Monday, May 16, 2005

An offer of private financing from BW Realty Advisors for the Washington Nationals’ planned stadium, first presented last fall to D.C. Council chairman Linda Cropp, is rapidly gaining favor among the entire council.

With an offer restructured several times and now operating under the name D.C. Baseball Stadium Associates (DCBSA), the group counts Cropp, finance committee chairman Jack Evans, at-large Democrat Kwame Brown and Ward 8 Democrat Marion Barry among those interested in developing the proposal further. The DCBSA bid involves a complex mixture of debt financing, real estate tax credits and equity investments to fund the stadium.

The heightening interest in the DCBSA proposal could be a fatal blow for Deutsche Bank, whose bid of private ballpark financing had been recommended by Natwar Gandhi, District chief financial officer, and then endorsed by Mayor Anthony A. Williams. But last week, Deutsche Bank surprised Evans and other council members when it said it needed firm guarantees backing a $246million debt financing package, leaving its bid as essentially a loan with higher interest rates than the District could gain on the bond market.

“I still believe this bid [from DCBSA] is the one that really puts private dollars into the equation and lowers our costs,” said Cropp, who as chairman will pull votes in whatever direction she goes. “There are things we still have to work through and clarify, but I’m going to keep swinging until we come up with something that makes this a better deal for the District.”

Cropp was the chief architect of an effort to find at least $140 million of private financing for the ballpark last fall.

Evans finished two days of public hearings yesterday on the bill to incorporate those public dollars into the stadium planned for the Anacostia River waterfront. The actual source of the private funding remains the key unresolved question, but an answer will need to come soon. Evans aims to mark up the bill in his committee June 1, with the first full council vote on the measure to follow six days later.

Despite the ground swell of support for the DCBSA proposal, several issues remain. Among them:

• The bid has not been certified by Gandhi. Though not a binding requirement for council passage, Gandhi did assert in March the proposal presented “significant risks and higher costs.” Furthermore, several key documents verifying elements of the DCBSA plan were not forwarded to Gandhi’s office during his review of all eight submissions of private stadium financing.

• The DCBSA bid involves a ground lease of the stadium from the District, which might need to acquire some of the land needed for the ballpark through eminent domain. A case currently before the Supreme Court might make it unlawful for municipalities to gain land through eminent domain and then transfer it to a private entity.

• The proposal also relies in part on the use of depreciation tax credits, and the group has not supplied the necessary tax opinions to the city to certify the viability of the plan. Evans is seeking assurances the city will not be harmed financially if a future IRS ruling limits what DCBSA can do.

• Evans also wants to keep the stadium development under the control of the D.C. Sports & Entertainment Commission, contrary to DCBSA’s original aim of taking over the process. Richard Gross, DCBSA principal, said he is open to the request, though nothing is in writing yet.

“We’ll have to see what happens. If we still control the building of the stadium and we’re not on the hook if this turns out to be a bad deal for them, then this becomes more interesting,” Evans said.

BW Realty Advisors is based in the District and New Hampshire.

When the council votes on the bill, the choices will be to stay with the existing, ratified plan relying on District bonds or to amend that structure to include private financing. Parallel to the legislation itself, both Cropp and Evans said the door is still open to advance a master development plan from Georgetown builder Herb Miller for the area around the ballpark.

Meanwhile, efforts are under way to amend the gross-receipts tax on large District business, one of the key funding sources for the new stadium. DCBSA’s bid intends to wipe out the tax entirely. But if it stays, several local business groups want the tax structure changed to make it more progressive, particularly on smaller businesses. After three revisions last fall to the tax structure, District businesses earning more than $3 million a year are assessed one of four fees ranging from $5,500 to $16,500.

“There are things we can do to make it more progressive, particularly at the lower end,” said Robert Peck, executive director of the Greater Washington Board of Trade. “At the upper end, there’s no way to make this truly progressive and leave everyone with the same effective [tax] rate. But we’re working on making this more fair.”

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