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Details emerge on possible Fredericksburg baseball deal

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COMPLETE COVERAGE: View all related stories and images on the Fredericksburg baseball proposal

New real estate taxes on commercial properties in Central Park and Celebrate Virginia South would likely pay for a large percentage of the costs to build a multi-purpose stadium that could bring a minor league baseball team to Fredericksburg.

The city is looking at issuing up to $30 million in bonds to pay for a 5,000-seat stadium in Celebrate Virginia South. City staff is discussing a deal to lease the facility to a minor league baseball team, probably the Hagerstown Suns, a Class-A affiliate of the Washington Nationals that has been looking for a new home and stadium deal.

Under the deal being discussed, the city would build and own the stadium and lease it to the baseball team. The city would generate revenue from the lease, the stadium naming rights, the taxes generated at the facility and a share of the team’s net profits beyond an agreed-upon amount.

The city has not yet determined exactly how much of the financing costs would come from the new tax district at Central Park and Celebrate Virginia, but that district could provide the majority of the funds used to cover the debt service.

Annual debt service on the $30 million in bonds is expected to range between $1.73 million and $1.95 million, depending on the interest rate. Money from sales taxes generated at the stadium would go toward debt service, and much or all of the remainder would come from the tax district.

That could lead to the properties in the district paying as much as 33 cents per $100 of assessed value annually on top of their regular real estate taxes. The city’s current real estate tax rate is 74 cents per $100 of assessed value.

Fredericksburg Mayor Mary Katherine Greenlaw noted that those costs would likely be passed along to the businesses leasing the buildings. She said City Council therefore has a “significant decision” to make on whether to add that tax on Central Park and Celebrate Virginia properties.

She said it would be great to have a local baseball team and stadium, but only if the deal makes “business sense.”

JUSTIFYING THE COST

Fredericksburg City Councilman Matt Kelly, who has been leading the local effort to land the minor league team, said the businesses in Central Park and Celebrate Virginia would benefit from the traffic that would come through the developments to get to the new stadium.

Kelly also noted that special tax districts used in Spotsylvania County retail centers such as Cosner’s Corner and Harrison Crossing range from 33 cents to 65 cents per $100 of assessed value, which is on top of the county’s 88 cent real estate rate. Stafford County’s regular real estate tax rate is $1.07 per $100 of assessed value.

Kelly favors also putting the money the city would get from the lease and the naming rights toward the debt service, which could significantly lower the tax rate in the new service district.

The council would set the tax rate annually and could reduce it over time as the principal is paid down, and if the stadium outperforms expectations.

Kelly would like to see proceeds from the stadium beyond what is needed to service the debt—from revenue sources such as admissions and meals taxes and profit sharing with the team—go toward the city’s school system and Riverfront Park.

Under the plan being discussed, the tax district would include all of Central Park other than the Central Park Corporate Center. It would include the developed portions of Celebrate Virginia South other than the building where Bill Buttram Photography is located and the Fredericksburg Expo & Conference Center. The intent is to mostly place the tax on areas where national retailers are located.

The undeveloped portions of Celebrate Virginia South would not be included in the new tax district at first, but parcels there would be added as they are sold and developed. Celebrate Virginia property owners already pay a special tax assessment on top of their city real estate taxes to cover the debt service on the $25 million in Community Development Authority bonds that were issued in 2006 to finance the development’s roads, sidewalks, utilities and other infrastructure.

The owners of the undeveloped land at Celebrate Virginia South, which includes Silver Cos. principals and other investors, have fallen significantly behind on their taxes amid a sluggish economy and face the prospect of a tax sale if the development doesn’t turn around. The stadium is seen as a way to potentially jump-start the development.

The 38 acres where the National Slavery Museum was once intended to be located has been eyed as the best site for a stadium. It overlooks Interstate 95, which could prove lucrative for a naming-rights deal. Tax sale proceedings have begun on that property, but it has turned into a drawn-out legal battle.

The baseball team has also looked at sites next to the land where the slavery museum was slated to go.

The Fredericksburg City Council is expected to hold a July 9 public hearing regarding the terms of the lease between the team and city. Future public hearings could be held on issuing the bonds, which Kelly said will likely be revenue bonds and not affect the city’s borrowing limits, as well as the special tax district.

The state Attorney General’s Office has been reviewing the legality of the tax district at the request of the city, specifically to determine whether the stadium would be enough of a benefit to nearby businesses to justify such a levy.

DETAILS OF THE LEASE

Kelly offered a briefing of the terms of the lease that is currently being negotiated. Among the points:

The team would sign a 30-year lease that would pay the city $105,000 per year. The team would have options at the end of the lease to extend the deal another 10 years, five years at a time.

The city would get 50 percent of the naming rights revenues at the stadium, with the team keeping the rest. A recent Brailsford & Dunlavey study conducted for Fredericksburg’s Economic Development Authority estimated that the naming rights deal would likely be worth about $200,000 annually, half of which would go to the city.

The amount that the city has to put into stadium capital improvements would be capped at $1.5 million over 30 years. The city would also need to contribute no more than $50,000 in maintenance costs annually.

The team would put up $3 million up front, money that would go toward land acquisition and, if anything is left over, the amount the city would be required to invest in stadium capital improvements.

The city would provide police and emergency services coverage during the roughly 65 baseball games that would be played at the stadium each season, and the team would be responsible for that at all non-baseball events, of which there are expected to be 25 to 35 a year.

The city would get 15 percent of the team’s net profits that exceed $700,000 annually. Revenues from a restaurant at the stadium that would offer a variety of arcade and sports-related games and be open throughout the year would be included in the profit-sharing arrangement.

REVIEWS ON DEAL MIXED

In several of those areas, the city would be getting one of the best deals of the localities that have teams in the South Atlantic League, into which the Hagerstown Suns fall, said league President Eric Krupa.

Krupa said the team is contributing a substantial amount up front, and he called the 50–50 split on naming rights revenue a “generous gesture” by the team. He also said deals that involve sharing a portion of net profits are rare, as are leases as long as 30 years. A more traditional length is between 15 and 20 years, Krupa said.

Though he hasn’t seen all parts of the lease, Krupa said it seems to work well for both the city and team and therefore has a good chance of success.

Not everyone is convinced of that. A group called Play Ball VA!—which is led by Bob Hagan, Hap Connors and Irv McGowan and operates out of the Westwood Office Park in Fredericksburg—recently sent out an email to its advisory committee critiquing the city’s secretive efforts to court the Hagerstown Suns and urging the community to get a better deal with a baseball team.

Bill Freehling: 540/374-5405

bfreehling@freelancestar.com

 

 

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