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Question of the Day
While Mayor Anthony A. Williams and the D.C. Council strive to find ways to pay for a new ballpark for the Washington Nationals in Southeast, they also are debating how to best spend millions of dollars in surplus cash raised for the project.
D.C. Chief Financial Officer Natwar Gandhi expects the city to collect an average of $58 million to pay off $535 million in 30 years but says only $38 million is needed. That means as much as $20 million could be left over each year — cash that has not been earmarked.
The excess money stems from a requirement by bond raters, who told the city they would not provide investment grade ratings on the bonds used to pay for the stadium unless the city raised more money than what is needed.
The city estimates it will raise an average of $14 million from the ballpark fee on businesses, $24 million from taxes on concessions and other goods from the stadium, $14 million in a utility tax on businesses and $6 million in rent from the Nationals. Those numbers could fluctuate depending on the financial success of the team and the businesses being taxed, but if both are successful the city will have extra money to use.
“This is like bonus money,” said Vince Morris, a spokesman for Williams. “Every year we’ll get more and more.”
At a hearing last month, Gandhi said he likely would inform the council of the surplus at the end of each fiscal year, and the council would vote on where the money should go. But city leaders and council members already have ideas.
Council chairwoman Linda Cropp has introduced legislation calling for a rebate of the extra money to businesses because they are paying for a large share of the stadium. But other council members have pushed money to be used for other needs, such as school modernization. Some city leaders have suggested the money be added to a community benefit fund based on tax revenues from development around the ballpark.
Other city leaders said the money should be used to pay off the bonds early, possibly saving the city millions of dollars in interest. Still others have suggested earmarking some of the money for stadium cost overruns.
“It does provide an additional source of money for construction and cost overruns, but I think that’s politically unlikely at this point,” said William Hall, chairman of the baseball committee for the D.C. Sports and Entertainment Commission. “It hasn’t been determined yet.”
The cost of the stadium has led several council members to block the passage of a lease agreement for the ballpark. Major League Baseball filed last week to have a mediator help with the dispute because the city had let a Dec. 31 deadline for approval of the lease pass. The city is working on a plan to cap the city’s responsibility for cost overruns, hoping council members will be swayed. But it has not decided whether to enter into mediation with MLB.
According to Gandhi, the $535 million worth of borrowing will support construction of a $631 million stadium because the city expects to earn premium and interest from the bonds, plus $37 million from the ballpark fee and baseball-related sales taxes from 2005. The latest cost estimate for the stadium is $667 million, but that includes infrastructure costs the city believes can be paid for by private developers, the federal government or other outside sources.
The city once believed it could reduce revenues from the ballpark fee on businesses from $14 million to $8 million through a partial financing agreement with Deutsche Bank. The District entered into the agreement last summer, but bond raters insisted on collecting the full $14 million, arguing it was a more stable revenue stream than the other taxes.
Several council sources said they are eyeing a possible vote on the lease at the body’s next legislative meeting Feb. 7, but nothing has been scheduled.
Council members met yesterday with the mayor’s legislative aides to go over possible proposals, and members also are scheduled to meet with council attorneys Thursday.
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