D.C. Council Chairman Phil Mendelson (D) said he will ask his colleagues to vote Tuesday on a revised deal to build a professional soccer stadium in Southwest Washington that removes some of the previously negotiated tax abatements and would require more than $60 million in new city borrowing.
To complete the proposed $300 million deal by year’s end, the council must take the first of two votes at Tuesday’s legislative meeting.
Under the outlines negotiated by outgoing Mayor Vincent C. Gray (D), the city would pay as much as $150 million to purchase and prepare the land for the 20,000-seat stadium while the D.C. United soccer team would pay a roughly equivalent amount to build it.
One controversial part of the deal concerned sales and property tax breaks offered to the team, which has said the abatements are needed to help secure financing for the construction of the stadium.
Consultants hired by the council agreed it “would become much more difficult for D.C. United to obtain any significant level of long-term stadium debt” without the breaks, but another analysis done by the city’s chief financial officer disagreed.
At a news conference Monday to discuss the agenda, Mendelson said he planned to discard a proposed 10-year sales tax abatement worth roughly $7 million while leaving in place the more extensive 20-year property tax abatement worth $43 million.
Mendelson said he was more dismayed by the sales tax break because it was “hard to see how it would have a direct economic effect on the team.”
“Cutting all of the abatements might be a wonderful idea, but what is before us is the result of negotiations,” he said.
Also laid out Monday were new details of the council’s plan to fund the District’s out-of-pocket stadium costs, which has been sketchy since Mendelson and Mayor-elect Muriel E. Bowser (D) announced their plan to replace Gray’s funding mechanism — the sale of the Frank D. Reeves Municipal Center — with borrowing.
Council budget officials said the stadium plan would require the city to issue $62 million of new debt and reshuffle another $37 million in existing capital spending.
Mendelson said he did not anticipate any major projects needing to be delayed because of the soccer deal. However, a more salient obstacle to closing out the soccer deal before year’s end could be Gray’s reluctance to cooperate with the council’s moves to dismantle his original deal.
To authorize the new borrowing this year, the mayor would have to send the council a supplemental budget request. But Gray has so far balked at doing so, according to aides familiar with the matter but not authorized to comment publicly on it, and mayoral budget officials are exploring ways to finance the council’s stadium plan without reopening the current budget.
Bowser could send down a supplemental budget after she takes office Jan. 2, but Mendelson said he sees no reason to wait.
“I’m not quite sure what they’re thinking,” he said of the mayor’s office. “It’s my sense that there is widespread support for this deal going forward.”
But there are questions about what effect the stadium borrowing could have on other city priorities, including finding a solution to the problem of family homelessness. Gray has proposed closing the dilapidated shelter at the former D.C. General hospital, but the city’s capital spending plan includes no plan to renovate or replace it.
Ed Lazere, executive director of the D.C. Fiscal Policy Institute, said tying up scarce capital dollars in a soccer stadium could be short-sighted. “Is anybody even thinking about it or asking any questions?” he said. “There are some real tradeoffs being ignored.”
Mendelson said Monday that the city needs to “take a hard look” at its capital spending plans but noted the council had no concrete shelter proposal to consider at this point, while the soccer deal has been honed for months.
The legislation set for a vote Tuesday would not resolve the fate of a key stadium parcel owned by the developer Akridge, which had been in line to receive the Reeves Center in a trade.
The bill would authorize a total of $90 million in land acquisition spending — which, assuming that prices for other stadium parcels remain steady, leaves little room for negotiation above the $21.1 million price Akridge had agreed to when the Reeves swap was still in play. Eminent domain, which would be authorized in the bill, remains a possibility.
D.C. United declined to comment on the proposed withdrawal of the sales tax abatement, citing the ongoing negotiations, but it is not likely to receive the change warmly particularly because it already made a number of substantial concessions in negotiations with the Gray administration.
In the original term sheet the team signed with the District, United would have paid no property taxes or sales taxes whatsoever during the entire 30-year term of the initial lease.
United’s owners then agreed to property and sales tax abatements that sunset during the course of the lease, providing an estimated value of about $50 million to the team and giving it runway to create a profitable operation.
The owners also agreed to a $2 surcharge per ticket, which would make attending games more expensive for fans but provides greater revenue to the city.
Further narrowing the subsidies to the team will likely factor into negotiations that it has with lenders. Jason Levien, the team’s managing partner, spent part of the Thanksgiving break in Europe meeting with the team’s majority owners, from Indonesia, about the stadium prospects.