With a cadre of lawmakers deeply uneasy about trading away valuable property to fund a new stadium for the D.C. United soccer franchise, District officials are considering options for the proposed $287 million project that don’t involve selling a city office building.
A deal negotiated last year by Mayor Vincent C. Gray (D) and City Administrator Allen Y. Lew calls for the sale of the city’s Frank D. Reeves Center, at the corner of 14th and U streets NW, for cash and stadium land on Buzzard Point in Southwest Washington.
The city would purchase and prepare the land; the team would pay to build the 20,000-seat stadium.
But several of the council members who will be called on to approve the deal have balked at trading Reeves, citing concerns about the site being turned into more than 400 apartments and the city not getting an even deal in the swap. A consultant’s report said Lew’s agreement had undervalued Reeves by $11.2 million.
Officials from the council, the Gray administration and the city finance office said last week that those concerns have prompted exploration of other options.
“It’s increasingly clear that the combining of two different projects makes this very difficult,” said Chairman Phil Mendelson (D), who acknowledged “conversations” about alternate ways to finance the stadium.
The talks come as consultants hired by the D.C. Council to assess the proposal rolled back their estimate of economic benefits to the District in advance of what was likely the council’s final hearing on the proposal.
In the 406-page report, a trio of consulting groups had estimated that the District could net up to $109 million through 2046, which is when the team’s initial lease would expire.
But on Thursday, Dallas-based Convention Sports & Leisure wrote Mendelson to acknowledge that the $109 million estimate of “net new” benefits to the District included roughly $71 million in proceeds from the sales of city assets — the Reeves building and a Mount Vernon Triangle parcel.
“We want to be clear that the $71.4 million in land exchange proceeds is not intended to convey net new benefits to the District as this represents a monetization of assets the District already owns,” the letter stated.
The revised estimate is between $17.6 million and $38 million in benefits over 32 years.
Despite the downgraded projection, members of the D.C. Council continued to express support for a new stadium. The Finance and Revenue Committee on Thursday took the council’s first vote on the accord, approving sections of the legislation dealing with sales and property tax abatements. Passage came over objections from the office of Chief Financial Officer Jeffrey S. DeWitt, which called them unjustified.
The more substantial part of the package surrounds the acquisition of the stadium land, valued in Lew’s deal at roughly $94 million. The proposed sale of the Reeves Center to developer Akridge for $55.6 million and the Mount Vernon Triangle parcel to Pepco for $15.8 million would provide the bulk of those costs.
When Lew’s arrangement was unveiled, the land swaps were pitched as a way to acquire the stadium site without breaching the city’s debt limit. According to D.C. law, the city’s debt service spending cannot exceed 12 percent of overall general fund expenditures in a given year.
Despite a warning from the consultants that the city was forfeiting $25.7 million more than it should in the trades, the plan would not violate that cap on borrowing.
But according to officials in the Gray administration and the CFO’s office who spoke on the condition of anonymity given the sensitivity of negotiations, a work-around of the debt cap may not be required.
The D.C. Council’s move earlier this year to pare down funding for the city’s planned streetcar system opened room underneath the debt cap, the officials said, raising the possibility that the stadium land could be acquired without trading the Reeves Center.
“I don’t like the idea of more borrowing, but certainly that’s an option that people are discussing,” Mendelson said.
Abandoning the Reeves swap would create other complications, however. It would require the council to identify $10 million to $15 million yearly to pay the debt service, according to one official familiar with the discussions. Some existing capital projects — such as school renovations or park projects — might have to be delayed or reworked.
More crucially, perhaps, Akridge would oppose any proposal removing the Reeves Center from the deal.
Company officials led by president Matthew J. Klein have spent two years on the present understanding with Lew and dispute the consultants’ contention that they are being treated favorably in the Reeves swap. If the company is asked to receive cash instead of the Reeves Center for its land, the price tag for Akridge’s property could well go up.
““I would be very surprised if they were to say, ‘That’s okay.’ Why would they agree to that?” Mendelson said.
Regardless of the financing mechanism, there are other hurdles the legislation must clear to win approval by the end of the year. The CFO’s office says the council needs to determine how to fill financial gaps in the present deal, including an estimated $75.6 million needed this fiscal year.
At the hearing Thursday evening, council members raised other priorities they would like included in legislation as well.
Council member Marion Barry (D-Ward 8) said the bill ought to include money for the surrounding neighborhoods in Southwest to benefit from the stadium as well, particularly public housing communities. Barry suggested that “no stadium deal will be done without a community benefits agreement.”
Not present at the hearing was the District’s mayor-elect, Council member Muriel E. Bowser (D-Ward 4), who has repeatedly said she wants a new stadium for United but is uncomfortable with the Reeves Center swap. She has not offered an alternative.