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Baseball financing back at the start

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

With this week’s announcement that the partners seeking to build a stadium complex in Fredericksburg need help with $18 million more in expenses than anticipated, the city finds itself almost where it started with the project.

One year ago, Fredericksburg’s City Council approved a financial package of tax incentives plus $8 million to build a parking lot in an agreement to bring minor league baseball’s Hagerstown Suns and Diamond Nation to Celebrate Virginia South.

That agreement followed rejection of the original plan in which the Suns wanted the city to bear the bulk of the financial burden of building a stadium for the Class A affiliate of the Washington Nationals to move here from Maryland.

But while Fredericksburg residents relished the idea of having professional baseball in their backyard, they didn’t support a taxpayer-funded stadium then estimated to cost about $29 million.

That’s when the Suns ownership brought Diamond Nation into the deal. The New Jersey-based company operates a complex for amateur baseball and softball that runs camps and tournaments in Flemington through most of the year.

Diamond Nation would have a similar operation here, increasing the economic benefit for the city. Diamond Nation’s involvement was the turning point in gaining council support for the project and the financial deal reached last September.

Diamond Nation and the Suns ownership formed a partnership to privately fund the stadium complex, which their experts estimated would cost $35 million.

But at Tuesday’s City Council meeting, City Manager Bev Cameron announced that the partners have been seeking for months to address revised cost estimates that could mean a price tag of as much as $18 million more.

Cameron said the project was at risk because the partners were “not willing to proceed with the project unless the funding problems can be resolved.”

If the city is left to pick up the tab, that would mean a $26 million investment plus the tax incentives, which would add up to roughly what the city was asked to invest at the start of negotiations.

“I am disappointed we’re at this place,” Mayor Mary Katherine Greenlaw said this week.

The council has scheduled an Aug. 26 work session to discuss the project. Councilman Matt Kelly is trying to organize a public meeting between the council and baseball partners ahead of the work session.

In the meantime, the partners face a Monday deadline to finalize the purchase of the land for the stadium. The partners have a contract to buy the 38 acres where former Gov. L. Douglas Wilder planned to build a U.S. National Slavery Museum.

On Tuesday, they asked for an extension of the tax-sale deadline.

On Thursday, City Treasurer Brenda Wood said she will attend the council’s Aug. 26 work session and then decide whether an extension is warranted. She previously extended the deadline twice.

In the interim, she will place on hold the pending sale of the museum land.

Kelly said he asked Cameron to provide a public update on the project at Tuesday’s meeting because the Suns face a deadline in about a month to file plans with Major League Baseball.

“We know what the issues are. It’s time to make a decision,” Kelly said.

The city has known for months that the partners were struggling to address the higher-than-expected costs for the project.

The chief factor driving that cost overrun is the topography of the site, which is very hilly and would require a lot of work to make it suitable for a complex that would include a roughly 4,750-seat stadium for the minor league team and six artificial turf fields and associated facilities for Diamond Nation.

The Suns originally hoped to have a stadium in Fredericksburg ready for the 2015 season but are now looking to 2016.

The team has contracted with the city of Hagerstown, Md., to continue playing there over the next two seasons, if necessary.

BACK TO THE START

Cameron said a special tax district was discussed last year during initial negotiations with the partners.

But that financing option was avoided in the deal.

Now, with all of the possible incentives exhausted, Cameron said a special service tax district is back on the table—though not at his suggestion.

Under the deal reached last year, the partners would receive a myriad of tax reimbursements that put the burden of performance on them. Those incentives could be worth more than $22 million over 20 years, but only if the team performs financially as expected.

Most of the tax revenues the partners could get back from the city would come from the stadium complex itself such as tax revenues from sales of tickets, food, beverages and concessions.

The team also could receive a percentage of the incremental meals and lodging tax revenues that Fredericksburg generates citywide in the first 10 years of the baseball complex’s operations.

The city has estimated that the baseball complex will result in an additional $2 million in tax revenues annually, much of it from Diamond Nation’s visitors staying in city hotels and visiting city restaurants and stores. That figure doesn’t include the tax revenues generated at the baseball complex itself.

Kelly said he’s looking into any state funding that can be found to help address the cost overrun. Other than that, Cameron said he’s out of options for supporting the project apart from a special tax district.

If employed, a special service tax district would be created in Celebrate Virginia South and Central Park.

Those areas would be selected because they are expected to reap the biggest benefits from tourism and economic development resulting from the stadium complex.

The city would levy a tax on property owners there to repay the city bond issued to provide the financial support the baseball partners seek.

The tax district would run for the term of the bond.

The tax would be on top of the real estate tax, currently a rate of 79 cents per $100 of assessed value.

With a taxable value of roughly $600 million for all properties in Central Park and Celebrate Virginia South, the tax district levy could be as high as 20 cents per $100 of assessed value to cover a 20-year bond for $18 million, Cameron said.

If the financial gap was less, or the city did not cover the full gap, the tax district levy would be lower.

With the additional $18 million in expenses, the original $35 million estimate and the city’s $8 million parking contribution, the project’s current price tag totals $61 million.

But Keith Dilgard, president of Diamond Nation and point person for the partners, said the additional $18 million is a worst-case scenario.

“We feel that number will come down substantially once we can get architectural drawings to the point where we can get hard numbers—construction bids,” he said.

Dilgard said he remains upbeat about the project and is pleased with its prospects, which were reinforced by an economic impact study produced by George Mason University economist Stephen Fuller for the baseball partners.

Fuller estimates the baseball stadium complex would generate $2.6 million in tax revenue annually for Fredericksburg.

Dilgard said the partners remain committed to the project and hope the financial challenge can be overcome with the city’s help.

“We’re still very, very excited. Hopefully, we can just sit down and work this out to make it happen,” Dilgard said.

“We love Fredericksburg and we really think that area is prime for this.”

Pamela Gould: 540/735-1972

pgould@freelancestar.com

WHAT’S NEXT

The Fredericksburg City Council will hold a work session at 5:30 p.m. on Aug. 26 in City Hall, 715 Princess Anne St. to discuss the baseball stadium project.

Councilman Matt Kelly is trying to organize a public meeting between the partners and the council to be held before the work session.

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