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Bill Freehling is a business writer for The Free Lance-Star and Fredericksburg.com. This blog is on Fredericksburg-area business. Send an e-mail to Bill Freehling.
Fredericksburg releases details of baseball proposal
COMPLETE COVERAGE: View all related stories and images on the Fredericksburg baseball proposal
The city of Fredericksburg on Thursday unveiled details of an incentive-laden stadium financing plan that could lead to the Hagerstown Suns relocating to Celebrate Virginia South.
The proposal, which Fredericksburg City Council will discuss Tuesday night, puts most of the risk on the Suns and their business partner, New Jersey-based Diamond Nation, and allows the team to receive a significant percentage of the tax revenues attributed to the stadium complex.
“The proposed incentive package, we believe, delivers an exciting baseball and economic development opportunity for the City, in a manner that minimizes the City’s risk and places the burden of performance on the Team,” Fredericksburg City Manager Bev Cameron wrote in a memo to City Council released Thursday.
Though details remain to be worked out, the major business terms of the proposal have been approved by the Suns, Diamond Nation and a city negotiation team composed of Cameron and City Councilmen Fred Howe and Brad Ellis following many hours of discussions.
City Council could vote Tuesday night on whether to endorse the financing concept and put in motion the many remaining steps that would be needed before a deal would be finalized. Those steps would include numerous public hearings.
The privately owned complex would include a multi-purpose stadium for the Suns with 4,750 fixed seats and five artificial turf fields where Diamond Nation would host amateur softball and baseball camps and tournaments. Diamond Nation runs a similar facility in New Jersey and has an existing business relationship with Suns majority owner Bruce Quinn.
Diamond Nation and the Suns, a Class A affiliate of the Washington Nationals, have estimated that about 837,000 people would visit the complex annually. They have estimated their economic impact on Fredericksburg — including direct and indirect spending — at about $83 million annually and have predicted that the complex would result in about 28,000 hotel-room nights per year, mostly for people in town for Diamond Nation camps and tournaments. They also believe the complex could help jump-start the Celebrate Virginia development.
The Suns and Diamond Nation would be responsible for about $29 million of the estimated upfront costs for the stadium and fields, and the city would issue about $7 million in bonds to pay for an 1,800-space parking lot that wouldn’t include a garage.
Cameron wrote in his memo that the public investment of $7 million “is necessary to bring affiliated minor league baseball to Fredericksburg.” Without it, he wrote, “it is unlikely that the Team could assemble sufficient private financing to make the project a reality.”
Cameron said he has spoken with Silver Cos. officials on obtaining the land needed for the parking facility. He said the city does not intend to create a special tax district on Central Park and Celebrate Virginia to help cover the debt service but rather will explore alternative funding sources such as parking revenues and an Economic Development Authority grant. He said it hasn’t been determined whether the bonds would be revenue or general obligation.
The city’s share of parking revenues is estimated at $150,000 annually. The city would also be able to use the parking facility for special events at Celebrate Virginia such as the Marine Corps Historic Half race.
The team’s larger portion of the financing costs would come from both revenues generated from operations and an incentive package that is valued at more than $1.1 million annually and $22.6 million over 20 years.
The team would receive tax revenues generated at the complex, as well as a percentage of incremental citywide increases in meals and lodging tax revenues. Cameron’s memo to Council notes that the team would receive the payments based solely on its economic success.
The proposal includes the following economic incentives:
- The city would return to the team all of the local taxes from meals, admissions and business licenses generated at the stadium for 20 years (estimated annual value: $435,000).
- The city would provide to the team an annual grant of the 3.5 percent state sales tax clawback from the stadium authorized by Virginia law for 20 years. It remains unclear whether the city could receive that clawback by financing only the parking portion of the complex. If it cannot qualify for that, the city would pursue a 2 percent state sales tax clawback allowed for tourism-related projects. The Hyatt Place hotel at Eagle Village used that 2 percent clawback in its financing package. (estimated annual value assuming the 3.5 percent clawback: $250,000).
- The city would raise the admissions tax rate from 6 percent to 7 percent citywide, providing the team with an additional $37,500 annually. The admissions tax rate would also increase on other city businesses such as the Regal movie theater in Central Park. A public hearing would be necessary on this proposal.
- The city would waive all building permit and site development permit fees, and all water and sewer connection and availability fees (estimated value: $410,000).
- The team would privately hire city police and EMS crews for home baseball games, and the city would provide a grant to reimburse the team for expenses incurred up to $75,000 annually for 20 years.
- The city would waive all incremental real estate taxes on the complex for either 20 years or the team’s financing term (estimated annual value: $300,000).
- The city would purchase $50,000 worth of marketing and advertising services from the team per year for five years with an option to renew.
One incentive that would close the gap needed to finance the complex is still being negotiated between the city and team.
That incentive would allow the team to receive a percentage of the increased meals and lodging tax revenues generated citywide for 10 years if those taxes increase by a certain percentage, adjusted annually for inflation.
The team would not receive a percentage of any of the city’s existing meals and lodging tax revenues but rather a portion of the increases. The total amount would be capped.
The percentage by which meals and lodging tax revenues must increase for the team to tap this incentive, as well as the percentage of the incremental increases that the team would receive and the cap, are still being negotiated.
Even if City Council votes Tuesday to proceed on the plan, many matters remain to be settled before the proposed complex could become a reality, with chief among them being the team acquiring the land.
The Suns and Diamond Nation are targeting a 38-acre tract in Celebrate Virginia South that was once scheduled to be home to the U.S. National Slavery Museum, which has not been paying its city real estate taxes and faces the imminent prospect of a tax sale on the land. Efforts are under way to reach an agreement that would allow the land to be obtained for the stadium complex.
A two-hour hearing in the slavery museum case is scheduled starting at 9 a.m. Tuesday in Spotsylvania County Circuit Court. Attorneys for the city of Fredericksburg will ask Judge Joseph Ellis to allow the tax sale to proceed. Fredericksburg Circuit Judge Gordon Willis recused himself in the case.
The slavery museum site is not part of the Celebrate Virginia South Community Development Authority, which issued $25 million worth of bonds in 2006 to finance the development’s infrastructure.
Most of the land in Celebrate Virginia South carries a special assessment each year on top of city real estate taxes, with those assessments going to the CDA bondholders. There are significant delinquencies on the undeveloped portions of Celebrate Virginia, and the CDA has defaulted on recent bond payments.
If the slavery museum site can be obtained, the team would not have to include annual CDA assessments in its financing plan. If the stadium goes on any other parcel in Celebrate Virginia, those CDA payments would represent additional annual expenses for the team.
Meanwhile Hagerstown officials are trying to reach a last-minute deal to keep the Suns in the Maryland city by building a new downtown stadium for the team, the city’s Herald-Mail daily newspaper reported this week. And a local organization called Play Ball VA! is making a pitch for a stadium complex in the Massaponax area of Spotsylvania County.
Here are supporting documents with additional detail:
- Cameron’s memo to Council
- Proposed economic development incentives
- Resolution that Council will consider Tuesday