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NEWS RELEASE FOR IMMEDIATE RELEASE
March 15, 2005
CFO Releases Evaluation of Alternative Financing Plans for the Baseball Stadium
(Washington, DC) As required by the Private or Alternative Stadium Financing and Cost Trigger Emergency Act of 2004, the District of Columbia Office of the Chief Financial Officer (OCFO) has issued a report on alternative financing plans submitted for the construction of a baseball stadium.
The Chief Financial Officer has certified two of the eight proposals submitted for meeting the intended goals of: 1) reducing the total amount of bonds the District would need to issue, 2) reducing the Ballpark Fee needed to support debt service, and 3) providing additional financial benefits with minimal additional financial risk.
The plans submitted by Deutsche Bank and The Gates Group were certified as alternative financing vehicles based on the criteria outlined above. Further details on how the criteria were met by these respondents are included in the documents below.
Six proposals did not meet the intended goals for alternative financing. They included proposals from: Baseball Village Associates; DC Baseball Associates; DSG Capital Group; The Dubois Group; Global Development Partners; and HooverMilstein. Further details on how the criteria were not met by these respondents are included in the documents below.
Respondents had to submit a non-refundable $10,000 fee in order for the OCFO Office of Economic Development Finance to review and evaluate their submitted plans.
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Office of the Chief
Financial Officer
Government of the District of Columbia
Alternative Financing Plans for Baseball Stadium
Evaluation
Overview
-
In October 2004, the Mayor, DC Sports and
Entertainment Commission and Major League Baseball signed the Baseball
Stadium Agreement. and Major League
-
Major League Baseball agreed to move a baseball
team to Washington, DC.
-
Mayor and the Sports and Entertainment Commission
agreed to renovate RFK stadium for the new team and to build a new
ballpark for the 2008 season.
-
In December 2004, the Council passed the Ballpark
Omnibus Financing and Revenue Act of 2004.
-
Authorized the District to issue up to $534
million in bonds to pay for the RFK renovation and the new
ballpark.
-
New Ballpark Fee, a utility tax on non-residential
customers, and increases in sales taxes at the stadium were
imposed to repay these bonds.
-
Council passed the Private or Alternative Stadium
Financing and Cost Trigger Emergency Act of 2004.
-
Required the Chief Financial Officer (CFO) to
request and review supplemental or alternative stadium financing
plans and proposals.
-
Plans must substantially reduce the annual amount
of the Ballpark Fee required to substantially reduce the annual
amount of the Ballpark Fee required to repay bonds issued to
construct the baseball stadium.
District’s Public Financing Plan
Note: At least 80% of sources of repayment must be from
highly reliable sources in order to obtain bond insurance and market
acceptance.
Alternative Financing Plans Received
-
The request for supplemental plans was issued on
December 23, 2004.
-
Eight plans were received by January 18, 2005
-
Two of the alternatives will convert future
revenue streams into upfront payments (monetize)
-
Deutsche Bank
-
The Gates Group
-
Five plans will pay the District for the right to
develop the area around the stadium
-
One submission offers to pay for the stadium in
part by attracting equity investors through the availability of
substantial Federal tax benefits
Criteria for Financial Certification
Deutsche Bank
Certified
DESCRIPTION
-
Provides District with $405-$493 million in an upfront
payment
-
For a $493 million upfront payment, District will
repay Deutsche Bank $37 million annually from
-
Stadium Rents and Taxes ($18 million average
annual payment)
-
Utility Tax ($12 million average annual payment)
-
Bus Shelter Advertising Revenues ($7.6 million
average annual payment) (Note that the City Administrator has had
separate discussions with Deutsche Bank and may have other uses
for these funds.)
REASONS CERTIFIED
-
Eliminates need for District to issue bonds
-
Eliminates need for Ballpark Fee after 3 years
-
Monetizes revenue streams that would be very difficult
to sell in the bond market
-
Reduces the upfront financing costs
-
Allows District to retain the development rights to
land not used for the stadium and to the land in the surrounding area
for future sale
Gates Group
Certified
DESCRIPTION
-
Provides District with $26-175 million in an upfront
payment
-
For a $100 million upfront payment, District would pay
approximately $10.6 million annually from “parking district” fees
-
District will issue bonds for remaining project costs
REASONS CERTIFIED
-
Reduces amount of bonds District must issue
-
Reduces Ballpark Fee to $6.9 million for the first 24
years, for an upfront payment of $100 million
-
Monetizes revenue streams that would be very difficult
to sell in the bond market
-
Reduces the upfront financing costs
-
Provides District with $40 million that could be used
as a reserve against future repayment
-
Allows District to retain the development rights to
land not used for the stadium and to the land in the surrounding area
for future sale
Baseball Village Associates
Not Certified
DESCRIPTION
-
Design and construct baseball stadium for a guaranteed
maximum price
-
Build a 5,000-car parking garage and develop
additional land within the footprint of the stadium site
-
District would issue $845.4 million in revenue bonds
supported by
REASONS NOT CERTIFIED
-
Increases amount of debt supported by District
resources to $845 million
-
Increases required Ballpark Fee to $35 million for
first 3 years
-
Requires transfer of land to private developer
-
Requires negotiation between District, Sports and
Entertainment Commission, Major League Baseball, and private entity to
build stadium
-
Requires TIF financing
DC Baseball Stadium Associates
Not Certified
DESCRIPTION
-
Design and construct baseball stadium and 7,000-space
garage
-
Team makes lease payments from money provided by
District:
-
BSA issues corporate bonds for $383 million and raises
equity of $101 million
-
District provides GO or moral
obligation pledge backing corporate obligation pledge backing
corporate bonds
-
District issues $223.9 million of debt supported by:
-
BSA would lease land from the District. All lease
payments would be deferred until year 25
REASONS NOT CERTIFIED
-
Increases amount of debt supported by District
resources to $607 million
-
Requires negotiation between District, Sports and
Entertainment Commission, Major League Baseball, and private entity to
build stadium
-
Requires renegotiation of Baseball Stadium Agreement
with Major League Baseball
-
Requires a GO guarantee
-
Risk to investors that IRS may contend that tax
benefits should be reduced or recovered over a longer period of time
-
BSA and Major League Baseball share all increases in
revenue, above what is needed to service the debt.
-
Council must assign taxes and parking revenues from
the stadium to the team.
DSG Capital Group
Not Certified
DESCRIPTION
-
Build baseball stadium at a total project cost of
$607.7 million
-
DSG issues bonds for $135.5 million to be repaid from:
-
District would provide a moral obligation for 80% of
the debt service.
-
District issues remaining $506.8 million of debt
secured by:
-
DSG receives development rights to the land within the
footprint that is not used for the stadium and related used for
parking
REASONS NOT CERTIFIED
-
Increases amount of debt supported by District
resources to $642 million
-
Increases required Ballpark Fee to $31 million
-
Requires transfer of land to private developer
-
Requires negotiation between District, Sports and
Entertainment Commission, Major League Baseball, and private entity to
build stadium
-
District must compensate DSG if the team moves before
30 years
The Dubois Group
Not Certified
DESCRIPTION
-
Total project costs of the plan-$578.4M
-
Two-phase mixed-use development on 52-acres of land in
Southeast DC
-
Phase I – construction of ballpark on 13-acres
(remaining 39 acres, including parking, would be developed in Phase
II)
-
All DC government-owned land within 52-acre area,
including streets and alleys, would be transferred to DG
-
DG would select site for the ballpark within the
52-acres
-
DG would provide upfront funds of $100 million
-
DG would design and build the stadium using an
additional $100 million of funds from DG
-
District issues $409.8 million of debt secured
by:
REASONS NOT CERTIFIED
-
Requires transfer of land to private developer
-
Requires negotiation between District, Sports and
Entertainment Commission, Major League Baseball,and private entity to
build stadium
-
District must provide Dubois with all government owned
land including streets and alleyways and development rights within
52-acre site
-
District must rebate sales and parking taxes generated
in area to Dubois
-
Must extend the 10% tax on concessions to the entire
52-acre site
Global Development Partners
Not Certified
DESCRIPTION
-
Design and construct stadium
-
Develop additional land within the footprint of the
stadium site
-
Total cost of the roject is $543.5 million
-
GDP pays District $28.7 million for exclusive
development right on the stadium site
-
GDP issues $267.9 million in revenue bonds supported
by:
-
District issues $62.8 million in TIF bonds secured by:
-
District issues $254.9 million in bonds secured by:
REASONS NOT CERTIFIED
-
Increases amount of debt supported by District
resources to $586 million
-
Increases required Ballpark Fee to $23 million
-
Requires transfer of land to private developer
-
Requires negotiation between District, Sports and
Entertainment Commission, Major League Baseball, and private entity to
build stadium
-
Requires TIF financing
-
GDP would retain all tax revenues generated by the new
development and not required to pay debt service
HooverMilstein
Not Certified
DESCRIPTION
-
Design and construct baseball stadium for guaranteed
price
-
If HM complete construction for less than guaranteed
price, savings used to acquire & develop land in District
-
Lease portion of the baseball stadium site that is not
required for the stadium and related facilities for approximately $1.4
million annually
-
District issues $538.1 million of bonds secured by:
-
HM purchases or places $35-$45 million of revenue
bonds secured by rent payments and stadium taxes
-
District guaranteed debt service on bond issuance
REASONS NOT CERTIFIED
-
Increases amount of debt supported by District
resources to $538 million
-
Increases required Ballpark Fee to $29 million for
first 15 years
-
Requires transfer of land to private developer
-
Requires negotiation between District, Sports and
Entertainment Commission, Major League Baseball, and private entity to
build stadium
-
District must use any excess revenues from stadium
rents and taxes to pay down the debt held by HM rather than reducing
the Ballpark Fee
General Concerns with Economic Development Plans
Economic Development Opportunities
-
The stadium can provide an excellent economic
development opportunity in the near Southeast neighborhood.
-
Some of the plans could provide a vehicle for the
District to accelerate the economic development of the area
surrounding the stadium.
-
I cannot certify any of the development plans as
alternative financing mechanisms because they either increase the debt
or the financial risk of the District.
-
With defined economic development criteria, the Mayor
and the Council may choose to consider some of these plans as the
process moves forward.
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