The District's urban renewal agency yesterday firmly rejected a revised price and financing package for the prized Portal site in Southwest Washington, saying the offer was nowhere near what the city was originally promised for the 10-acre site at the foot of the 14th Street bridge.

The valuable city-owned land could be up for grabs again if the developers, Banneker Associates, do not negotiate a substantially better deal with the city soon, the chairman of the five-member Redevelopment Land Agency board said after yesterday's meeting. The Banneker group was given another month to renegotiate.

The board's rejection of the deal represented the first major setback for efforts by Ivanhoe Donaldson, Mayor Marion Barry's economic development czar, to spur building on city-owned sites by offering substantial concessions to developers. Donaldson had negotiated the Portal agreement, which called for a $7 million reduction in the original land price and different payment terms.

It was the third package of price cuts Donaldson has negotiated with developers who had won the right to buy prime parcels of land but who then ran into economic difficulties, largely because of the recession and a glut of office space.

Donaldson has argued that the benefits the city would obtain from increased employment and other results of quick development make price reductions for the parcels worthwhile.

The RLA approved concessions in May for the developers of the long-delayed Metro Center, at G Street NW between 11th and 13th streets. A hearing is scheduled in September on negotiated financing breaks for the developers of the Gallery Place site at Seventh and G streets NW.

Barry's housing director, James E. Clay, was the only member of the RLA board to vote to approve the Portal deal.

"This deal didn't narrow the gap" between the $45 million in cash the developers originally agreed to and what they now say they can afford, said RLA board chairman Nira H. Long. Asked if the site might be taken from the Banneker group and put up for competitive bid again, Long said, "It depends on what they come up with. It could."

When Banneker won the right to develop the coveted site in February 1982, some members of the splintered RLA board pointed to the group's superior financial position and its plans to develop the land quickly as major reasons for its selection over four other bidders.

Banneker's planned $355 million complex was to include office buildings and a hotel, and it was the only proposal that had no theater, no stores and no community uses at the site. The two principal members of the Banneker group are office building developer Melvin Lenkin and shopping center owner Theodore Lerner.

The RLA board yesterday voted 4 to 1 against the revised financial package, which would have reduced the overall price for the land from $45 million to $38 million and provided that $3 million would be paid in cash, with the rest financed at favorable rates over 15 years.

The board agreed to extend Banneker's deadline for negotiating an acceptable agreement by 30 days to mid-September.

The developers have said that the economic downturn and changes in the plans of prospective tenants reduced the feasibility of the project.

RLA chairman Long said that the board is not opposed to giving the developer financing concessions but that the developer needs to offer more cash up front. The RLA also has to consider fairness to the rejected competitors, she said.

"I do assume that there is a certain amount of puffing in any proposal that includes competition," Long said. "But is it fair to the other competitors to have such a substantial change in the price proposal after the designation, even with the changed business conditions?"

Banneker attorney S. Lee Narrow said the main area where the developers are flexible is in payments that would be due in future years, after the development is completed.

Narrow told the board there is little or no room for negotiating more money for the city before construction because so much cash is required to develop the site. He said the group is "prepared to consider some variables" in terms covering future years but added that if the city gets more in one part of the agreement, the developers will have to get more concessions somewhere else to keep the project economically viable.

Giving the city some form of equity position in the project "hasn't been totally rejected," he said later.

Banneker submitted a cost analysis of the project that showed the developers breaking even in 1999, assuming they got the requested financing concessions.

Board member Stephen Klein told Narrow that "the major plus of your proposal was your financial capability." If the city is going to finance development at the site, the RLA should go back to the other proposals with more public benefits, he said.

"There is no public benefit to having another office building down there," Klein said.

But city housing director Clay argued that the design should not be an issue now, only the financing. "We are now second-guessing ourselves on what we chose to be on that site. I don't think that should be an issue," he said in response to Klein.

The Portal site is the largest and virtually the last city-owned land in the Southwest renewal project, started in the 1950s, and it has a panoramic view of the Potomac River from Rosslyn to National Airport.