Major League Baseball has not agreed to the District's request for an additional $20 million to help build a stadium and might file for arbitration if a lease agreement is not reached with the city by the end of December, MLB President Robert DuPuy said yesterday.

"The stadium agreement provides for arbitration if a deal is not reached and would be one of the options," DuPuy said in an interview.

DuPuy's comments raised the stakes in the sensitive negotiations over a stadium lease between the city and baseball, which have held up the sale of the Washington Nationals and threaten to delay construction of the $535 million stadium project in Southeast.

During a nine-hour oversight hearing yesterday on the stadium project, the D.C. Council was assured by Mark H. Tuohey, chairman of the D.C. Sports and Entertainment Commission, that baseball probably would contribute the extra money and that lease negotiations would wrap up as soon as next week.

Asked to comment last night on DuPuy's assessment, Tuohey said that serious negotiations are continuing and that he expected to reach an agreement soon.

"I didn't say an agreement had been reached on the $20 million -- I said we were close to an agreement," said Tuohey, who is overseeing stadium construction.

Nevertheless, the negotiations appear so bogged down that the council has demanded to be involved in the process. City Administrator Robert C. Bobb told the council that the administration will submit the lease agreement to the council for approval when it is completed and signed by baseball and the sports commission.

D.C. Council Chairman Linda W. Cropp (D) said she has been told by city officials that the lease could be completed by Thursday, but she did not set a date for a council vote.

The District needs the lease to issue construction bonds on Wall Street. Baseball Commissioner Bud Selig has said he will not sell the Nationals -- there are eight bidders -- until the lease is finalized.

Among several sticking points in the lease negotiations, baseball has refused the city's request for a $24 million letter of credit that would ensure the Nationals' rent payment in the event of a terrorist attack or players' strike. Jerry Reinsdorf, owner of the Chicago White Sox, and Jonathan Mariner, baseball's executive vice president for finance, are believed to be coming to Washington this week to resume negotiations, baseball sources said.

The council's involvement sets up another uncertain December for the stadium project.

After a bitter debate, the council approved the stadium financing package last December by a vote of 7 to 6.

In the midst of the lease negotiations, city officials acknowledged last week that they have removed $55 million in the stadium budget that had been earmarked for infrastructure improvements to projects including roads and a nearby Metro station to deal with rising costs.

Council members said yesterday that they fear that additional costs will ultimately force the city to contribute more money to a stadium project being funded largely with public dollars.

"The lease, when it comes to the council, is an issue we will have to deal with," Cropp said. "My suggestion is that if, in fact, this stadium costs over $535 million and if there can't be the appropriate types of reductions or changes, it is time to cut our losses and . . . renegotiate another [stadium] location."

Last year, Cropp said she would prefer the stadium to be built adjacent to Robert F. Kennedy Memorial Stadium, which she said could save up to $200 million.

Council members said they will not increase the stadium budget under any circumstances and called on Major League Baseball to name an owner for the Nationals who will be able to negotiate directly with the city and add private dollars to the project.

Baseball representatives were not at yesterday's hearing, but league officials have said the stadium agreement with the city stipulates that the city is responsible for all cost overruns. Nationals President Tony Tavares, who is employed by Major League Baseball, noted last week that the team will pay an average annual rent of $6 million to help pay for construction.

Bobb said that Mayor Anthony A. Williams (D) intends to ask the federal government to help pay for the Metro upgrades at the Navy Yard Station on the Green Line -- an expansion that could cost an additional $20 million to $40 million, depending on the scope of the renovation. The federal government is constructing a Department of Transportation building near the ballpark site, so it should fund the Metro expansion, Bobb said.

If federal agencies do not agree to contribute, Bobb added, the city will seek the money from private developers who are looking to capitalize on the stadium by building stores and restaurants nearby. Williams selected the near Southeast site because he believes it offers ripe opportunities for development that will contribute to the city's tax coffers.

Tuohey told the council that the commission will keep the project within the $535 million budget. He and other commission officials blamed the cost increases on inflation in the prices of building materials and the land, as well as the state-of-the-art design of the stadium.

If costs rise higher, Tuohey told the council, the commission will eliminate some elements of the stadium design, a process called "value engineering."

But council members remained skeptical, saying they worry that the District will be forced to cover infrastructure costs with additional public money if the federal government or private developers do not contribute.

Carol Schwartz (R-At Large) added that removing money for Metro from the stadium budget is dangerous because large crowds could cause injuries if the Navy Yard Station is not expanded.

"We have to plan accordingly to expand that station. We can't just depend on the feds or find a buddy to call from heaven. That's irresponsible," Schwartz said.

A dozen city residents testified at the hearing, and all implored the council to limit the public investment in the project.

"The District is not sharing the risk and reward in a congruent manner with Major League Baseball," said David Malloff, who lives in Dupont Circle. "Critically, Major League Baseball was not asked to share in cost overruns. . . . D.C. cut a wholesale giveaway in no uncertain terms."

Cost overruns on the $535 million stadium could mean that it's time to find another location, said D.C. Council Chairman Linda W. Cropp, shown at a December vote on ballpark financing.