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City baseball complex costs, benefits examined

A minor league stadium and an associated complex for amateur baseball and softball could yield $1.8 million in tax revenue annually over 20 years for the city of Fredericksburg, an economic impact report says.

The $1.8 million would be the city’s benefit after a package of tax incentives is paid to the partners who want to build a stadium complex on 38 acres in Celebrate Virginia South.

The tax incentives were offered as part of a deal to bring the project to the city.

Overall, the project is expected to generate $2.6 million annually in additional tax revenues, according to an analysis done by George Mason University economist Stephen Fuller for the partners.

Owners of the Hagerstown Suns, a Class A affiliate of the Washington Nationals, are partnering with Diamond Nation, a company in Flemington, N.J., that operates a facility for amateur baseball and softball camps and tournaments, to build the stadium complex. Local auto dealer Ron Rosner is also an investor in the team and his Rosner Auto Group is purchasing stadium naming rights.

The complex would include a 5,000-seat stadium where the Suns would play and five artificial turf fields for amateur baseball and softball camps and tournaments.

The project has been in the works since last summer. City residents criticized the idea of a city-funded stadium for the Suns, but in September the council approved a draft performance agreement that spells out the deal with the Suns and Diamond Nation.

The stadium is to be privately financed with the city providing about $8 million to build an adjoining 1,800-space parking lot and providing a list of tax incentives tied to the partners’ success. The more business they generate, the more they gain financially.

However, negotiations are now underway that could change the structure of the deal, Councilman Matt Kelly said.

Last week, City Manager Bev Cameron announced that the partners have not found a solution to the project’s higher-than-expected price tag to build on the site and are looking for help in closing a gap of as much as $18 million to fully build the project.

The partners have financing for $35 million, the cost they expected for the stadium complex.

With the city’s $8 million contribution, that puts the current price at $61 million. However, Keith Dilgard, president of Diamond Nation and point person for the partners, said that figure is expected to drop significantly when detailed drawings are available and construction bids can be more precise.

Council members Kelly and Brad Ellis are working with city staff and the partners to find a solution to the cost issues before the City Council’s work session on the project next Tuesday.

That night, Kelly expects the council to vote on whether to proceed with the project.

Fuller’s economic analysis report was produced last month and has been distributed to the council.

The estimate of new annual tax revenue of $2.6 million from the stadium project would come from spending within and outside the complex and would result from four tax streams.

Fuller expects the most revenue to come from the meals tax at $1.7 million, followed by $380,681 from retail sales, $299,580 from hotels and $204,277 from the admissions tax.

STADIUM SPENDING

Fuller’s report spells out projections for visitors at the stadium and the Diamond Nation facility once operational, possibly in time for the start of the spring 2016 season.

The report anticipates the Suns playing an average of 70 home games in a 140-game season. Average attendance at newer South Atlantic League stadiums was 4,925 per game over the course a season, the report states.

However, attendance varies widely in that league.

He expects an average ticket price of $9 per person for games in Fredericksburg.

The stadium is also expected to be used for other events such as concerts and Fuller anticipates 49 such events annually with an average attendance of 1,800 people, bringing in 88,200 people per year with 85 percent of them buying a ticket at an average price of $13.

In addition, visiting Minor League Baseball teams are expected to bring 30 players and coaches for each game and have 75 travel days per season. The report translates that into $90,575 spent for meals each season, $11,250 for goods and services, and an unknown amount of spending for families accompanying the visiting teams.

Those players and fans are expected to account for 4,500 room nights in local hotels. Another 900 room nights would be from people attending non-baseball events.

Those hotel stays are projected to generate $426,000 in annual hotel revenue.

The visitors to events at the stadium are projected to generate $44.2 million each year in food and beverage purchases on site and around the city.

PARTNER OPERATIONS

Diamond Nation’s partnership in the project was a game changer for the City Council because it operates during a longer portion of the year and brings more people in from outside the area for its tournaments and camps.

The Fuller report supports that idea, projecting a “substantially larger” market area for its events.

The stadium is expected to draw people primarily from the Fredericksburg region: the city and the counties of Spotsylvania, Stafford, King George and Caroline, with a few from Orange and Prince William.

However, Diamond Nation’s New Jersey facility draws players and families from throughout the East Coast and some from outside the country, which means more overnight stays in local hotels.

Dilgard has said he expects the same kind of draw for Fredericksburg and said he is already seeing a rise in interest as a result of plans for the city.

Fuller expects Diamond Nation’s Fredericksburg operation to bring 238,674 players with an average of 1 family members each for a total of 596,685 people from out of town each year.

Based on tourism calculators, he expects those visitors to spend $39.4 million per year, broken down into 63 percent for food and beverages, 25 percent on retail sales and 12 percent on hotel stays.

‘SYNERGISTIC MIX’

Businesses in Celebrate Virginia South and Central Park would reap the greatest benefit from business spurred by the stadium complex.

Those two areas are projected to reap 52 percent of off-site spending, equal to $20.5 million in spending each year, which will generate $1.163 million annually for city coffers.

“The co-location of this sports complex with the commercial services—restaurants, retail and hotels—at Central Park/Celebrate Virginia South and in nearby Fredericksburg will establish a synergistic mix of land uses that will reinforce the economic attractions and market penetration of their component parts,” Fuller states in his report.

He also expects the complex to bring more businesses to the sites surrounding it.

Once the complex opens, the project is expected to support 707 full-time jobs in and around the complex, with at least 64 going to city residents.

Direct spending to the city during construction is estimated at $60.4 million for planning, design and construction. Of that total, about $51.2 million would be for goods and services.

The report projects the city will reap $1.8 million annually in higher tax revenues from the project after the incentive agreement dollars are deducted, but goes beyond that to project $44.1 million in city revenues over the 20-year agreement. That figure includes 2 percent annually for inflation.

Apart from that, the report states that it is providing a conservative estimate of the financial benefits to be derived from the stadium complex.

Overall, Fuller states that the project “will enhance the city of Fredericksburg’s strategic competitive position” beyond the city limits.

The project “will increase the city’s visibility and its attractiveness to other sources of external investment capital at a time when the regional and state economies are struggling to diversify and accelerate their growth” as they must rely less on federal spending, he wrote.

Pamela Gould: 540/735-1972

pgould@freelancestar.com

CITY TO TAKE NEW  LOOK AT BASEBALL INCENTIVES

Last September, the City Council approved a draft performance agreement with the partners planning to build a stadium complex in Celebrate Virginia South.

The city has estimated the total incentive value of the agreement at $1.32 million per year over the first 10 years of the project.

The agreement calls for the city to waive the business license tax, return meals and admissions taxes generated at the stadium, and waive the incremental real estate taxes on the site to the stadium partners for the first 20 years.

The city also would return revenues equal to 3.5 percent of the state sales tax generated at the site.

Those incentives are why the partners are expected to receive about $800,000 of the $2.6 million in annual tax revenues George Mason University economist Stephen Fuller projects the complex will generate.

The agreement also calls for the city to reimburse the partners for rescue and police services for home games of the Suns up to $75,000 annually, and purchase $50,000 in marketing and advertising from the team for five years.

As part of a tourism-zone ordinance the council approved for the site, the city would waive sewer, water and development fees.

The city also has agreed to provide up to $8 million toward land and construction of an 1,800-space parking lot to serve the complex. The partners would be responsible for maintaining the lot and would split revenues from it with the city 50–50.

The agreement led to an increase in the admissions tax rate from 6 to 7 percent but no other tax increases.

Baseball representatives proposed a special service tax district as part of the original deal but that was rejected by the city.

Now, with the project expected to cost up to $18 million more, they have again proposed levying a special service tax district in Central Park and Celebrate Virginia South.

Properties there would be assessed the service district tax on top of the real estate tax.

City Manager Bev Cameron said it would take a rate of about 20 cents per $100 of assessed value to cover the full $18 million.

Pamela Gould: 540/735-1972

pgould@freelancestar.com

 

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