitol Street and the Navy Yard in Southeast Washington. Although D.C. financial officials said they have enough money to cover the debt service -- in part because a special tax on city businesses is bringing in more money than anticipated -- the fight over the rent appears headed toward binding arbitration.
Some city leaders said the dispute with the Lerner family might not be resolved until after a second rent payment is due from the team early next year, which could begin to hamper the debt service schedule.
"The stadium for purposes of use as a ballpark obviously was complete," said D.C. Council Chairman Vincent C. Gray (D). "It's been universally well received as a venue, which is just first-class. We did what we were supposed to do, so to be in this kind of debate is frankly shocking."
In negotiations with the D.C. Sports and Entertainment Commission, which oversaw stadium construction, Lerner representatives have cited problems with the ballpark, including the quality of the sound system and the lighting on the scoreboard, according to sources familiar with the talks who spoke on condition of anonymity because of the dispute.
Nationals officials declined two requests for an interview. In a statement, the Lerner group said the team and city "have worked extremely hard every single day since opening the ballpark to fulfill the terms of the agreement. We remain firmly committed to fulfilling the promise made to all of our fans that Nationals Park will be the finest facility in all of baseball and we thank them for their patience."
Matthew Cutts, chairman of the D.C. Sports and Entertainment Commission, which oversaw stadium construction, said the agency is in the process of hiring the law firm Seyfarth Shaw to handle the case.
Business leaders expressed frustration at the lack of progress. The faster the city can pay off the bond debt with ballpark tax revenue and rent money, the faster the businesses can be relieved of the special tax, said Barbara Lang, D.C. Chamber of Commerce president.
"It was never our intent for our money to be used as a stopgap if stadium revenues were down," Lang said.
Through Wednesday, the Nationals, who have been plagued with player injuries this season, had a 58-94 record, one of the worst in the major leagues.
In 74 home games, the team has sold about 2.2 million tickets at Nationals Park, a game average of 29,261, which ranks them 19th out of 30 teams. If the Nationals continue on that pace, they will sell 2.4 million tickets this season.
That is well below the number the D.C. government projected in a report to Wall Street two years ago in preparation to sell construction bonds for the stadium. Economic Research Associates, a consulting firm hired by the city, examined trends from other recently opened ballparks and concluded that the Nationals would sell 3.1 million tickets in 2008.
Ticket sales would make up about two-thirds of stadium revenue, and concessions would make up 25 percent, the consultants said. The team would gross $165 million and pay $16.1 million in taxes to the city, they said in the report.
Instead, the Nationals will pay $13.5 million in taxes this season. Taxes are 10 percent of gross revenue, so the team appears to be set to gross about $135 million, though neither Nationals representatives nor D.C. officials would confirm that figure.
"The fact is that it was a lousy product this year. The team was awful, the worst team in baseball," said D.C. Council member Tommy Wells (D-Ward 6).
Two weeks ago, the Nationals announced that they will lower season ticket prices for 7,500 seats next year, including 3,400 in the lower bowl of the stadium.
"This was not a one-year deal. This is a deal that is going to help that portion of the city for many years to come," Cutts said. "I would not say you can judge the success based on one year's performance. There is no question it has sparked economic development in that area. Thousands have traveled in that area who never used to go there. There are plenty of positives. It's a little premature to say if there were any negatives."
Former mayor Anthony A. Williams had touted a "ballpark entertainment district" that would be a lively corridor for fans, similar to the development in Gallery Place around the Verizon Center. But economic development near the ballpark has slowed because of the sluggish commercial development and residential property markets, developers said.
A block north of the ballpark, Monument Realty is building a $350 million, 775,000-square-foot mixed-use project along Half Street SE. Company vice president Russell Hines said an office building will be completed next year, but plans for a residential tower and hotel next door, along with restaurants and retail on the ground level, have stalled as the company continues to seek financing.
"It's certainly a reasonable assumption that the disruption to the capital markets has set things back," Hines said. "But look down there. There are still people starting projects. The medium- and long-term outlook for Washington is still very bullish."
Akridge Co., which owns an old Metro bus garage next to the Monument property, will break ground in 2010 on a mixed-use project that could be completed by 2012, said spokeswoman Mary Margaret Plumridge.
Michael Stevens, executive director of the Capitol Riverfront business improvement district, which includes the ballpark area, said he remains confident that the corridor will become a vibrant neighborhood in the long term.
"Everybody's been the victim of the bad financial markets, and it's going to be bad for two more years," Stevens said. "Retailers and restaurateurs are really scared to open up stores during an economic downturn. Are the restaurants as far along as I'd like? No, they're not. I'm sure the ballpark folks feel the same way."