Mayor Anthony A. Williams and his top aides have quietly shifted major expenses for a baseball stadium complex out of the city-approved budget of $535 million in the past several months in hopes of persuading the public that the city will spend no more than the amount agreed upon a year ago.
But the District's fiscal commitment to the project has risen above that budget by at least $54 million And it isn't clear who will pay for up to $125 million in additional costs, which would raise the total to $714 million.
Although Williams (D) declared publicly last week that the project would not go over budget, the D.C. Council amended the stadium legislation last month to add $54 million in bond financing fees. The change was made at the request of D.C. Chief Financial Officer Natwar M. Gandhi, who called the amendment minor but acknowledged that it increased the city's commitment to $589 million.
"I feel thoroughly hoodwinked," said Jim Graham (D-Ward 1), who, like several other council members, said he was unaware that the action authorized the larger budget. "The council sat in blissful ignorance and approved technical amendments that expanded the budget by $50 million. . . . It's time for the council of the District of Columbia to say, 'Enough is enough.' "
From the time Williams announced the arrival of a Major League Baseball team in September 2004, his administration has understated the costs of the stadium project at several critical points, in part to help sell the deal to a skeptical council. As costs have risen in every major category for the project along the Anacostia River in Southeast Washington -- buying the land, building the stadium and paying for infrastructure -- the administration has removed project expenses and placed them in a separate category of costs that remain unfunded.
The approved budget plus the unfunded costs could reach $714 million, Gandhi told city officials last week in a private meeting.
The result is that with less than three months before the city had planned to break ground on the stadium, city leaders have rekindled a debate over the true public costs and the project remains in political limbo.
New uncertainty has prompted the council to explore building near Robert F. Kennedy Memorial Stadium to reduce costs. Tomorrow, the council expects to receive a more detailed study from Gandhi that will compare the Anacostia site to the RFK location.
In the meantime, concerns about rising costs will influence the council's vote next week on the city's stadium lease agreement, which baseball wants approved before it sells the Washington Nationals.
At a news conference last week, Williams again said, "The entire project will not cost more than $535 million."
He emphasized that bond financing fees should not be counted against the budget because they will not be covered by money from the general fund. Instead, the city will use revenue generated for the city by the Nationals' first season and by interest earned on the bonds next year before the bond money is spent on construction. He expects private developers and the federal government to cover expensive infrastructure upgrades to roads and a Metro station, expenses once covered by the $535 million stadium budget.
Most city leaders, however, remain focused on the dramatic cost increases of the past year.
From $435 Million
To $535 Million
On Sept. 29, 2004, Major League Baseball returned to Washington after 33 years, setting off a celebration among fans eager to adopt the former Montreal Expos.
The deal was made official in a 70-page contract between the District and baseball officials known as the Baseball Stadium Agreement, which contained a $435.2 million budget.
Stephen M. Green, a top mayoral adviser, developed the budget along with paid consultants who specialize in facility planning and construction, and received input from baseball's stadium consultants.
The budget, which included $244 million for materials and labor, was made over two years, starting in 2002, well before the city received a team or had any architectural designs. It was based largely on an analysis of other sports stadiums, Green has said.
In a memo dated Oct. 14, 2004, consultants stated that the District could expect to spend $232 per square foot for the stadium, comparable to ballparks in San Diego, Cincinnati, Detroit and Pittsburgh that ranged from $210 per square foot to $225. On virtually every aspect of the stadium, the consultants settled on an average cost and adjusted it for inflation and the D.C. construction market.
Green's budget, however, did not include money for upgrades to a nearby Metro station and roads or other infrastructure costs because a stadium site had not been selected, said a source who helped prepare the budget. The source, who spoke on condition of anonymity because the project is at a sensitive stage, said officials also added relatively small contingency costs because they knew it would be hard to persuade the council to approve a larger budget.
At a council hearing on Oct. 28, 2004, however, Gandhi testified that, based on conversations with water and transportation officials, he felt compelled to add $50 million for infrastructure and $41 million in contingencies in case of cost overruns.
When revised financing fees were calculated, the stadium package reached $534.8 million -- $100 million higher than the mayor's initial budget. After significant debate, the council approved that package by a vote of 7 to 6 on Dec. 21, 2004.
"Finally and at last, all of us have risen above the fray, and the Washington Nationals are rounding third and heading for home," Williams said at a news conference that day. "Isn't that great?"
From $535 Million
To $589 Million
During the stadium debate last December, no one was more influential than council Chairman Linda W. Cropp.
With her 12 colleagues evenly split, Cropp (D) negotiated several changes to the stadium agreement with Major League Baseball before blessing the deal. One amendment required Gandhi to conduct a second analysis of land and infrastructure. If the new costs were no more than $50 million above his first estimate for those two categories, the stadium could go forward.
On March 29, Gandhi sent a letter to Williams and Cropp stating that his second analysis raised the price by $46.4 million -- just under the council's $50 million cap. The stadium project was a go but was over the $535 million budget.
Gandhi added the $46.4 million in land and infrastructure costs to the budget and removed $54 million in bond financing fees to be paid for another way. Gandhi now says that he believed the legislation gave him that authority.
Wall Street bond raters were not satisfied with the legislation, however. They asked Gandhi to get the council to approve three amendments, including one that would allow the city to spend more than the approved budget.
Cropp agreed that the amendment was a "technical" change that would establish the council's original intent to allow Gandhi to take out the financing fees, if necessary.
The council approved the amendment Nov. 15 without discussing that it permitted the city to spend more than $535 million. Instead, Cropp cast the issue in the opposite way: The amendments were needed to get investment-grade bond ratings from Wall Street, which would save the city significant money in interest.
The council approved the amendments 11 to 2, with David A. Catania (I-At Large) and Adrian M. Fenty (D-Ward 4) opposing them. This month, Catania raised the issue again.
"The moment of truth is the integrity of the council," Catania said Tuesday at a council meeting. "Can the mayor and baseball supporters rewrite the law?"
Several members who supported the amendments, including Graham and Kwame R. Brown (D-At Large), now say they never intended to authorize more spending.
Williams, Cropp and Gandhi stressed that the financing fees will not be paid with money from the city's general fund, but rather with revenue generated by the Nationals in the past season and interest earned on the bonds next year.
But the city's commitment to the project had risen to $589 million.
From $589 Million
To $714 Million
The stadium budget had grown significantly -- but not enough.
After months of work, architects submitted designs to the D.C. Sports and Entertainment Commission for a state-of-the-art stadium made of glass, steel and limestone. But the estimated cost for the ballpark had increased from $244 million to $337 million.
Cutbacks reduced the price to $300 million, but sports commission Chief Executive Allen Y. Lew said he could go no lower.
"The initial estimates that were developed by the city were for an average ballpark," Lew said. "We wanted something iconic, and you have to pay for that."
To help cover the cost of the ambitious ballpark, including buying land and the rising cost of materials, Lew shifted money within the budget. Roughly $55 million that had been set aside for infrastructure and $40 million in contingencies would be used for construction.
Those decisions have had significant ramifications. As Gandhi has analyzed the costs during his study this month, he has put the contingency and infrastructure costs back on the table and determined that the price tag for all costs related to the project could reach $714 million, although government sources said he is likely to lower that figure slightly.
Williams and sports commission Chairman Mark H. Tuohey called the infrastructure costs "ancillary." They pledged to seek contributions from the federal government and private developers. Baseball recently has agreed to contribute $20 million.
But uncertainty remains. Sixteen land owners at the stadium site have not accepted the city's offers and are asking a Superior Court judge for more money. The sports commission is hoping to break ground in March, but delays could result in even higher costs.
"People have to be alarmed," Graham said. "Do you want to finance a stadium at $535 million? That's a lot of money. How about $634 million or $710 million? At some point, you lose everybody because it's just not worth it."
Natwar Gandhi has found costs could reach $714 million.