More Money, More Problems

So the mayor thinks he has found a solution to the baseball stadium drama. But the council members are already making noise that the $20 million he has identified for cost overruns will take the project over the council's $611 million cap.

I've been told this is the last chance for the stadium deal to go forward. Mayoral aides believe MLB wants to simply be sure the Nationals' owner will not get stuck with cost overruns and that there is enough money to build underground parking. Those are the final sticking points. But if the mayor's latest idea comes under heavy council fire, there could be a problem. Also, we'll have to see what the business community says about the mayor's plan because some businesses were hoping the council would rebate some of the taxes they are paying for baseball if there was a tax excess.

I just talked with council member Kwame Brown, who voted in favor of the spending cap, and he said today he is not in favor of the mayor's plan to use excess tax money for the cost overruns.

-- David Nakamura

By Eric Weiss |  March 1, 2006; 9:20 AM ET
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Comments

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I was wondering why baseball hadn't agreed to the latest deal to bring baseball to DC. They're trying to soak the city for every last penny. The city will eventually pay more than the $611 million cap when this is all over. It's a bad deal..........

Posted by: John Bonagur | March 1, 2006 10:11 AM

I agree....This is the final straw. If MLB doesn't agree on the changes made by the council, this will be the end of the Nats in DC. Both sides are tired of each other (not to mention the pending court case of who actually owns the National's name). With all thats at stake here, you'd think these elected officals and millionaire owners could realize that they are fighting over minute details when you think about the big picture. From the District's side of things.... so what if you wanted a $611 Million cap, but have to spend $630. And on the MLB side of things.. so what if an already enormously rich owner has to make a $20 million investment in a stadium which will in turn make his team more profitable! Excuse my expression, but both sides need to Sh*t or get off the pot!

Posted by: Navy Yard | March 1, 2006 10:13 AM

Everyone knows the cost overruns on this project are going to be a lot more than $20 Million. Thus why the issue. If the city caves again (they already caved from the phony $535 Mil promise to $611 Mil), they will set the precident of the DC taxpayer eating it all.

Posted by: So what | March 1, 2006 10:22 AM

People need to realize that the "DC Taxpayer" that most people think about are residents of the city. The residents of the city aren't being taxed at all. The taxes that will pay for the stadium are taxes on businesses in the city, and the taxes generated on concessions from the city (which will be mostly paid by residents of Maryland and Virginia).

Posted by: Navy Yard | March 1, 2006 10:52 AM

Navy Yard, I tend to agree with you. However, if there are overruns that are not covered by the revenue streams as defined for the bond payments, then what?

This is the first time I have waivered on the prospects of baseball in DC.

Posted by: andrew | March 1, 2006 11:16 AM

No matter how many times you try to explain it to people Navy Yard, some people just don't understand that NONE of the money for the stadium is coming from the general fund. Further, the cap put in place by the council specifically prohibits use of any money from the general fund for purposes of paying for the stadium. Also, there has been a construction agreement signed that places a cap on the most significant costs of the stadium construction. The problem here is that agreement is based on site work starting in March (yes, this month). Ironically, MLB's consistent dragging of their feet is what is causing the increased likelihood of cost overruns.

Posted by: anonymous | March 1, 2006 11:37 AM

I think that this is a bad idea, to assume that the propose tax revunue base will be generated by concessions, and businesses is really out of touch will reality. Think about this, just supposed on any given day, no one decides to show up and purchase, or buy anything, who still pays the rent?

Posted by: James | March 1, 2006 11:38 AM

A few thoughts:

1. Money is fungible. $20 million used for the stadium is not available for other things, and therefore places $20 million more pressure on the general fund. Pretending it is not taxpayers' money because it is taken out of one pocket rather than the other is naive to the point of dishonest.

2. Anyone who thinks overruns will be limited to $20 million is fooling themselves. Cost overruns on the land alone are likely to exceed that because of the deliberately lowballed original cost estimates. Most people now put the total cost at somewhere between $700 and $800 million.

3. it is past time for MLB to pony up a reasonable amount of money (somewhere between $50 and $100 million) in exchange for getting a stadium worth hundreds of millions to the franchise. if they had agreed to a fixed-sum payment months ago, they wouldn't be in the position they are now of being asked to take on an open-ended obligation.

4. For all the threats of the Nats going elsewhere, I am still waiting for someone to tell me what other metropolitan area will offer them (1) a better stadium deal than the $611 million they are currently being offered, and (2) better demographics. I haven't heard one yet. If one existed, they'd be there already.

Posted by: Meridian | March 1, 2006 12:09 PM

Money is fungible. There is nothing stopping any Admin from simply playing games with the numbers and shuffling money from the general fund into a stadium slush fund. You just need a third fund to slide the money between...and DC Govt has a lot more than one option.

If the city caves on this, the average DC Taxpayer is about to be gouged. While the stadium construction cost is supposedly "capped" with the company doing the construction, there is no mention of land purchase, infrastructure issues, etc... And land purchase is number one with a bullet in expected cost overruns.

Posted by: Wrong NY and Andy | March 1, 2006 12:14 PM

The problem is that they haven't really settled the issue of who pays the overruns. Baseball says not the owner, the Council says not the city. Williams keeps trying to come up with ways for the city to pay, without the city paying -- using the city's money, without using the city's money. It's essentially money-laundering.

Posted by: Contrarian | March 1, 2006 12:27 PM

Let's all agree on one thing - That no one truly knows EXACTLY how much this stadium is going to cost. No One. Everyone has estimates. However, to MAKE money, in most cases you have to SPEND money. That's the reason why developers are snatching up land in the Navy Yard area, paying Millions of dollars for city blocks. The city is no different. Making this investment in the city will no doubt bring people to that area all year round. The city will reap the benefits from this stadium for the next 20-30 years. I think opponents of this stadium deal are very shortsighted... kinda like people who rent apartments their whole lives, instead of saving and putting a downpayment on a home that will benefit them in the long run.

Posted by: Navy Yard | March 1, 2006 12:39 PM

First thing that I would do if I got named as the Nationals owner: tell the city I was changing the plans for the stadium to suit my wishes and I'll pay for the overruns.

Second thing that I would do if I got named as the Nationals owner: sue Major League Baseball and Pete Angelos for the TV rights to MY TEAM.

DC is getting screwed here because we're dealing with an entity that refuses to act in the best interest of the team and the fans. I find it hard to believe that the guys who have enough money to buy an MLB franchise could care about a marginal cost of a few tens of millions of dollars.

Posted by: Mt.P GOPer | March 1, 2006 01:08 PM

All parties involved in this process are shortsighted. The members of the council are squabbling over money that will be made up in tax revenue on the stadium in a short period of time. Similarly, they are focused more on their short term political careers than on the strong financial longevity for the city.

Baseball owners seem to care more about how the sale will impact their bottom line in the next two years than on how a strong team in DC will help raise the revenue of the entire league for years to come. $20 million spread over 26 teams? You do the math. That's less than you can get Sammy Sosa for these days.

Posted by: KMB | March 1, 2006 01:40 PM

This just proves that the City Council (and Mayoral candidates) are more interested in good politics than smart public policy. $20 million is a drop in the bucket compared to a $611 million + stadium. But here's the thing -- the benefits to the city of a stadium, team and development (check out today's Business section for an article about development plans in Anacostia) will go on far longer than the three or four years it will take to construct a stadium.

Could we have gotten a better deal? I suppose. But that's spilt milk now.

And keep in mind, that if MLB forces the city into arbitration on this, the likely price tage will be $50-75 million. How ironic that Fenty, Graham et al will end up costing the city a great deal more by the riddiculous posturing.

Posted by: Glover Park | March 1, 2006 01:52 PM

If it's true, as several of the commentors here say, that "you have to spend money to make money," MLB should not be exempt. As the principal recipients of the revenue stream the stadium will generate, they should be among its investors. MLB can either kick in a portion of the $450 million they will receive for the sale of the franchise (a profit of over $300 million, and $150 million over the originally anticipated sale price when the move to DC was announced), or they can transfer the cost to the new owner and accept a lower sale price for the team. In either case, the MLB share -- let's say $100 million -- can be financed over the life of the stadium.

It is likely that even with a $100 million investment from MLB (or the Nationals), the city will end up spending more than $611 million when all is said and done. But it will be a lot more palatable, fair, and politically viable. If they are not willing to spend money to make money, it is not clear to me why the city should spend even more. And make no mistake -- we are not talking about only another $20 million in the city's financial exposure. More likely it is another $100 million or more beyond the $611 million already authorized.

Yes, MLB could, alternatively, take DC to arbitration. But beyond penalizing the city by an amount likely to be less than the overruns alone, it's not clear that an arbitrator can force the city to build a ballpark. So MLB's options are not particularly attractive, and a city that has no active competition in offering $611 million plus the nation's best demographics should not act as though it is playing with a weak hand.

Peter Angelos, Marvin Miller and others have demonstrated that the only way to deal with MLB is to play hardball. It is late, but not too late, for DC to do the same.

Posted by: Meridian | March 1, 2006 02:47 PM

DC = Suckers. Thank God this didn't come to VA!

Posted by: Arlington Guy | March 1, 2006 02:48 PM

We all know what's going to happen: council members will object to this plan and they'll head to arbitration. No need to kid ourselves otherwise.

In my eyes, the blame for this latest failure should be placed squarely on MLB. They just don't get the political reality here in DC. At all. If they understood DC even one bit, they'd realize that the council members just wanted to save face by voting for what appears to be a hard cap, even if it isn't. And by realizing that, MLB wouldn't have played hardball (pardon the pun) with the lease that FINALLY was approved, and the mayor wouldn't have had to tell everyone about this plan for an extra $20 million, and the council wouldn't have to object. MLB could have understood that the cap was a soft cap, as it was written, kept quiet about it, winked and nodded at the mayor, signed the lease, and everyone could have declared victory later. But they didn't.

Posted by: AJ | March 1, 2006 02:55 PM

Would everyone who thinks MLB, because they are profiting so nicely, should kick in more money agree to buying my house and then giving me a slice of the profits when THEY sell it, long after I have moved on. That's essentially what you're demanding of MLB.

Whether or not MLB is making a lot of money this is no one's business but thiers. Do I like it? No, but I also recognize it is irrelevant.

The City made a deal, in the form of its suly elected representative Mayor Williams, to bring baseball to DC. Included in that deal was a promise to build a stadium. Either we welch on the deal or we honor it. It's that simple.

IT'S DAMN TIME THIS CITY HONORED ITS PROMISES!!!!

Posted by: Glover Park | March 1, 2006 03:31 PM

There's lots of blame to go around here, but let's not lose the big picture. The City will make hundreds of millions in tax revenue from the development of this project. As a DC taxpayer, I don't have a problem with funds generated by the baseball project (business taxes, utility taxes on office bldgs, stadium concessions taxes)being used to cover the cost of the stadium. Someone here called it "money laundering." I call it basic accounting and project finance.

Should baseball come up with the $20 million? Of course. Should the City let this project die over $20 million that they may not even have to spend? Of course not. It would be irresponsible and severely hinder the national reputation of the City.

Posted by: Brightwood, DC Resident | March 1, 2006 03:58 PM

Well said, Brightwood! Of course, this city has done so much to make itself a laughing stock already...

Posted by: Glover Park | March 1, 2006 04:01 PM

The problem with the "honor their promises" line of reasoning is that Williams made a promise he had no authority to make. Glover Park, if Mayor Williams promises MLB that you'll sell hot dogs at the new stadium, are you ready to strap on a tray? Williams had no more business promising MLB without council approval that the city would build a stadium than he had promising that you would sell hot dogs. It's not the citizen's fault he made a promise he couldn't keep. MLB was foolish to take his promise at face value.

Posted by: | March 1, 2006 04:08 PM

Glover:

If, to enable you to sell your house at a substantial profit, you were asking me for $611 million (or more) in home improvements, I might be expecting you to pick up some percentage of the tab for those improvements. That's what we're talking about here.

You are right about the city needing to honor its commitments, and I agree that the problem is that a bad deal made in December 04 to some extent ties the city's hands. But the lords of baseball are no strangers to the concept of renegotiating a contract, and that is, really, what is going on here. Nor do they have a sterling record when it comes to honoring their own commitments. Bottom line: An MLB/Nationals contribution of $100 million to a $700-800 million stadium near the downtown of the largest available metropolitan area is a fair deal. They won't get a better one elsewhere.

Posted by: Meridian | March 1, 2006 04:11 PM

Now that he's flip-flopped and voted FOR a policy he campaigned AGAINST, Kwame Brown wants us to believe what?

He's FOR the legislation but AGAINST its implementation?

Buyer's remorse, anyone?

Posted by: CT | March 1, 2006 04:15 PM

Yes, Williams did have the authority to make the deal: he is the Mayor. Indeed, the City Council even ratified the deal. Now that costs are going up, as costs tend to do, the Council is crying over spilt milk. Bottom line: you made a deal, honor it.

March 1, your analogy makes no sense. There's no reason I'd ask you for money to make improvements as I own the house. You do not own the team or the stadium. Why should you be entitled to a share of their profits when it doesn't concern you in the slightest. They are providing a product to be purchased. It's called a free-market economy. It's a fact, and, to quote Marion Barry, get over it.

IT'S TIME FOR THIS CITY TO HONOR ITS PROMISES.
Baseball makes long-term sense for the

Posted by: Glover Park | March 1, 2006 04:19 PM

Glover:

Let me explain the analogy for you. The promise of a new publicly financed stadium contributes significantly to the value of the franchise and makes up a substantial portion of the profit that MLB will reap in selling the franchise as well as the long-term value of the franchise to its new owners. This is analogous to home improvements that would enhance the sale price of your house. If the city is going to incur those expenses, it is reasonable to expect something in return from their beneficiaries (MLB and the Nationals) upon whom this value is conferred.

MLB is free to seek a penalty against the city, declare the deal dead and take their business elsewhere, just as you would be entitled to sell your house to someone else, without the improvements, presumably for a much lower price.

But unless MLB is irrational, they would only take their business elsewhere if they can get a better deal.
The fact is, they won't get a better deal anywhere else. If they could, they would have a long time ago. And that is why several owner groups made known they would be willing to kick in some additional money for the stadium, until the MLB owners muzzled them in their continuing effort to con the city and ballpark supporters into believing that we are without leverage.

Posted by: Meridian | March 1, 2006 04:31 PM

"Free market economy" ? A private business getting a 600million+ subsidy is "free market economy"? In a true free market economy, teams would pay for their own stadiums.

Posted by: | March 1, 2006 05:00 PM

Observations on the stadium fiasco. I made a two part bet with co workers in 2004 when the "deal" for a new baseball stadium in DC was announced and $$ figures given for construction, that within a year those projected costs would be 25% higher AND not a spade of dirt will have been moved on the project, within that same year. The other part of the bet was that MLB would "run over" DC elected officals who would rush to make more promises they couldnt keep, with money they dont have and land they dont own. How am I doing?? I have a couple of free meals coming my way. Predicting politicans actions isnt all that difficult folks. Neither are MLB's actions. Negotiations 101. You residents of the district who have "skin" in the game, (IE, those paying the "designated" taxes for the stadium), best be certain that the lease and bond language doesnt contain anything about YOUR first born child and endentured servitude......goodness knows what the politicos may have promised MLB in their rush to consummate a really, really bad deal for you and the district. Mr Angelos must be enjoying all this immensely.

Posted by: davidus | March 1, 2006 05:15 PM

Wecan argue all we want, but it comes down to one basic point which no one, to date, can refute:

DC HAS TO HONOR ITS PROMISES.

Posted by: Glover Park | March 1, 2006 08:21 PM

Amidst all the squawking and growling, I frankly don't see why we have not been considering a reasonable compromise: build a new stadium on the RFK site.
Wait! What do I hear? A sonic shock wave of derision, traveling faster than the speed of sound, "You idiot! There are a million obstacles to building a new stadium at RFK!!"
To which I might reply, "Apparently not as many as there are to building one on S. Capitol Street."

Posted by: HarpoDC | March 1, 2006 08:35 PM

Take a look around RFK and show me where all the development will go. The planned site offers a great deal more to the city in the long-run in terms of long-term economic benefit. And that is why:

DC MADE A DEAL AND NOW IT HAS TO HONOR ITS PROMISE.

Posted by: Glover Park | March 1, 2006 09:05 PM

Glover,

RFK has a huge amount of land devoted to parking lots. That could be replaced with a large under/above ground parking facility, and the vast bulk of the remaining land could be slotted out into development.

Posted by: Parking lots | March 1, 2006 09:20 PM

What you forget is that this notion was already evaluated by both the Council and MLB and it was rejected. To say nothing of the fact that it would displace the Nats for who knows how long. Development has alredy started in the Anacostia location, which was part of the rationale for bulding there. But the land is irrelevant here as it will still cost a great deal of money to build a stadium anywhere. Finally, it still comes down to one immutable point that no one can answer:

DC HAS TO HONOR ITS PROMISES AND HONOR THE DEALS IT MAKES.

Posted by: Glover Park | March 1, 2006 09:35 PM

"DC" didn't promise MLB anything. Anthony Williams stepped outside his authority to promise MLB a deal that he a)couldn't deliver and b)would only serve to penalize DC citizens. Virginia residents make out in this deal because we, those of us who want it, get local baseball without having to pay for it. Try putting the baseball deal to a general vote in DC and see how many residents want to pay for an open-ended money pit. Most of the revenue that comes in via baseball goes to MLB or the owner of the team, NOT to DC. It will be decades if ever before DC would be able to recoup the costs of the stadium let alone all the infrastructure improvements and security that will be needed.

Posted by: Alexandria, VA | March 1, 2006 11:08 PM

Iron-clad cap, huh? This is exactly what Councilmembers Mendelson, Fenty, Catania, and Graham said would happen. You give an inch of wiggle room and the Mayor blasts the door open and acts like it's no big deal. And Cropp chided Mendelson that day for wanted to slam shut this loophole - now she's stating that she didn't intend for this to happen? That's like jumping in the Atlantic with a bloody cut and not expecting the possibility of tangling with a shark. We all need to remember that Brown and Barry, along with Vince Gray and Kathy Patterson (two candidates for Chair of the Council) flipped on their pledge - now that are coming out saying that there will be rebellion if the Mayor goes along with this plan for overruns. You can't have your cake and eat it too, lady and gentlemen - and for folks to say that the DC taxpayers won't pay for this - that is unfortunate. Yes, DC residetns' tax bill may not have a line item that says "Stadium" but the enormous bond that must be floated will ensure that we, as a city, cannot borrow more for critical issues such as affordable housing, healthcare improvements, education - you name it. We as residents need to face it - those Councilmembers made a choice - and now we might have a beautiful stadium at some point, but the cost, althought maybe not monetary, will be felt for years. I hope baseball is that important.

Posted by: Who Can We Count On? | March 2, 2006 08:26 AM

In point of fact, the Council ratified the deal that WIlliams made, so Alexandria has no idea what he/she is talking about.

And what "Who Can..." fails to realize is that the money for the stadium is coming from a business tax. Money for schools etyc. has already been apportioned. But what they also fail to realize is that the long-term revenue that the stadium will generate will proivide money for schools etc., as if money was all these issue need. Ha!

What would you all prefer? MLB dragging the city into binding arbitration (which the city will lose) and with it penalties of $50-75 million? Brilliant idea for saving money.

Here's another point no one even attempts to address:

THE CITY MADE A DEAL. NOW IT HAS TO HONOR IT.

Posted by: Glover Park | March 2, 2006 09:38 AM

"THE CITY MADE A DEAL. NOW IT HAS TO HONOR IT." - This statement is true, no way to get around it. However, reality is that the orginial deal the city made has been changed so much, its not point even discussing it. Seriously, the original deal had the district financing EVERYTHING. We are now at the point where the Federal Government is paying the $20 Million for the upgrades to the Navy Yard Metro Station, MLB is putting up $20 Million toward the cost, and Developer's are contributing money, in exchange for development rights. Therefore, the orginial deal has been thrown out the window a long time ago, and we are at the negotiating table. I for one want the stadium, and think its good for the city, without this latest "technical ammendment" that calls for this $611 Mllion Cap. Hopefully, the stadium gets built on the Anacostia... we'll just have to wait and see.

Posted by: Navy Yard | March 2, 2006 10:30 AM

Navy Yard makes some good points. I would just remind him that all of those elements -- the Feds kicking in for the Metro station, developer money, etc. were all used to sell the original deal, so I guess I don't see how those are new developments that have altered anything significantly.

Just a technical refinement of his/her fine point, as it should be no surprise, that I am a strong stadium supporter as well. :)

Posted by: Glover Park | March 2, 2006 10:41 AM

The only two people on the Board who seem to know anything about the deal are Navy Yard and Glover Park. The key points:

1) The District is legally responsible for cost overruns. Period.
2) DC "taxpayers" are not paying a dime for this project--something baseball-haters have NEVER acknowledged.
3) Money from ticket taxes, concession taxes, and Nationals rent payment will be 100% profit once the bonds are paid off. So this money should obviously cover any cost overruns.

And Meridian, to your ridiculous point that if DC has to "spend money to make money" than MLB should too, maybe you forgot that they already did: they bought the Expos. Now they are going to get a windfall in return. Same as the District.

Posted by: Roadhot | March 2, 2006 11:38 AM

Roadhot:

Yes, MLB bought the Montreal Expos. But they don't want to sell the Montreal Expos, they want to sell the Washington Nationals.

Why? Because they can get a significantly higher price for a Washington-based team (about $450 million) than they could for one still playing in Montreal's Olympic Stadium (which they bought for about $125 million in a very curious three-way transaction that left the owner of the Expos with the Florida Marlins).

A significant component of that much higher price is the value of the stadium being provided to them through the use of DC tax revenues (call it what you will, but money collected through the coercive power of the state is a tax). No one is expecting MLB to pick up the whole tab. But investing $100 million in a stadium that will enhance the franchise's value by at least twice that is not unreasonable.

You might note that in the last few years, the San Francisco Giants, New York Yankees, and New York Mets agreed to build stadiums with their own money. In other cities, such as Pittsburgh and Philadelphia, new stadiums were built with the teams paying between 30% and 50%.

No one is suggesting that MLB would have brought a team here and paid for 100% of the stadium. But it is certainly reasonable to expect some meaningful contribution, especially when Virginia backed out of the running and no other metropolitan area has comparable demographics or has offered a comparable deal.

Re: "a deal is a deal." With certain exceptions, the law provides no penalty for breach of contract other than preservation of the other party's "benefit of the bargain." If a party is stuck with a contract that it believes is a losing proposition, it is often better off paying the other party to go away than to continue performing. I am not suggesting that should happen here, merely that there is generally no legal or moral obligation to continue performing on a bad deal so long as you are prepared to pay the consequences of breach. And, in fact, the other party has a general obligation to minimize (or, to use the legal term, "mitigate" its damages). Part of the problem in this case, however, is that it's not entirely clear what the December 04 deal obligates the city to or the nature of penalties for nonperformance. In fact it has been reported that both parties are reluctant to go to arbitration because no one really knows what an arbitrator would do in this case.

Posted by: Meridian | March 2, 2006 02:07 PM

Correction: In my earlier post, I misstated that MLB purchased Olympic Stadium. Of course that is not true, they purchase the Expos, not the stadium.

Posted by: Meridian | March 2, 2006 02:10 PM

Meridian, you are so mistaken on so many points.

First, the value of the Expos/Nationals grew, just like any sensible investment. By your rationale, I should be entitled to a percentage of anything you sell in the Washington DC city limits as I am a resident here as well. So pay up!

You're information about NY is incorrect. There has been much talk of a PUBLICALLY-financed stadium on public lands and the deal is now where close to being settled.

If you think that MLB is going to look at the DC situation and think, we can't do better anywhere else, please explain why they didn't sell to DC ages ago.

FInally, your whole explanation of why a deal isn't a deal is so non-sensical that it doesn't merit a response. But I love a challenge...there is no way to prove DC is on the bad side of this deal as the city will benefit from a team and a stadium for years upon years.

Your point about arbitration is dead wrong. MLB is itching to go to arbitration because the case is about as open and shut as it gets. Part of the deal to bring a team to the city was a provison to build a stadium. Further, the costs of losing at arbitration will be $50-75 million.

The mayor made a deal, the Council ratified it and now it is trying to renege on the deal with all kinds of monkey-business on the stadium lease.

A DEAL IS A DEAL, AND IT IS TIME THE CITY HONORED IT'S PROMISES.

Posted by: Glover Park | March 2, 2006 02:24 PM

There is in fact a dollar amount on contracts the Mayor can make without council approval, and this ballteam deal exceeds that amount. Since the Williams administration misrepresented the fincances involved with the proposed deal and now wants to amend it, the council has a duty and every right to reconsider and likewise amend its approval.

To suggest otherwise is either innocent ignorance or purposeful lies.

Posted by: None | March 2, 2006 02:25 PM

You are entirely mistaken.

If the Council wants to revisit the deal itself, that's fine.

But what is being debated right now is a sperate bill covering stadium construction and lease.

Please be sure your facts are correct --it's two different legislative entities.


Posted by: Glover Park | March 2, 2006 02:30 PM

We can argue about opinions but no point arguing about facts:

1. The Yankees have committed $800 million in private money for the new Yankee Stadium. It would sit on public land, currently Macombs Dam Park, but the current stadium also sits on city-owned land, which would become a park (although details of this remain unsettled). See http://www.ballparks.com/baseball/american/nyybpk.htm

2. As for a replacement for city-owned Shea Stadium, "The Mets will pay for the stadium, which they estimate would cost about $600 million. The city would pay about $85 million and the state another $75 million for improvements to roads and other infrastructure around the stadium. " Additional construction expense to adapt the stadium for the Olympics, if it had been necessary, would have been born by the city. See http://www.ny1.com/ny1/content/index.jsp?stid=1&aid=51455

3. I am not entitled to profit from anything you sell in the District. But neither am I obliged to hand you $611 million.

4. MLB didn't move to the Washington area "ages ago" in part because Northern Virginia couldnt get its act together, in part because during the Barry years DC's government was in total disarray, in part because of the problems posed by the Orioles (which continue to vex the tv issue), and because during that time they expanded to other cities, such as Miami, Tampa, Denver, etc. Some have worked out, others haven't. But there are currently no major North American cities left that are anywhere near the size and demographic appeal as Washington. If there were, the Expos would have been moved to one of them.

5. I dont know whether baseball is "itching" to go to arbitration. All I know is that it carries huge uncertainties for both parties and that neither party seems to be in any hurry to do it.

Posted by: Meridian | March 2, 2006 04:22 PM

Now that the city has been shamed into spending more money on schools, they have also decided to have a "committee to spend the money"! So what is the Public Schools Administration for, if they can't be trusted not to uh, borrow (steal) the money meant for schoolkids? Why does this monopoly over the schools still exist? They don't actually DO anything except get in the way of poor schoolkid's education.
Frank

Posted by: Frank | March 2, 2006 04:28 PM

Anyone interested in more details on the Yankee Stadium deal might want to read the Feb. 22 AP story reporting the approval of the city planning commission:

NEW YORK (AP) -- A city commission voted on Wednesday to approve a plan to build a new stadium for the New York Yankees in the Bronx.

The unanimous approval by the City Planning Commission sends the plan for the privately financed $800 million project to the City Council, which must vote on final approval within two months.

"A new facility would be a benefit to both the Yankees and the city," Commission Chair Amanda Burden said. "The commitment by the Yankees to invest $800 million to construct this new stadium immediately north of the existing stadium is representative of the new faith in a resurgent South Bronx."

The new ballpark will be just north of the current stadium, which opened in 1923, and the Yankees have said they hope to break ground this spring.

"This project will create thousands of jobs, new and improved parklands and benefits and opportunities for the residents of the Bronx, the City of New York and visitors alike," Yankees president Randy Levine said after the 12-0 vote.

The current Yankee Stadium is the third-oldest ballpark in the major leagues, trailing only Boston's Fenway Park (1912) and the Chicago Cubs' Wrigley Field (1914).

Last summer the Yankees unveiled a model of the planned ballpark, which on the outside will be treated with limestone and resemble Yankee Stadium before its 1974-75 renovation. The ballpark will seat from 50,800 to 54,000 people; the current ballpark seats about 57,000.

http://sports.yahoo.com/mlb/news;_ylt=AhYht3ykcFw0cUAK.OOJg1URvLYF?slug=ap-newyankeesstadium&prov=ap&type=lgns

Posted by: Meridian | March 2, 2006 04:39 PM

Just to make it clear, the significance of the Yankee Stadium deal to this debate is not that we should expect MLB to pay 100% of the costs of a new stadium.

The significance is that the Yankees agreed to pay only after efforts to get the city to build them a new ballpark (which Giuliani tried very hard to do) were rebuffed by the Bloomberg administration. Once it was clear they couldn't extort the money from the public, they decided to invest their own money. Why? Because it makes business sense to do so.

Let me repeat: I do not suggest the situation here is identical. The Yankees, playing in Yankee Stadium, are a uniquely valuable franchise. I am not suggesting MLB pay $800 million for a stadium in DC. But $100 million to settle this dispute and get it done would be a bargain.

One additional thing: As David Catania and others have pointed out, the lease includes a provision similar to some others in recent stadium deals. Known as a "keeping up with the Joneses" provision, it commits the city to match any upgrade that has been made by 50% of the stadiums around the league. Thus, as other teams build new stadiums over time or renovate their facilities, DC will be obliged to do the same. This, as several commentators have pointed out (including the Wall Street Journal), can end up being more costly than the original ballpark, and can force the city into paying significant additional construction costs even before the original construction debt is retired.

This provison is a ticking time bomb, as noncompliance with it can be (and has been) used by the team as the basis for a threat to break the lease and take their toys elsewhere. These expenses are capital expenses, beyond those associated with ordinary maintenance and wear and tear, and need to be considered when considering the real cost of the ballpark.

Posted by: Meridian | March 2, 2006 04:50 PM

Oh I see, so we should compare the acts of a city of 7 million+ people to a small city of not even 1 million. THAT makes sense.

Let's also keep in mind that the Yankees are the most profitable sports franchise in history, and that their stadium efforts have everything to do with Steinbrenner's ertwhile threats to move the Yankees.

Finally, go check some more clips Meridian. MLB has already requested arbitration and former Detroit Mayor Denis Archer is handling it.

Throwing all of this sh-t around about the Yankees is merely an attempt to deflect attention away from three immutable facts that you simply cannot defend:

The DC City Council ratified the deal to bring a team to DC and that deal included building a stadium.

The team and stadium will provide long-term benefits to the city.

THE CITY MADE A DEAL. NOW IT HAS TO HONOR IT.

Posted by: Glover Park | March 3, 2006 09:15 AM

Baseball Stadium Still Shows Up in the 'Win' Column

By Steven Pearlstein
Friday, January 6, 2006; D01

Okay, let's take a deep breath, put emotions aside and think about this baseball stadium thing in a businesslike manner.

Contrary to what you hear from stadium opponents, our choice is not between pouring unknown sums of taxpayer money into a baseball stadium and spending nothing at all.

If the District walks away now, it will have already committed or spent $62 million on the proposed Anacostia waterfront site, according to an analysis by the city's straight-shooting chief financial officer, Nat Gandhi. Add to that $19 million in penalties the city would probably incur for not delivering a stadium, as called for in the legally binding agreement with Major League Baseball.

Harder to calculate, but no less real, is the risk premium the city would have to pay in dealing with other business entities in the future as a result of the District's reputation as an unreliable development partner. And while renewal of the Anacostia waterfront is inevitable, it would surely take years longer without the jump-start from a baseball stadium, at a cost of tens of millions of dollars in foregone tax revenue.

In other words, the cost of backing out of the $631 million stadium project now would be substantial.

In contrast, city taxpayers, with one exception, would pay nothing toward the stadium under the current proposal. Yes, the District government would "finance" the stadium -- that is, borrow the money at favorable rates in expectation of revenue to pay it off. But the people actually paying back the interest and principal would be those who use the stadium -- the team owners, in the form of rent, and baseball fans, in the form of sales taxes on tickets and money spent on hot dogs.

The exception involves 2,000 large businesses that effectively "volunteered" to pay an annual ballpark fee that would generate $14 million a year. In theory, that's money that could be used for more worthwhile purposes. As a practical matter, imposing a new tax on those businesses for other purposes would have been a political non-starter.

Of course, taxpayers might be on the hook for cost overruns on the stadium that have already totaled $100 million since the plan was approved. But let's consider where some of the added costs have come from.

Some of the increase is the result of rising construction costs. But think about it: If it costs more to build the stadium, it also costs more to build the billions of dollars worth of other development going on around the city. Higher construction costs translate into higher assessments, which translate into more property tax revenue. The fiscal benefits of that tax windfall swamp the higher cost of stadium construction.

Another reason the stadium project costs are rising is that the land turns out to be more expensive than expected. But, again, that's good news. It means all the other land around the stadium is also worth more than we thought and will generate more tax revenue than previously expected.

There's also lots of bellyaching about the $20 million it would take to expand the Metro station to accommodate stadium-bound riders. But remember, those fans wouldn't ride free. By my back-of-the-envelope calculation, that works out to an extra $4.5 million a year in fares -- enough to cover the carrying costs on $20 million in capital expenditures, with plenty left over for the incremental costs of operating the extra off-peak trains.

The point here is that the cost of a baseball stadium must be considered in the context of what else is going on in the city and the very real fiscal benefits that would flow from the project. This would not be a one-time expenditure but an investment with long-term paybacks.

If people are worried about cost overruns, it is possible to contract with a construction management firm that, for a fee, would assume the risk of cost overruns. The current financing plan already includes a contingency fund equal to 10 percent of the construction cost, which could be used to buy just such an insurance policy.

Furthermore, Gandhi has identified and certified nearly $100 million in "other" revenue sources from the baseball initiative that has not been spoken for and would cover the higher costs that have received so much attention. They include interest earned on the bond proceeds before they are spent, the $37 million earned from last year's Nationals season and the $20 million that MLB recently agreed to throw into the stadium financing pot.

Gandhi's analysis also shows that while the annual carrying costs for the stadium bonds would be $38 million, the revenue stream from stadium-related rent and taxes would be $58 million. Wall Street underwriters insist on that $20 million cushion. Assuming the full $58 million is raised as expected, several hundred million dollars would be returned at some point for whatever use the city decides.

Many D.C. Council members who oppose the stadium on financial grounds are hardly known for their fiscal rectitude or abiding distaste for government intervention in a free-market economy. What really galls them, it seems, is the symbolism of a project that would line the pockets of rich team owners and players and be used disproportionately by middle- and upper-class white residents of Northwest Washington and the suburbs.

But at this point, we need to get beyond the symbolism. A city-financed baseball stadium is not, nor will it ever be, the reason why D.C. schools are failing poor black kids or why so many residents receive inadequate health care. Nor will it ever be the answer to those problems.

As a hard-nosed business proposition, however, the stadium is a reasonable investment in the city's economic development with a return that easily justifies its manageable risks.

Posted by: Glover Park | March 3, 2006 09:18 AM

Glover:

Wrong again. Archer's role was temporary, as a mediator, not an arbitrator. An arbitrator has not yet been named. From the Post, Feb. 8:

"Major League Baseball has filed a claim with the American Arbitration Association, which assigned former Detroit mayor Dennis W. Archer to mediate the standoff. Archer's involvement ended two weeks ago when Williams submitted a revised stadium lease to the council that contained new commitments from baseball officials."

You're right on one thing: I would not equate DC and New York. And if a city of 7+ million people decided that building a ballpark for the Yankees wasn't worth the money, I don't think a city of 580,000 should come to a different conclusion.

And you're right that Steinbrenner's decision to pay his own money came only after his threats to move to New Jersey were faced down by New Yorkers.

And New York is not unique. In smaller cities that are more like DC, reasonable cost-sharing agreements were made: Philadelphia, Pittsburgh, and elsewhere. And San Francisco, which is almost exactly the same size as DC, refused to build the Giants a new stadium, after which the Giants decided to do it themselves.

Posted by: Meridian | March 3, 2006 10:42 AM

You're throwing everything you have at the wall in the vain hope that something will stick.

Mediation was called off because the lease deal passed. But it is still very much a reality that MLB knows it will win. Now that the City is screwing arond again, MLB will have no reservations in going into arbitration, which DC will likely lose and end up having to pay $50 million in additional penalties.

NY? Other cities? They all negotiated better deals. That's fine. DC negotiated a deal and the COuncil ratified it. And it brings us back to one point you cannot rebut:

THE CITY MADE A DEAL. NOW IT HAS TO HONOR ITS PROMISES.

Posted by: Glover Park | March 3, 2006 11:03 AM

By the way, the SF Giant DID NOT build the stadium. Businesses did. The very same people who will be taxed to build the stadium here.

Get your facts right.

Posted by: Glover Park | March 3, 2006 11:06 AM

And do you know why the City had to capitulate to so many of MLB's demands?

Because they knew something like this would happen. That class and race politics would overshadow the indisputable long-term economic gains being offered the City. So they did what any smart business person would do: MLB required the City to commit a great deal of time and money to the deal SO THEY WOULDN'T BACK OUT OF IT.

And that's what they are trying to do, which again brings us back to one basic point:

THE CITY MADE A DEAL AND NOW IT HAS TO HONOR ITS PROMISES.

Posted by: Glover Park | March 3, 2006 11:14 AM

See:

http://wwwsouthcapitolstreet.blogspot.com/

Posted by: Douglas A. Willinger | April 4, 2006 01:32 AM

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