January 31, 2006
Will the Stadium Ever Come to Pass?
We've talked the new stadium into the ground, but with the news last week that District officials and MLB had reached an agreement on a new lease, we were hopeful that enough concessions were granted and desires met to allow the D.C. Council to give their stamp of approval next week.
But that would be far too simple.
Buried in the Post's initial article on the revised lease agreement was a token quote by the District's CFO, Natwar Gandhi, who said, "The lease agreement as it is submitted, I have serious reservations about. I cannot take it to Wall Street."
Excuse us? Is this to say that D.C. Mayor Anthony Williams and members of the D.C. Sports and Entertainment Commission negotiated a deal that while purporting to include a variety of new concessions from MLB could not receive the stamp of approval from the city's main money man? And let's not be mistaken -- this is not a simple technicality. Gandhi is saying that should the lease pass the council as written, Wall Street would not issue the bonds necessary to finance the stadium's construction. Conclusion -- the city would either have to finance the construction out-of-pocket or not build at all.
According to a Post editorial on the issue today, Gandhi has objected to the removal of a provision that would secure rent payments over the next 30 years regardless of whether the Nationals were playing or not -- say during a player strike or city-wide emergency situation. Does this sound familiar? It should. In mid-November MLB balked at the prospect of paying annual rent, only to reverse course less than a month later and agree to the provision. But there's more, or so says the Post:
Likewise, Mr. Gandhi told us yesterday the revised agreement strips other provisions that were designed to provide the city with a steady revenue stream, e.g., prompt and irrevocable payment by baseball of taxes on ballpark concessions. Mr. Gandhi said the revised lease agreement, as it stands, 'is a non-starter,' and he declared again yesterday: 'I will not go to Wall Street with that lease.'We'd like to act surprised, but given that neither Williams nor MLB seems truly interested in producing a lease agreement that wouldn't overtly threaten the city's finances, we're just going to give up and assume the District is going to get screwed.
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Should opponents of the DC stadium deal gloat that each piece of news further validates the argument against Williams' give-away, or do we line up behind a bad deal and work to prevent costs from getting further out of hand? Being able to say "I told you so" is about as satisfying as knowing our government is threatening our city's fiscal solvency and our tax are being dumped into a sinkhole.
Does Williams understand what negotiations are suppose to do? You try (and he needed to) get a better deal. This appears to be worse. How does anyone expect the Council to pass it now?
It's not quite accurate to say that MLB balked at paying rent. They balked at guaranteeing the rent for games not played because of a disaster. There's a slight difference between the two.
Also, it appears that if you look at the revised lease clearly, there is a mechanism for putting the rent guarantee back into the lease if Wall Street requires it.
It seems like Gandhi is just having a hissy fit about the removal of the private financing scheme, which he personally negotiated, and which would cost the city many millions more than just financing the full amount on their own.
Chris' comment is very enlightening. It would be great to take a look at the revised lease. Is it publicly available on the web somewhere?
Thanks.
I seriously doubt it's available, since last I heard it was 600 pages long!
Whether or not Gandhi is having a sissy fit doesn't so much matter to me -- it's the fact that he think Wall Street won't agree to the provisions of the new lease agreement. He has no reason to oppose the stadium, nor has he ever, but he does have a good reason not to want to go to Wall Street and be denied the necessary bonds for construction.
Your good friends at DC Watch http://dcwatch.com/govern/sports060127b.htm have posted Marc Tuohey's letter to Linda Cropp, which includes the major changes between the latest lease and the one from earlier. The key part:
Changes to Sections 4.1, 4.6, and 5.1 - Bondable Lease Terms. In the Original Lease the Team provided certain assurances of rent and tax payments in order to assist the District in obtaining a favorable investment grade rating on bonds proposed to be issued in a private financing. The District has now determined not to proceed with that private financing. Accordingly, the assurances provided in the Original Lease have been removed, but will be restored if required for the District to obtain an investment grade rating on the revised financing plan. The specific changes are as follows:
Which is to say that MLB won't object to them being included, because they've already signed off on including them IF Wall Street wants them.
If you hold your nose and visit the Moonie Times (don't worry, the NSA won't come after you), they have a much more substantive article:
http://washingtontimes.com/metro/20060130-113023-7600r.htm
That one also emphasizes the godawful private financing scheme, which was Gandhi's baby, being knocked down as a source of his ruffled feathers.
Chris,
Thanks for the info. It does seem that there may be a little turf battle going on here, but I'd like to think Gandhi is thinking and speaking as a professional. I could be wrong, though.
This part of the WT article frightens me:
"Some council members said they would be reluctant to approve the lease until they have a chance to review the Construction Administration Agreement, which outlines how the stadium will be built. Mayoral aides said the construction agreement may not be in the hands of council members until after the lease vote."
I can see this sinking this round of voting. Most council-members still want to know that the $535 million price-cap will remain, and they'll need that evidence before they vote. A baseball academy and a few thousand extra tickets won't quell their constituents' anger if the stadium ends up over budget.
Dave Catania has posted lots of stadium-related documents on his web site:
Click here.
Stop complaining you whiners. You know full well that watching grown adults hit a ball with a stick and then run around in a circle is the _single most important thing in the world_. In fact, it's so important that we who love it so have every right to force everyone else in town to subsidize it for us. You can't expect us to eat the full costs ourselves...besides, only freaks would object to ponying up to watch grown met hit a ball with a stick and run in a circle.
I would suspect that you'll see one of those capped-cost contracts being pushed heavily over the next few days. They've, apparently, had multiple discussions with the lead construction companies in the area. The number that's floated out has always been roughly $300 million, which is solely for the actual construction costs.
The biggest variable in all this seems to be the land costs. I think they're up to around $100 million, but there are still a few landholders who are fighting the process (even though they've technically already lost their land through the ED process.)
With the construction costs capped by one of these contracts, I think they'll be able to get the votes.
Remember, they only need seven. And no matter how much Fenty and Catania scream, the stadium supporters don't need their votes. There were about three up in play. The baseball academy (a dumb pork-barrel idea if there ever was one) probably brings one of them. And the assurances of no construction overruns probably brings at least one of the others. It's not out of the realm of possibility that this thing gets 8 or 9 votes. Of course it's not out of the realm of possibility that it gets knocked back to hell either. ;)
I wonder if Williams did a back-room drug deal with smoking ban supporters in hopes of getting the stadium lease done. Maybe he agreed to not veto the ban on smoking if they agreed to not block the final stadium vote. Or would that be giving the mayor too much credit?
TC