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Baseball partners seek ‘win-win’ deal with city

MORE: Read more news from Fredericksburg

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

Diamond Nation owner Jack Cust (left) and president Keith Dilgard address the Fredericksburg City Council about the proposed baseball stadium in the city during a council meeting on Tuesday, Aug. 26, 2014. Sara Sleeper (background) joined a small group that brought signs protesting the possible project. (PETER CIHELKA / THE FREE LANCE-STAR)

Diamond Nation owner Jack Cust (left) and president Keith Dilgard address the Fredericksburg City Council about the proposed baseball stadium in the city during a council meeting on Tuesday, Aug. 26, 2014. Sara Sleeper (background) joined a small group that brought signs protesting the possible project. (PETER CIHELKA / THE FREE LANCE-STAR)

The Fredericksburg City Council voted unanimously Tuesday to continue negotiating with the partners seeking to bring minor league baseball to the city and build a stadium complex that would host training and tournaments for amateur athletes.

Mayor Mary Katherine Greenlaw and City Manager Bev Cameron are to begin working today with representatives from the Hagerstown Suns and Diamond Nation, the organization that operates an amateur softball and baseball complex in Flemington, N.J.

“We are only interested in a win–win baseball deal that returns to everyone a positive investment,” Jack Cust, managing partner of Diamond Nation, told the council during Tuesday’s meeting. “We’re committed to continuing to go forward.”

Council members expressed support Tuesday for the idea of a minor league team in Fredericksburg and a stadium complex. However, they were concerned about whether it was financially viable.

The city agreed last September to a deal that would mean an $8 million upfront investment and a package of tax incentives worth about $1.4 million annually that would be paid to the partners based on the project’s performance. The $8 million was to buy land on which to construct an 1,800-space parking lot.

The baseball partners were, in turn, to privately finance a stadium complex for which they obtained roughly $35 million in financing.

However, two weeks ago, Cameron announced that the project’s current price tag is $18 million more than expected and the partners have asked the city to make up that cost overrun.

In exchange, the partners offered a 3 percent share of gross revenues to the city for the first 10 years of operations and a 1.5 percent share thereafter. The partners, however, also asked for a permanent exemption of real estate taxes.

The Suns, a Class A affiliate of the Washington Nationals, are partnering with Diamond Nation to build a stadium complex in Celebrate Virginia South that would include a multipurpose stadium with 4,750 fixed seats and five artificial turf fields for amateur baseball and softball.

Councilman Matt Kelly, the chief proponent of the venture, started Tuesday’s work session by announcing the plan for the mayor and city manager to begin meeting with the partners to further negotiate to see if a better plan can be achieved.

It was clear there was little support among the council for the plan as it stood before the start of the work session. The Council Chambers of City Hall were packed during the baseball proposal discussion. Nearly all of the nine people who spoke at the meeting opposed the city’s increased investment in the project.

Resident Anne Little spoke against the proposal for the city to take on $18 million more debt for the project. She provided the council a packet that she said included a petition with 113 names of residents who oppose the current deal.

As part of the ongoing negotiations, the city will have its bond counsel and financial advisors review the finances of the partners after agreeing to confidentiality of the details.

During Tuesday’s work session, Cust briefed the council on the partners’ plan and provided a short video to acquaint people with the Diamond Nation facility in New Jersey.

That facility has five artificial turf fields, the same as it plans to build here. Cust said people from 42 states have visited the complex and about 500,000 come there per year.

He projected the Suns would be one of the top teams for attendance in the South Atlantic League once in the new stadium. He estimated visitors to the stadium complex would spend $51 million each year.

The New Jersey complex is on 35 acres in a rural area. The complex here would be built on 38 acres overlooking the Rappahannock River and Interstate 95 if the partners complete their purchase of the land that was to be home to the U.S. National Slavery Museum envisioned by former Gov. Doug Wilder.

That land, in Celebrate Virginia South, is slated to be sold to recover unpaid taxes and interest. However, the tax sale was put on hold while the partners worked to finalize the purchase. They have a contract to buy the land. However, their deadline to finalize the deal passed earlier this month.

City Treasurer Brenda Wood said during Tuesday’s work session that, if the city moves ahead with the project, she wants Diamond Nation to place funds in escrow to cover the back taxes owed and the costs the city has incurred trying to recover them from the slavery museum.

She prefers that to extending the deadline for the land purchase to be completed.

Cameron posed five public-policy questions for the council to contemplate in evaluating the stadium proposal.

He noted that the city traditionally has given economic incentives to businesses after they demonstrate performance but that the current proposal asks for $26 million up front plus tax incentives for 20 years.

He said the council should consider what financial security the deal offers since the project could fail or underperform.

He noted that if the economic impact projection offered by the partners’ economist holds true, the city would reap about $1.8 million annually in increased revenues but that would be offset by the amount due on the $26 million debt.

Cameron asked the council to consider whether its return on investment is sufficient when Diamond Nation’s revenue-sharing offer is estimated to total $360,000 to $600,000 annually for the first 10 years, and between $180,000 and $300,000 per year thereafter.

He also asked the council to contemplate what tax revenue it would use to cover the debt and, finally, the impact on the city’s bond rating if it adds the debt to its accounts.

Greenlaw said those issues will be considered as negotiations continue.

Councilwoman Kerry Devine said she’s hopeful the negotiations can be successful.

“Please bring us a revised deal that we can say yes to,” she said.

Pamela Gould: 540/735-1972

pgould@freelancestar.com

 

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