November 10, 2004
Haggling over the price
More details on D.C. council chair Linda Cropp's latest stadium proposal, courtesy of the Washington Times: A real-estate consortium would spend $350 million to build a stadium for the Expos, then lease the stadium to the team until the debt was paid off. The obvious question, then: Since the present deal with MLB says that all stadium revenues go to the team, do these real-estate folks somehow know how to pay off $350 million in debt with $5.5 million a year in rent? Or would Cropp's new deal require renegotiating the rent and/or split of stadium revenues - which would be a great idea from D.C.'s perspective, but would likely cause Bud Selig's combover to hit the ceiling.
One answer could be, as the Times indicates, that Cropp envisions the private consortium as being eligible for "federal tax credits of up to $35 million per year in exchange for taking the financial risk of building the stadium." The Washington Post describes this as "a tax shelter that relies on a loophole in the federal tax code to generate tax benefits for a private investor claiming depreciation on a public facility" - none of the economic development experts I've been able to contact so far has known what this is about, but I'll keep checking.
(Interestingly, the Post also indicates that Cropp's new plan would allow the developers to collect "revenue from ticket and concession taxes." If that includes both the proposed surcharges and existing taxes, then this would amount to an additional public subsidy of $60 million or so.)
The lawyer-turned-real-estate-exec who heads up the private group, Richard Gross, should be well aware of the pitfalls of privately financing stadiums while still meeting teams' extortionate lease demands: He ran the company that was initially hired by the St. Louis Cardinals to seek private investors for their $387 million stadium. That search ultimately ended in failure, with the Cardinals themselves fronting $230 million of their own money for the project.
Back on Mayor Anthony Williams' side of things, meanwhile, the Washington Post has got ahold of the list of tens of millions of dollars worth of quid pro quos that the mayor has promised to various council members in order to secure their votes for his original stadium proposal. Among them: $45 million in library funding (in exchange for Jim Graham's vote), $40 million for commercial development in Southeast D.C. (for Sandy Allen's vote) and $2 million in laptops for McKinley Technical High School students and $10 million for a hospital feasibility study (for Vincent Orange's vote).
"Everybody understands that this occurs," opposition councilmember David Catania told the Post in disgust. "What makes it incredible is that they would put it in writing. Everyone realizes votes are bought off, but this takes it to a new level."
