District officials are expected to tell the city council Monday that raising a $535 million cap on spending for a new baseball stadium is not an option, and that the city must scale back the ballpark design or persuade Major League Baseball to chip in to stay under budget.
Chief financial officer Natwar Gandhi and other officials will tell the council they can’t budge from the cap and retain credibility with bond raters, who would be asked to provide investment-grade ratings for the bonds used to finance the ballpark.
The city revealed this week the ballpark is considerably more expensive than first believed, and is now working to scale back some features of the ballpark design and on persuading developers and the federal government to pay for infrastructure improvements.
Meanwhile, sports commission members said they will provide the council with details of a new lease agreement with MLB for the stadium, which could be finalized this week. While officials stopped short of promising the lease would be done in time for the hearing, they said they were confident that talks will be far enough along that the lease can be discussed publicly before the council.
“I’m optimistic that we will work out the issues necessary to make good on the deal from Wall Street’s standpoint, as well as keep ballpark costs at or below that $535 million,” said William Hall, chairman of the baseball committee for the D.C. Sports and Entertainment Commission. “It will be close, but [the council] will in my view be able to get a pretty complete account as to what the agreement will be.”
Monday’s council hearing, held jointly by the committees on Finance and Revenue and Economic Development, is expected to be highly contentious, as there has been mounting frustration over rising costs and glacial progress in the face of looming deadlines.
“The whole purpose is to find out where we stand today,” said Jack Evans, the chairman of the Finance and Revenue Committee, who has been heavily involved in ballpark discussions. “Should we build it in Southeast. Should we build a cookie-cutter retro structure. Should we renovate RFK? What should we do?”
Evans said he is not aware of any discussions to raise the price ceiling on the ballpark, even though it was revealed this week that costs for the ballpark in Southeast have risen from $244 million to $337 million, and that land acquisition costs will be $98 million, or about $21 million more than estimates.
To make up the costs, the city will ask the federal government and private developers to pay for many of the infrastructure improvements at and around the ballpark site and already has started removing some aspects of the stadium not seen as part of the core design. For instance, the commission’s offices probably will be housed in the D.C. Armory instead of the ballpark, and the city has decided against a “hardening” process that would make the stadium more able to withstand an explosion.
MLB has thus far said the city must pay for any cost overruns, citing the ballpark agreement signed by the two sides last year.
Ballpark designs have not been released publicly, but it is said to include heavy amounts of steel, glass and limestone. Some officials, including Evans, said they prefer a more traditional design with brick and other materials, arguing that it could be cheaper.
“If you build something that’s novel and futuristic, the likelihood is that it’s going to cost you more,” Evans said. “If cost is an element, sometimes you can’t get what you want.”
The city is planning to begin selling bonds on Dec. 15, assuming the lease agreement is done. Officials have been battling MLB on the issue of making sure revenue streams for the stadium — including a $6 million average annual rent payment — are guaranteed in order to satisfy bond raters. The city is asking for $24 million in up-front rent from MLB to go into a reserve to cover costs in the case the team can’t play in the stadium because of disaster, player strike or other reasons. Also, the city wants $20 million to cover the cost of some parking at the ballpark.
Meanwhile, the D.C. attorney general is expected to issue a recommendation as soon as today on whether the council must approve the lease agreement. Officials have strived to avoid council involvement because the body could strike down the deal, or at the very least create additional delays. The council now includes several new members who have been critical of the stadium agreement, but council sources said they have the seven votes needed to approve the lease if needed.
It is unclear how soon MLB will announce an owner once the lease talks are done. Hall and other city sources said they believe a decision could come quickly after the lease agreement is signed, and MLB commissioner Bud Selig has said he will select an owner as soon as possible. But more skeptical sources said MLB is in no hurry to choose an owner because the Nationals have been successful under the league’s control.