Hurricane Katrina and the fear of terrorism in the District are playing a role in talks between Major League Baseball and the city over the terms of a lease for the Washington Nationals’ new ballpark.
MLB has asked the city to soften its demand for a guaranteed annual lease payment, in part because it wants the ability to pay less rent or eliminate it in cases in which outside events — such as catastrophic weather or terrorism — would force the Nationals to play in another stadium.
The issue of the rent payment has become one key sticking point in efforts to complete the lease agreement, which must be in place before Wall Street will approve the city’s financing plan for the $535million ballpark in Southeast.
Details of the lease talks were discussed by city sources only on condition of anonymity because negotiations are ongoing and at a sensitive stage.
Hurricane Katrina, which bashed New Orleans in late August and forced the NFL’s Saints to play in Baton Rouge, La., and San Antonio, has brought the issue to the forefront. The risk of a terrorist attack, perceived to be higher in the District than in most cities, also has moved MLB negotiators to look for ways to reduce the league’s financial risk. In 2001, MLB postponed games after the events of September11, but no games were moved or canceled.
Under the financing plan approved by the D.C. Council last year, the District is authorized to pay for the stadium by issuing bonds, which would be paid back using an annual rent payment, stadium revenue, a utility tax and a gross receipts tax on businesses. The city says it needs about $6million in annual rent to cover its debt. Wall Street won’t provide an investment grade rating on the bonds unless the payment is fully guaranteed for the duration of the 30-year lease.
Deutsche Bank, which is negotiating with the city on a deal to pay for part of the ballpark in exchange for stadium revenue, won’t sign off until it knows what ratings the bonds will receive.
A spokesman for District Mayor Anthony A. Williams declined to comment. MLB officials did not return phone and e-mail messages. The league has said it will not select an owner until the lease agreement is in place, and there is pressure on all sides to complete the agreement within the next two weeks so owners can vote on new ownership at a meeting in Milwaukee in mid-November.
Sports business experts said teams and leagues are becoming increasingly aware of financial risk and will do whatever is possible to eliminate it or pass it on.
“There are contingency plans that go into everything,” said David Carter, executive director of the Sports Business Institute at the University of Southern California. “They’re accounting for things that five or six years ago would be such an improbability they’d be almost laughable.”
Mark Rosentraub, a sports economics professor at Cleveland State University, said insurance usually will cover any business loss resulting from switching stadiums and that all the parties must decide is who pays the premium.
In the District, any losses resulting from war or terrorism likely would be covered by the federal government. And closure of the stadium because of weather-related problems like a hurricane is viewed as an unlikely event, meaning premiums are relatively low.
The District, meanwhile, is facing several deadlines. It must complete the ballpark financing and have money from the sale of bonds in the bank by Dec.31. It also wants to acquire the ballpark land by the end of this year and have construction begin in March so the team can begin playing there in the spring of 2008. The District began eminent domain procedings yesterday against some landowners at the ballpark site.